Economy & Trade, Headlines, Latin America & the Caribbean

ENERGY-LATIN AMERICA: Region’s Oil Powers Vie for Influence

Humberto Márquez

CARACAS, Dec 16 2005 (IPS) - Mexico and Venezuela, Latin America’s biggest oil producers, have launched separate energy cooperation programmes with their smaller neighbours in Central America and the Caribbean, in a quiet geopolitical competition that contrasts with their alliance of the past quarter century.

A new refinery capable of processing between 250,000 and 300,000 barrels a day of crude oil from Mexico will be built in one of the countries in Central America, as the hub of an ambitious energy assistance project that Mexico has agreed with its neighbours.

Mexico’s Mesoamerican Energy Integration Initiative will be the biggest engineering project in the region since the Panama Canal was built, involving not only the construction of a new refinery, but of a natural gas plant, hydroelectric dam and gas pipeline running along the Pacific coast as well.

The project will also link power grids from Colombia to Mexico, while Mexico’s state oil company, Pemex, will create a chain of gas station franchises. Plans also include renewable energy and energy efficiency programmes.

The refinery alone, to begin operating in 2011, will cost more than three billion dollars, of a total investment of nine billion dollars, according to the agreement signed Dec. 13 in the Mexican resort of Cancún by the governments of Mexico, Belize, Colombia, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama and the Dominican Republic.

Central America, which is heavily dependent on oil imports, is one of the regions of the world that has been hit hardest by soaring prices in the last few years.

According to the Economic Commission for Latin America and the Caribbean (ECLAC), the impoverished region imported 94.7 million barrels of oil last year, for which it paid over 3.9 billion dollars, 23 percent more than in 2003. But in 2003, the region had already paid 47 percent more than in 2002. And the total bill for 2005 will stand at around five billion dollars.

The meeting in Cancún also decided to create a multinational oil marketing company, at the cost of around 100 million dollars, of which Mexico will provide between 20 and 40 percent.

But Mexico and Venezuela will maintain the San José Pact, which dates back to 1980, by means of which the two oil exporters sell 160,000 barrels a day, divided in equal parts, to nations in Central America and the Caribbean on preferential terms, with financing for up to 20 percent of the total cost. The beneficiary countries enjoy the possibility of recuperating up to 20 percent of what they spend on oil through the Pact in the form of long-term loans for development projects. The credits, meanwhile, benefit suppliers of goods and services in Mexico and Venezuela.

“With the Mesoamerican programme, the pact could be updated or reformulated,” said Mexican Energy Secretary Fernando Canales.

Venezuela began to take steps in that direction in 2000, when it forged the Caracas Energy Accord to provide the beneficiary countries of the San José Pact with additional oil under preferential prices and terms. The Accord was later expanded to include other countries in Central America and the Caribbean like Cuba, which was excluded from the San José agreement.

Last June, Venezuelan President Hugo Chávez hosted a summit meeting with the leaders of Cuba, the Dominican Republic and the members of the Caribbean Community (CARICOM), made up of the English-speaking Caribbean nations plus Haiti and Suriname, to launch a new initiative: Petrocaribe.

Through the new alliance, Venezuela will export a total of 198,000 barrels a day – between seven and eight percent of its total exports – to 13 Caribbean nations, with financing for part of the cost.

In addition, part of the oil can be paid for by goods like sugar or bananas, or services, as in the case of Cuba, which sent Venezuela 18,000 doctors, dentists and coaches to take part in social programmes bringing healthcare, dental care and sports activities to the country’s slum neighbourhoods.

Caracas also set up a 50 million dollar fund to build the infrastructure needed by several Caribbean islands in order to receive oil from Venezuela. In addition, the Venezuelan state-run oil monopoly, PDVSA, will help expand and upgrade refineries in Cuba and Jamaica.

Venezuela has also proposed a similar initiative, Petrosur, for the countries of the Southern Common Market (Mercosur) trade bloc, made up of Argentina, Brazil, Uruguay and Paraguay.

At the Mercosur summit in Montevideo earlier this month, Venezuela’s request to join the bloc was formally accepted, although it will not actually become the fifth full member until undergoing a complex process.

Under the new alliance, PDVSA will export 18,600 barrels of oil to Paraguay on terms similar to those offered by Petrocaribe, and will help expand Uruguay’s refinery to allow it to process heavy crude.

In addition, PDVSA and Brazil’s oil company Petrobras will begin to build a refinery this month in northeast Brazil, and several oil fields in Venezuela will be reserved for oil companies and refineries from Argentina, Brazil and Uruguay.

In the Caribbean, Venezuela’s initiative made oil producer Trinidad and Tobago nervous, because its sees Petrocaribe as a new rival.

Venezuelan President Hugo Chávez, meanwhile, was accused by the United States and by the opposition in his country of trying to “buy” political support in the Caribbean.

But at the early November Summit of the Americas in Mar del Plata, Argentina, the Caribbean countries supported, as a bloc, the initiative presented by Fox to relaunch the talks for the U.S.-sponsored Free Trade Area of the Americas (FTAA), while Mercosur and Venezuela opposed setting a date for the resumption of the negotiations.

Chávez even lashed out at his friend, Dominican Republic President Leonel Fernández, for supporting the FTAA rather than the alternative proposal he had set forth, the Bolivarian Alternative for the Americas (ALBA).

The Dominican Republic, which consumes 110,000 barrels a day of imported oil and is plagued by a constant power deficit, is taking part in the energy cooperation initiatives of both Venezuela and Mexico.

Two years ago, Caracas temporarily cut off oil supplies to the Dominican Republic after it refused to investigate whether former Venezuelan president Carlos Andrés Pérez, who was living in exile in that country at the time, was conspiring to topple Chávez.

Pérez, who was convicted of corruption in Venezuela and is now living as a fugitive from justice in the United States, had stated that “”I am working to remove Chávez. Only Violence will allow us to remove him. That’s the only way we have.(Chávez) must die like a dog, because he deserves it.”

Perhaps that is what Fox was referring to in Cancún when he said the Mesoamerican energy initiative “will not depend on the good or bad will of the president or whatever government is in power in Mexico, as is the case with regard to other offers; it is not subject to anyone’s whims.”

Fox and Chávez had a bitter run-in during the Mar del Plata summit, after the Mexican leader complained that Chávez had addressed a rally against the FTAA that drew 40,000 people to a local stadium. Chávez responded by calling Fox a “puppy” of U.S. imperialism, and accusing him of “kneeling before Washington”.

The conflict escalated to the point that the two countries recalled their ambassadors, creating the political climate that forms the backdrop to the new energy cooperation initiatives offered by Mexico and Venezuela.

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