5 Facts About The PetroCaribe Repurchase Deal

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The Jamaican government’s current plan to repurchase the nation’s PetroCaribe debt is a source of great discussion locally, as many have chimed in on this deal’s possible implications. Opinions on the issue are varied with arguments being made both in favour and opposition of the government’s decision. Important voices in the discussion include that of Fayval Williams, Deputy Spokesperson on Finance, who suggested that the deal is to the detriment of the Jamaican people. The Government, however has projected that the deal will save the nation US$250 million in the long term and will reduce the country’s debt to GDP ratio by about 10%. Others that have weighed in on the matter include PSOJ CEO Dennis Chung and Opposition Finance Spokesman Audley Shaw.

In light of the lively debate surrounding this topic, diGJamaica has collated a list of five fundamental facts that everyone should know about the PetroCaribe debt repurchase.

  1. Jamaica is paying off about US$3 billion of PetroCaribe debt for a discounted amount of US$1.5 billion. 
  2. The Jamaican government raised the funds for this buy-back by issuing two bonds to the international capital market. The bonds were oversubscribed, raising in excess of their target. The main broker on the deal was Citibank.
  3. Of the US$2 billion raised, US$1.5 billion will be used to service the PetroCaribe debt, whereas the remaining US$0.5 billion will be used for general budgetary purposes.
  4. The bonds mature in 2028 and 2045, and have interest rates of 6.75% and 7.875%. Comparatively, the interest rate on the PetroCaribe loans was between 1% and 2% with payment periods of 25 years and 17 years respectively.
  5. This deal follows the precedent set by the Dominican Republic who in February 2015 reached an agreement to repurchase most of its US$4.1 billion debt to PetroCaribe at a reduced amount of US$1.9 billion as funded through the sale of government bonds.

Be sure to read and assess the arguments being made about the PetroCaribe deal to find your position on this hot topic. For background information on Jamaica’s relationship with PetroCaribe, read this blog post and check out diGJamaica’s History Of Petrocaribe In Jamaica.