The PetroCaribe agreement between Jamaica and Venezuela, the world’s fifth largest oil exporter, has been the focal point of high praise and harsh criticism since it arrived on the scene in 2005. The agreement has remained in place despite several changes in the leadership of the Jamaican Government and has made it back into the news after it was disclosed at a Gleaner's Editor's Forum, on August 24, 2012, that the PetroCaribe Development Fund would granting millions in funding to assist marginalized communities across the island. Here is a look at PetroCaribe’s impact on Jamaica.
WHAT IS PETROCARIBE?
PetroCaribe is an agreement between Venezuela and some Caribbean territories to purchase oil on preferential payment conditions. The agreement, which began in 2005, allows beneficiary nations to buy oil at market value but only pay a percentage of the cost up front. The balance can be paid over 25 years at 1% interest.
Beneficiary nations are allowed to purchase 185,000 barrels of oil per day on these terms. Additionally, these nations could settle their debt to Venezuela using goods and services.
The countries that are signatories to this agreement are: Antigua and Barbuda, the Bahamas, Belize, Cuba, Dominica, the Dominican Republic, Grenada, Guyana, Jamaica, Nicaragua, Suriname, St Lucia, St Kitts and Nevis, and Saint Vincent and the Grenadines. Cuba, the Dominican Republic, Haiti, Honduras and Guatemala are also party to the agreement.
Barbados and Trinidad and Tobago, which has its own oil industry, have not signed on to PetroCaribe.
WHAT WAS THE IDEOLOGY BEHIND PETROCARIBE?
In this Gleaner article, columnist Robert Buddan examines the idelology behind PetroCaribe and the dream of President Hugo Chavez to create an alternative to development. Here is an excerpt from that article:
“The philosophy behind PetroCaribe is simple. The American way is neither the only way nor even the best way to get development. Development must aim at the poor who are left out of markets and left behind by states. PetroCaribe encourages South-South relations and regional integration on consensual terms. It respects sovereignty because it does not require a country to stop doing business with any other, including the United States. It does not support overthrow of governments or assassination of presidents. Its only condition is that savings from oil concessions are used for social and economic development. The concessions go to the poor, not the rich.”
WHEN DID JAMAICA BECOME A PART OF PETROCARIBE?
Venezuela and 13 Caribbean countries signed multilaterial agreements on July 29, 2005. Eighteen countries are members of PetroCaribe, whose objective is to alleviate the burden of rising oil prices and its negative impact on Caribbean countries.
Below is the piece of legislation that solidified Jamaica's agreement with Venezuela.
The Petroleum (Ammendment) Act-The PetroCaribe Development Fund
WHAT ARE THE TERMS AND CONDITIONS OF PETROCARIBE?
Countries under PetroCaribe are required to pay 40% of their oil bill within 90 days. The remainder can be paid over the next 25 years at a fixed interest rate of 1% as long as oil prices exceed US$100 per barrel.
Seventy per cent of payments may be deferred if oil reaches US$150 a barrel.
For more on the terms of the deal, check this Gleaner article:
HOW MUCH MONEY ARE WE TALKING ABOUT?
Between 2006 and 2011 Jamaica’s total liabilities to Venezuela under the PetroCaribe Development Fund (PDF) amounted to J$164 billion.
Manager of the PetroCaribe Development Fund, which was established to manage the proceeds from the arrangement, Sharon Weber, said that Jamaica’s payments to Venezuela are under control.
"We commenced debt servicing to Venezuela in 2008 and have made provision to continue to meet Jamaica's obligations under the agreement as they fall due," she told Gleaner reporters in this article.
WHAT HAS IT BEEN SPENT ON?
The Government of Jamaica has used funds associated with PetroCaribe for the several projects including:
- The expansion and upgrade of the country’s road network
- Upgrading of the Norman Manley International Airport
- Expansion of the port infrastructure
- The refinancing of domestic public sector debt (to prevent job losses and agency closures)
- To support the public transportation system including the Jamaican Urban Transit Company (JUTC)
- The Petrojam Refinery Upgrade Project
- Venezuela purchased 49 per cent of the shares in the Petrojam Refinery in 2008
Here are some reports from The Gleaner about the use of Petrocaribe Funds:
PetroCaribe is not the first oil related deal that Jamaica has entered into with Venezuela. Here are two others you can view:
Check the latest headlines on PetroCaribe: