Jamaica Observer
CARACAS, Venezuela (CMC) — The Venezuelan government is set to increase the interest rate it charges to finance oil purchases by Central American and Caribbean countries under the PetroCaribe deal.
According to reports from online financial news agency Platts, the increase stems from higher administrative and maintenance costs of the loans.
Platts is a division of McGraw Hill Financial, a leader in credit ratings, benchmarks and analytics for the global capital and commodity markets.
Since the creation of PetroCaribe in 2005, 17 member countries have enjoyed an annual interest rate between one and two per cent, but as of October that will rise to 2.4 per cent.
The source said the planned increases are permitted under the agreements Venezuela signed with the participating countries.
He added that no additional increases in rates are being contemplated in the near term.
The report states that Venezuela is unlikely to reduce or suspend oil shipments to the debtor countries given the political value it sees in the oil alliance. Heads of State and Government of PetroCaribe member countries are set to meet in September.
In reacting to news of the planned increase, Jamaica’s energy minister, Phillip Pauwell, said he was not aware of this move. However, the Opposition Jamaica Labour Party’s spokesman on energy, Gregory Mair, said he is not surprised.
“Because of the precarious financial situation that Venezuela is in, I’m not surprised. But, what is of real concern is what we could see in the future as a tightening of the terms and conditions of the PetroCaribe agreement, meaning that they could reduce the credit lines and probably we would have to find more US dollars to pay them on a monthly basis, which would put more pressure on the foreign exchange rate for us here in Jamaica,” Mair said.
Under the PetroCaribe agreement, members can buy oil or refined products from Venezuela at favourable rates and through a long-term financing agreement at low-interest rates.
Petrocaribe members are Antigua and Barbuda, Honduras, Bahamas, Jamaica, Belize, Nicaragua, Cuba, Dominican Republic, Dominica, St Kitts and Nevis, Grenada, St Vincent and the Grenadines, Guatemala, St Lucia, Guyana, Suriname and Haiti.
On this matter a report out of St. Kitts states in part:
The source said Venezuela exports an average of 180 000 barrels per day (b/d) to PetroCaribe countries, of which 143 000 b/d is oil and 37 000 b/d is refined product.
Over the past two years, the debt for oil purchase by PetroCaribe countries has risen to $5.7B with Cuba and Nicaragua accounting for the most of it.
In a press release headlined “St. Kitts & Nevis Signs Another Petrocaribe Agreement” and dated June 29, 2006, it stated that St. Kitts and Nevis and the Bolivarian Republic of Venezuela have signed another PetroCaribe Agreement designed to activate the terms of the first agreement which symbolized a fuel arrangement between the two countries.
It also stated: “Permanent Secretary in the Ministry of Public Works, Utilities, Transport and Posts Mr. Oaklyn Peets, said that prior to the second signing there had been a meeting with the stake holders to ensure that the supply agreement would materialize.”
And that Permanent Secretary Peets said there had also been a meeting with representatives from Antigua and Barbuda to discuss the possibility of the country being a transshipment point to St. Kitts and Nevis.
The release also spoke to the benefits that could be derived from the PetroCaribe Agreement, which Minister of Public Works, Utilities, Transport and Posts Hon. Dr. Earl Asim Martin outlined the financial agreement.
“He said that if, for example, $100 million in petroleum products was purchased via the agreement, $60 million would have to be paid upfront. The Government of St. Kitts and Nevis could then invest the remaining $40 million in social programmes. The agreement enables the repayment of the $40 million over a period of 25 years at a one percent interest rate.
“The Minister responsible for Utilities further explained that the full repayment does not have to be done monetarily. He stated that the repayment could also be worked out in terms of services and products that could be given to the people of Venezuela. Minister Martin also referred to the fact that Venezuela is a member of the Organisation of the Petroleum Exporting Countries (OPEC) and so has to sell its petroleum at a standard price as set by the organisation. As such, the agreement is a means by which the signatory counties can obtain cheaper initial petroleum costs enabling the development of social programmes.”
