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FM
Former Member

Petro Caribe: are Caribbean countries prepared for the worst?

FEBRUARY 23, 2014 | BY  | FILED UNDER FEATURES / COLUMNISTSRONALD SANDERS 

By Sir Ronald Sanders
Caribbean governments that are members of the Petro Caribe Agreement with Venezuela would be prudent by beginning to adjust their budgets to take account of the loss of benefits now derived from the oil arrangement. This is especially important for the countries of the Eastern Caribbean that appear to have made little provision for the possibility that the arrangements with Venezuela could end abruptly.
Two events are playing-out in Venezuela to which vigilant officials in Ministries of Finance in Caribbean countries should be alert.  The first is the problematic state of the Venezuelan government’s finances and the other is the increasing confrontation between dissenting groups and the government that has spurred violence in the streets.
Venezuela’s economic conditions make it tough for President NicolÁs Maduro to continue the largesse of Petro Caribe started by his predecessor Hugo ChÁvez.


Inflation is now at 56 per cent; the government’s budget deficit is almost 50 per cent; the rating agencies, Moody’s and Standard & Poor’s, have downgraded Venezuelan bonds to junk status; and the bolivar fuerte (the “strong bolivar” so re-named by ChÁvez) has weakened steeply against the U.S. dollar – on the black market its value dropped from roughly 8 to 1 a year ago to 87 to 1 now; additionally, while in the ChÁvez years poverty declined and access to health care increased, today there are real food shortages across the country – the food shortages have a worse effect on the poor who, unlike the better-off, cannot afford to pay to circumvent normal food distribution chains.


The declining value of the Venezuelan bolivar and the foreign currency restrictions that the government has imposed have also angered the Venezuelan diaspora who find it difficult to get US dollars out of the country.  This led to a demonstration by disgruntled Venezuelans outside the Embassy in Barbados on February 17 when charges of human rights violations by the Maduro government were also made.


Venezuela also has debt obligations it must service.   For example, reports indicate that the government and the state-owned oil company, Petroleos de Venezuela, S.A. (PDVSA) signed loan agreements with China amounting to US$49.5 billion for the period 2007-2013. Of that sum only US$20 billion – or less than half – has been repaid in oil supplies.
These economic conditions make it difficult for Maduro, with the best will in the world, to continue the Petro Caribe arrangements as they are.  His government needs to address its crucial fiscal problems as well as the performance issues that confront PDVSA which has been the source of financing not only for the social transformation measures under ChÁvez, but also for the Petro Caribe arrangements.


There are 17 beneficiary members of PetroCaribe of which 12 are Caribbean Community (CARICOM) countries including The Bahamas, Guyana, Haiti, Jamaica and Suriname.  But the most vulnerable are the smaller territories Antigua and Barbuda, Belize, Dominica, Grenada, St Lucia, St Kitts-Nevis, and St Vincent and the Grenadines.  It should be noted that two other CARICOM countries – Barbados and Trinidad and Tobago – are not exposed to change in the Petro Caribe Agreement since neither country joined the arrangement.  Under Petro Caribe beneficiary there is no reduction in the price of oil; instead Venezuela converts a portion of the cost into a low-cost loan.


The amount of the debt owed to Venezuela by many Caribbean countries is shrouded in secrecy because the process of dealing with Petro Caribe has not been transparent. A notable exception is Jamaica where, in January, the government publicly put its Petro Caribe debt at US$2.5 billion.  For each of the other Caribbean countries, the debt would amount to hundreds of millions of dollars that, in their current situation of very high debt and large fiscal deficits, they would find almost impossible to repay.
Sources within the Venezuelan government have lamented that in many Caribbean countries not only has provision not been made to repay the debt, but the loan component of the oil price has not been used for the social programmes for which ChÁvez intended it.  It has been used in one case to pay the government’s public sector wage bill and in another to meet commercial obligations.


What would be worse for all of the beneficiary governments is either a sudden change in the Petro Caribe arrangements, forced by increasingly difficult economic circumstances in Venezuela, or a collapse of the arrangements altogether triggered by the intensifying confrontation between dissenting groups and the Maduro government in the streets of Caracas.


There is no doubt that Maduro is politically committed to continuing ChÁvez’s policies of helping Caribbean countries through the low-cost loan component of oil supplied by Venezuela.  But as conflict and confrontation increases and intensifies within Venezuela, and economic conditions worsen for his own supporters, he may be forced to choose between them and his own political fortunes and a political commitment to ChÁvez’s ideas.
The present turmoil in Venezuela and the clashes in the streets between groups protesting against the government and security forces have resulted in four deaths so far and increased alarm about the stability of the country and its prospects for economic growth.  CARICOM as a whole was right to call on all parties in the Venezuelan confrontation “to take the necessary steps to refrain from any further action that would hinder a peaceful resolution of the differences and a return to peace and calm in the country”.


The beneficiary Caribbean governments have much for which to thank Hugo ChÁvez and NicolÁs Maduro, but they would be imprudent if they did not now begin to make adjustments to their budgets for a transition from dependence on Petro Caribe to buying oil on the international market.  They would be sensible to approach the Caribbean Development Bank for technical advice on how to alter their financial circumstances to make the transition and to propose ways in which such a transition could be accomplished with the least amount of inevitable pain; pain which would be more desirable than calamity.

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Not only will this economic situation be like "Senna Pod" but with the right wing back in power there you can bet that the border issue would be like "castor oil" for Guyana also.

 

I do not want to sound like a broken record but Commonwealth status with the US or provincial or state status with some other major developed power like France (by linking up with French Guiana for instance), who would be willing to confront them on the border, may be our only way out of these situations.

FM
Last edited by Former Member
Originally Posted by Wally:

Not only will this economic situation be like "Senna Pod" but with the right wing back in power there you can bet that the border issue would be like "castor oil" for Guyana also.

 

I do not want to sound like a broken record but Commonwealth status with the US or provincial or state status with some other major developed power like France (by linking up with French Guiana for instance), who would be willing to confront them on the border, may be our only way out of these situations.

Maybe, just maybe. Like how the border issue surfaced under Cheddie's communist leanings, perhaps the PPP drug runnings is about to end wid the USA right wing leanings. Overthrow, 

S
Originally Posted by seignet:
Originally Posted by Wally:

Not only will this economic situation be like "Senna Pod" but with the right wing back in power there you can bet that the border issue would be like "castor oil" for Guyana also.

 

I do not want to sound like a broken record but Commonwealth status with the US or provincial or state status with some other major developed power like France (by linking up with French Guiana for instance), who would be willing to confront them on the border, may be our only way out of these situations.

Maybe, just maybe. Like how the border issue surfaced under Cheddie's communist leanings, perhaps the PPP drug runnings is about to end wid the USA right wing leanings. Overthrow, 

Guyana will suffer big time by this foreign relation blunder by communist PPP.

FM
Originally Posted by Wally:

Not only will this economic situation be like "Senna Pod" but with the right wing back in power there you can bet that the border issue would be like "castor oil" for Guyana also.

 

I do not want to sound like a broken record but Commonwealth status with the US or provincial or state status with some other major developed power like France (by linking up with French Guiana for instance), who would be willing to confront them on the border, may be our only way out of these situations.

Do you think that its only up to Guyana to accept these arrangements?  Why will the USA, UK, or France want Guyana?  France is already stuck with its unproductive French territories in the Caribbean and certainly don't want another.  Puerto Rico is also a disaster.

 

The border issue is only saber rattling. Venezuela has already said that Guyana has too many "negroes and hindus", who they consider to unassimilatable.  The average Venezuelan will merely demand that Venezuela ceases to support Guyana by charging market price for oil, and buying rice from the cheapest source possible.  The right wingers aren't as powerful as you think them to be.

FM
Last edited by Former Member

It is only a matter of time before they take a huge chunk of Guyana. It is not saber rattling.  If it was then Hugo would have solve the problem long ago.

 

Caribj you safe in North America where you have a full belly every day. Your bread and butter does not depend on the average Venezuelans demanding anything. 

 

All I am saying is we need to start exploring these possible solutions before it is too late. 

FM
Originally Posted by Wally:

It is only a matter of time before they take a huge chunk of Guyana. It is not saber rattling.  If it was then Hugo would have solve the problem long ago.

 

Caribj you safe in North America where you have a full belly every day. Your bread and butter does not depend on the average Venezuelans demanding anything. 

 

All I am saying is we need to start exploring these possible solutions before it is too late. 

What does Guyana have that Venezuela wants?  They have a large country which they haven't even developed properly.

 

What Guyana has to worry about is where to sell its rice and get cheap oil.

FM

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