{"id":35446,"date":"2013-01-16T11:09:43","date_gmt":"2013-01-16T16:09:43","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=35446"},"modified":"2013-01-16T11:09:43","modified_gmt":"2013-01-16T16:09:43","slug":"what-happens-if-hugo-chavez-croaks","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/01\/16\/what-happens-if-hugo-chavez-croaks\/","title":{"rendered":"What Happens if Hugo Chavez Croaks?"},"content":{"rendered":"

By The Sizemore Letter<\/u><\/a> <\/p>\n

It may sound like a harsh question.\u00a0 But the man is seriously ill with cancer, and he has had no public appearances in over a month. Rumors abound that he is near death\u2026or may already be dead.\u00a0 \u00a0As he is reported to be in Havana, some have even speculated that the Cuban government is essentially holding him hostage to secure its own future.<\/p>\n

Love him or hate him, the authoritarian Venezuelan president has quite a few mouths to feed across Latin America, and his death could send shockwaves across the region.\u00a0 Let\u2019s take a look at who is most likely to be affected\u2026and what it might mean for the financial markets.<\/p>\n

At the top of the list is the Castro regime in Cuba.\u00a0 Cuba gets about two-thirds of its oil from Venezuela, and most is either given to the island free or via loans that everyone involved knows will never be repaid.\u00a0 By Wall Street Journal estimates<\/a><\/i>, Venezuela accounts for 40% of Cuba\u2019s overall trade\u2026and Venezuelan aid and trade is worth about 22% of Cuba\u2019s entire economy.<\/p>\n

For all intents and purposes, Chavez is the patr\u00f3n of Cuba, and the Castro regime continues to exist at his pleasure.\u00a0 And if Chavez dies, his radical movement will probably die with him, or at the very least it will be significantly weaker without his cult of personality.<\/p>\n

Without Chavez\u2019s patronage, Cuba will have to seek a lifeline elsewhere\u2026which means it will likely have to open its economy further to foreign investment.\u00a0 Perhaps the best way to get exposure to an investment boom in Cuba and its neighbors would be via the shares of the Herzfeld Caribbean Basin Fund (Nasdaq:$<\/span>CUBA<\/a>).<\/b><\/p>\n

It is by no means a pure play on Cuba (remember, we\u2019re talking about a communist country here\u2026), but it is a nice collection of companies in the tourism, banking, and consumer products companies of the Caribbean and Latin American regions that should benefit from Cuban liberalization.<\/p>\n

The Castro brothers are not the only radical regime at risk from the demise of Chavez.\u00a0 Bolivia and Nicaragua both depend on Venezuelan generosity, and Syria and Iran have benefitted from political and diplomatic support.\u00a0 None of these are really investable themes, however, and it\u2019s probably better that way.<\/p>\n

One major question mark is the price of crude oil (NYSE:$<\/span>USO<\/a>).\u00a0 <\/b>Venezuela has the largest oil reserves in the world<\/a>\u2014yes, even larger than Russia or Saudi Arabia\u2014yet its annual production places it in 11th<\/sup> place globally.\u00a0 Venezuelan crude oil production has been in steady decline<\/a> since Chavez took power and for obvious reasons.\u00a0 Professional managers were replaced with political hatchet men, and no foreign investor in their right mind would invest in the country even if Chavez allowed them.<\/p>\n

The death of Chavez and the fall of his regime would likely mean massive foreign investment in the Venezuelan oil industry and could lead to a surge of new production\u2026which would be incredibly bearish for the price of oil.<\/p>\n

Alas, all of this is premature.\u00a0 Chavez is still alive\u2014as far as we know\u2014and his death will not automatically bring free trade, peace, and prosperity to his country.\u00a0 A far more likely outcome will be years of political infighting and\u2026in the worst case\u2026civil war.<\/p>\n

In the meantime, all eyes are on Havana.<\/p>\n

SUBSCRIBE <\/a><\/strong>to Sizemore Insights<\/em>\u00a0via e-mail today. This article first appeared on InvestorPlace<\/a>.<\/p>\n

The post What Happens if Hugo Chavez Croaks?<\/a> appeared first on Sizemore Insights<\/a>.<\/p>\n

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