COMMODOTIES: Errant Nations return to San Jose Fold

By Estrella Gutiérrez Reprint | | Print |

Estrella Gutierrez

CARACAS, Jul 18 1996 (IPS) - Haiti and Panama will finally return to the San Jose Pact fold from August, regaining their access to super soft loans while helping guarantee the future oil markets of Mexico and Venezuela.

Under the Venezuelan and Mexican Energy Cooperation Programme with Central America and the Caribbean, quotas of oil and its derivatives are sold to the beneficiary nations with 20 percent of the total cost returned to them in super soft loans, free of the demands of the multilateral lending organisations.

These funds must be used for development projects, with priority given to those which include contributions from Venezuelan and Mexican companies and products from the two nations.

Presidents Ernesto Zedillo of Mexico and Rafael Caldera of Venezuela will approve the agreement to supply member countries with 160,000 barrels of cheap oil per day for the 16th time running on August 2.

This will be followed by a joint declaration on August 6 which will also allow for the fuel to be received by the privatised electricity industries of the recipient nations, though they were previously not eligible.

Venezuelan Pact negotiators told IPS that Haiti and Panama had been able to return to the list after arrangements were made with the national governments on their overdue credit repayments.

There are now eleven Pact members: Barbados, Belize, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Haiti, Honduras, Jamaica, Nicaragua and Panama.

Haiti was suspended from Pact Membership twice, firstly when the dictator Jean Claude Duvalier was found to be selling the oil on when it served his purposes, and secondly, when Jean Bertrand Aristide was ousted by the Raoul Cedras coup in Sept. 1991.

Venezuela supported Aristide with political and economic measures including supplies of 6.5 billion barrels of oil a day under the Pact, though Mexico played no part in this initiative.

The new Haitian President Rene Preval paid the overdue interest arranging a repayment plan and asking to be readmitted to the pact.

Panama had also previously lost its membership as it ran up debts of more than 90 million dollars with Venezuela and parallel debts with Mexico, negotiations for its reinclusion should finish next week in Caracas.

Luis Giusti, president of the Venezuelan State oil company (PDVSA), explained this system also benefits the two companies providing the oil, as they are guaranteeing themselves a privileged position in one of most dynamic areas of the world oil market.

The timing of the Pact renewal is aimed to overcome a swell in oil exporting and consuming capital, which leads to the impression that the vicissitudes of the imposition market law might finally do away with the most successful schemes of South-South cooperation.

However, after substantial revision of the credit mechanisms, the new improved programme is back on line.

There were also problems in the donor nations, especially Venezuela, where the Pact was criticised for “giving away” funds which were not recovered, while the national population was suffering from serious economic problems.

But the figures show that 60 percent of the income going to the Venezuela Investment Fund (FIV), which deals with the financial part of the agreement come from cooperation.

The FIV is now limited to loans totalling 15 percent of its total assets, and a reduction to 50 percent of the goods and services to be used in a project in a beneficiary nation must come from Venezuela.

The FIV also eliminated the rule that 20 percent of the funds of each loan had to be left in the Central Bank to shore up the balance of payments, while the rest was employed in projects.

This mechanism had meant the loan approval system was previously very restrictive, as the financial authorities in the beneficiary nations preferred to keep the bulk of resources at low interest rates and as long term monetary support, instead of using them for trade and development projects.

The internal liberalisation programmes, especially in the Central American nations, have made it easier for the funds to go directly to local projects without the nation receiving direct assignations – a situation which also benefits the Mexican and Venezuelan companies working in cooperation projects.

Now the euphoria of a buyer dominated oil market with excess offer are over, the Central American and Caribbean nations have seen the that the secure supply and the loans offered by the Pact are really worth their salt.

Some two billion dollars in easy loans, have already been provided to the nations free of the demands of the multilateral lending agencies.

Meanwhile, the producers also make a good profit from these clients, for example, only 14 billion of the 35 billion dollars of oil supplied to the Dominican Republic came under the Pact quota, and all additional supplies in the recipient nations are provided by PDVSA and the Mexican PEMEX.

The PDVSA believes its plan for the year 2005 will make Central America and the Caribbean the most profitable area is traditionally provides with oil, ahead of South America, the United States and Canada, and it is therefore worth maintaining the privileged position of this market.