Guyana “concerned” about Petrocaribe’s cheap oil as unrest fuels alarm bells

Last Updated on Saturday, 26 December 2015, 20:59 by GxMedia

Guyana is paying keen attention to the likely impact that political unrest in Venezuela might have on oil supplies under PetroCaribe, even as a renowned Economist warned about a spike in prices for poor Caribbean countries if the concessionary oil deal falters.

Foreign Minister, Carolyn Rodrigues-Birkett acknowledged that Guyanese authorities were keeping a close eye on the weeks of political upheaval against the administration of Nicolas Maduro. “We supply rice to Venezuela, we buy fuel from Venezuela and so ‘yes’ certainly it’s a cause for concern in those areas,” she told Demerara Waves Online News (www.demwaves.com).

Government was expected to be briefed by the Head of the Guyana Energy Agency (GEA), Mahender Sharma who has just returned from the neighbouring Spanish-speaking nation.

Asked whether Guyana has received assurances from Venezuela that oil supplies would remain intact despite the opposition-fuelled protests, she said this country was unlikely to be atop the agenda of the government at a time of unrest. “I would check with him but I think if there is any interruption, one would understand given the situation there as well,” she said.

Currently, Guyana buys half of its fuel supplies from Venezuela and the remaining 50 percent from oil-rich sister Caricom nation, Trinidad and Tobago.

American Economics Professor, C. Fred Bergsten said the turmoil could negatively trickle down to Caribbean countries that have become dependent on cheaper oil in the short-term for long-term low-interest repayments. If PetroCaribe supplies are suspended or cancelled altogether, he warned that could spell doom for the virtually empty coffers of many tourism-dependent island nations. “Where you are going to get your oil at anything like that price? You are going to have sharp jump if you go to the world market price…and that’s the kind of thing I was worried about,” said Bergsten who XXXX

Bergsten, who was a senior US Treasury and foreign policy official,  said he had always predicted supply and price disruptions because PetroCaribe was a inherently temporary and did not allow beneficiary nations to plan their long-term energy needs.

“I have always thought that the (late President Hugo) Chavez economic concessions were driven wholly by very short-term foreign policy motivations and personal grandiosities and, therefore, they were inherently temporary,” he said. Some analysts said Venezuela’s oil diplomacy was aimed at wooing Latin American support for its brand of socialism and opposition to the United States.

He recommended that Caribbean countries follow in the footsteps of Organisation for Economic Cooperation and Development (OECD) member states and establish an admittedly expensive fuel reserve.

Former Antigua and Barbuda diplomat and representative to the World Trade Organisation (WTO), Ronald Sanders has urged Caribbean countries to begin adjusting their budgets. “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,” he said. Sanders recommended that the 12 Caricom beneficiary countries turn to the Caribbean Development Bank (CDB) for advice on how best to adjust their economies. Making out a case to explore alternatives in a post- PetroCaribe era,  Sanders noted that Venezuela’s inflation was not at a staggering 56 per cent; the government’s budget deficit was 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 US$1.00.

“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,” added Sanders in his periodical column.

Despite the unrest, DemWaves was told that officials of the two countries have been reconciling payments for rice and paddy sold to that country up to last December when the 2013 contract expired.

Authorities here hope that the troubles on the streets of Caracas would subside or would impact little on the negotiation and signing of another lucrative paddy and rice agreement with Venezuela.