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Petro Caribe- Are Caribbean Countries Prepared for the Worst

Petro CaribeCaribbean 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 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.

Sir Ronald Sanders is a Consultant, Senior Research Fellow at London University and a former Caribbean diplomat.

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15 Comments In This Article   

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@ Observer

#15 Analyst » 2014-02-24 16:04

So infact if what you are saying is true than the country's annual energie bill is somewhere in the region of US$146,000,000.00.
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Analyst

@John French !! » 2014-02-24 02:22

#14 Observer... » 2014-02-24 11:01

Confidants say that the Good Hon. Dr. PM wishes to be remembered as the Most Caring Leader in CARICOM hence the social good of taking care of the aged – a very noble endreavour.

As you can see this is just a front. The majority of the funds are not used on social program. They are use to suppliment the budget shortfall. Hope money will be their to pay all the bills on time for the next 25 years. Because each shipment creates a debt for the next 25 years to come. So as of today final pay will be in 2039. Sorry I don't think I will be around to speak to that. But if the Lord so grand me that long live I hope to be in sound mind to speak up about these very same days and wicket politicians.
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Observer...

@ Ciroc, Observer & Skyewill - Why Deny The Obvious Child! PT3

#13 John French !! » 2014-02-24 02:22

Notes From A Native Son Of The Rock! Confidants say that the Good Hon. Dr. PM wishes to be remembered as the Most Caring Leader in CARICOM hence the social good of taking care of the aged – a very noble endreavour.
The aged poor will not inherit the land, only the young, future generations & the meek.
Why were these funds not used to develop sustainable profitable enterprises to benefit those to whom the debt is bequeathed & some of the profits diverted to social services to care for the aged poor? Why did GoAB deny the Obvious Child?
www.youtube.com/watch?v=IUz6Hov7j-c
Anansi returned to spin a web:"A householder, planted a vineyard, ..., digged a winepress in it, ... let it out to husbandmen, went into a far country: when the time of the fruit drew, he sent servants to the husbandmen, that they might receive the fruits of it. The husbandmen took his aservants, beat one, killed another, ... Again, he sent others more than the first: they did unto them likewise. He sent his son, saying, They will reverence my son. But when the husbandmen saw the son, they said ..., This is the heir; come, let us kill him, let us seize on his inheritance. They caught him, ..., slew him. When the lord of the vineyard cometh, what will he do unto those husbandmen? He will miserably destroy those wicked men, will let out his vineyard unto other husbandmen, which shall render him the fruits in their seasons".
Oh Gad! Pray Fuh Mi Picknees!
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John French !!

@ Ciroc, Observer & Skyewill - Why Deny The Obvious Child! PT2

#12 John French !! » 2014-02-24 01:41

Notes From A Native Son Of The Rock! What lies ahead? Oil will never return to $40.00 USD per barrel. Is Sanders’ hoped for Venezuelan Opposition Government going to tear up the Agreements? Go Figure. What will become of the land dispute with Guyana should be the question?
Will it all slip away? www.youtube.com/watch?v=5_H-LY4Jb2M
This commenter has pointed to the lack of Vision, Mission, Values & Strategic Objectives being exercised by GoAB. Sanders points to the OECS given his consultant, researcher & diplomatic skills. Shall leave comments on them to their nationals.
That there is no transparency and accountability with this fund by GoAB is without question. Where are the Black Elites, Intelligentsia, Ecclesiastics , “Edge-up Arrivistes”, Hangers on? Besides, there is " ...Never a Free Meal." Is without doubt, given that the agreement specified amounts, term & interest payments
The issue GoAB failed to address is how do you turn lemons into lemonade
The funds benefits have been diverted to GoAB’s social programs they say under the care & guidance of the Good Senator Massiah. Was this the most apropos placement? Jobs for the faithful Ambassador? Have Mercy Pon Us! www.youtube.com/watch?v=I6Pvycdgp0g
Where are Corty 485K, The Economist & The Scientist and all of the Financial Administrators &Managers In The Ministry Of Finance? Duncy Bat What say you?
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John French !!

@ Ciroc, Observer & Skyewill - Why Deny The Obvious Child!

#11 John French !! » 2014-02-24 01:26

Notes From A Native Son of The Rock! Today’s discourse at the Amofah Market at Da Bridge has been between Akan & Ashanti. Anansi the beloved spinner of webs said it was above his pay grade & only the Venerable Pompey would be able to say what was amiss. Before he left for the Skerkley Mountains he said Quote:
Woe be unto the Scribes & Pharisees! But what think ye? A certain man had two sons; he came to the first, & said, Son, go work to day in my vineyard. He answered, I will not: but afterward he repented, & went. He came to the second, and said likewise. he answered & said, I go, sir: & went not. Whether of them twain did the will of his father?
The Vendor at Da Market said Forget “Nansi”! Pay Attention to The Venerable Pompey Quote:
Interesting Caption said he: It is clearly not whether the countries referred to are " ...Prepared," but whether they are " .Making preparations" for staving off that which lies ahead.
Trinidad & Tobago did not join the arrangement. Why should they? Too even mention TnT speaks to the writer’s sense of agency. He was once A&B’s leading diplomat to the Court Of St. James.
Bimshire was given marching orders by SAM or else say good bye to the good Offices. The Third force made it clear that this would not fly & they would upset the Political Balance between Servants & The Privateer Planter Cla$$. During Elizabeth's visit to Bimshire, she stayed with her Cousins.
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John French !!

@ CIROC

#10 Skyewill » 2014-02-24 00:31

Wind farming is perfect for Antigua and Barbuda and no research needed. I have written here before how Mast Codrington build windmills all around these islands in the perfect places to capture the trade winds. You thought I was joking? A serious ting dis! I did the research and it is fact. That place call Betty's Hope is full of secrets that we are not looking at. The Answer t who will own Antigua: CHINESE. They are coming in droves, buckets and sauce pans and every Chiney woman in Antigua is pregnant. They get free pass and plenty money and concessions from our government no Antiguan ever dreamed of. Soon you will have to order your English Harbor in Mandarin!
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Skyewill

Time for Socialism to go. It doesn't work #3

#9 Observer... » 2014-02-24 00:22

No transparency how our monies are being handled. And they have skillfully kept this out of the consolidated funds. So the minister can get his hands on these funds without parliament ever knowing until it is too late. We need to demand accountability in this country. Like the Venezuelan people we need to stand up. By the way I agree with the Venezuelan people. How can their government justify that with such an oil rich country, people should have it worse than us here. And we enjoy the benefits of their products. Un-acceptable for such an oil rich country. But this is what Socialism and Communism will do. Systematically keep the people poor. And then they want to put the blame on Capitalism and of course the USA. Had they had a free market society and had the Government use the country’s wealth for the betterment of the people they would have been in a much better state. There is absolutely no need for Venezuela to be in the list of poor countries. Where people suffer just to get by on essential goods. And they have billions out in grants and loans to other countries just because of some philosophy. Give me a break. Time for the Venezuelan people to rise up and take their country back from these Socialists.
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Observer...

Time for Socialism to go. It doesn't work #2

#8 Observer... » 2014-02-24 00:21

I was told this is about half the value of one shipment of oil. PDV Caribe seems to be importing about six shipments a year. Of which they get full payment from West Indies Oil but only need to pay Venezuela 50%. The other 50% need to be prudently invested over the term of the repayment, which as ambassador Underwood told us is 25 years and which include a moratorium of two years. So the Baldwin Spencer government really has a cash cow here and is very secretive about it. Nothing I mean nothing is being disclosed. This I have a great problem with. And we Antiguans sit and accept this. But when the chit hits the fan and we are called to pay back this debt, and we have no money to do so we all will ball murder. We are the ones that allow this gross miss use of public funds. These are not Chavez funds. He may have given us the credits but we have to find the money when due someday to pay it back. It is not free. So Mr. Pompey indeed there is no free lunch in this. And it never was one. The Government has used these funds to supplement their budget short comings and still they are not making it. Scandalous. And where the heck is the so called Labour Party opposition. I am positive they are not saying anything because it’s like the pot cannot call the kettle black. They would have done the very same thing. So the people are screwed no matter who is in power on this one.
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Observer...

Time for Socialism to go. It doesn't work #1

#7 Observer... » 2014-02-24 00:20

I have long warned about this arrangement with Chavez. Sometime ago the PDV Caribe office put out an advertisement in the paper as to the projects they have so far spent money on. Some I must say cannot be seen as social programs. Such as works around the Sir Vivian Richard Stadium, The Airport extension, the Dredging of Heritage Quay and the Barbuda Airport renovations. You have to be very deceitful in your argument to argue that these are social programs. But then again that is the UPP. Very deceitful. And furthermore I was told that most of its funds is invested in ABIB and Long Term Government Bonds. The two only social programs do not amount to that much money. Let’s take the Utility program. This program gives $100.00 to seniors. So in one year it’s $1200.00. From the last acknowledgment on the radio by the Operations manager I believe he said there are about 5100 beneficiaries. So that totals to be $6,120,000.00 per year. The other program People’s Benefit program give $215.00 p/month to their beneficiaries. And I believe he mentioned to have about 4000 beneficiaries. So that totals to $10,320,000.00 per year. Overall total EC$16,440,000.00, or US$ 6,088,889.00.
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Observer...

RE: Petro Caribe- Are Caribbean Countries Prepared for the Worst

#6 CIROC » 2014-02-23 14:13

Antigua and Barbuda one of the ways you could help yourself in the long run.Begin to turn to alternative energy.Do some real good studies as to where would be the best places to build wind farms.At some point fossil fuel would become to costly for you as a Government.As it stand now people are crying about their utility bills in the country.In my opinion Petro Caribe is not helping the majority of Antiguans. What were the incentives to join Petro Caribe in the first place. One of the concerns that I have. The Government signed on to many things for good public relations and then think about it after.By then it is too late. Do not forget the revised treaty of Chaguaramas.They only realized what it was all about after the case involving the Jamaica woman in Barbados.That case was adjudicated in the courts.The rest is history.Governments in Antigua and further afield need to show their side work before they signed off on the subject matter.I am wondering how much does Antigua owe Venezuela for their oil supply in regards to Petro Caribe.In closing who will own Antigua the Chinese and or Venezuela.Just concerned.
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CIROC

PetroCaribe IS A SERIOUS PROBLEM FOR ALL - et, all

#5 Concerned Antiguan » 2014-02-23 11:38

Just in case you missed this article. Please Read then join the debate.
www.trinidadexpress.com/commentaries/Cloud-over-PetroCaribe-245774611.html
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Concerned Antiguan

Kenred

#4 Migration » 2014-02-23 09:49

Are you aware that there was an agreement? If the programme comes to an end then the repayment must take the course that was agreed to. So please do not try to mislead ppl.
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Migration

NEVER A FREE MEAL

#3 RAWLSTON POMPEY » 2014-02-23 09:39

Interesting caption, Sir Ron.

It is obvious that given its current untenable economic state and international indebtedness, that are seemingly affecting the quality of life, resulting in domestic turmoil, " ...Venezuela's Generosity" has become unsustainable.

Besides, there is " ...Never a Free Meal."

It is clearly not whether the countries referred to are " ...Prepared," but whether they are " .Making preparations" for staving off that which lies ahead.
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RAWLSTON POMPEY

RE: Petro Caribe- Are Caribbean Countries Prepared for the Worst

#2 Kenred » 2014-02-23 09:25

PC will come to an end very soon. Venezuela's economy is on the verge of collapse and it can no longer give hand-outs. It will bring the program to an end. All that we will have left is a huge debt to Venezuela of hundreds of millions of dollars to repay. Venezuela will want its money sooner rather than later. The PC program has increased our government and national debt tremendously. Barbados was smart to stay away from the program.
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Kenred

A&B Elections Debate Topic

#1 Concerned Antiguan » 2014-02-23 06:44

To DMC, UPP, ABLP and True Labour. What provisions are in place or for new comers should/would you put in place if there is a loss in benefits from PetroCaribe sudden demise. These are the issues that matter now to a growing independent. movement. We will be voting for the party that crafted the best plan for Antigua and Barbuda. Leaders, thanks for replying. Hon Dr Cort, you could respond since you claimed on Friday, February 21, the your government reduced debt burden and set a target to reduce the debt by less than 60% before 2020. According to my record, UPP looks good with thus Pietro Caribe deal but I am not sure if we safe in light of the scare coming from Venezuela.
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Concerned Antiguan

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Sir Ronald Sanders

Sir Ronald Sanders is a business executive and former Caribbean diplomat who publishes widely on Small States in the global community.

 

 

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