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OIL-CARIBBEAN: Petrocaribe Building ‘Anti-Crisis, Anti-Hunger Shield’

Humberto Márquez

CARACAS, Jul 14 2008 (IPS) - Seventeen countries in Central America and the Caribbean are to make down payments of only 40 percent on Venezuelan oil, while cooperating to expand their food supply, and calling on the North to take measures to curb speculation on futures markets, which is resulting in surging crude prices.

“Petrocaribe must become an anti-crisis shield to protect us from hunger,” said Venezuelan President Hugo Chávez who hosted the Fifth Summit of this South-South alliance.

The Dominican Republic’s President Leonel Fernández proposed creating a bloc of the 57 poorest nations in the South who are net oil importers to lobby for a global cooperation agreement with oil producers, and to demand changes in the rules for futures markets.

Prime Minister Ralph Gonsalves of St. Vincent and the Grenadines, for his part, successfully argued that Petrocaribe address the issue of fertilisers, which have tripled in price in the last three years, threatening food production on Caribbean islands.

Not only Energy ministers will attend Petrocaribe meetings in future. At the summit, held in the city of Maracaibo, 600 kilometres west of Caracas, a council of Agriculture ministers was created, which is to meet for the first time on Jul. 30 in Tegucigalpa.

Petrocaribe was created in 2005 as a Venezuelan initiative to supply fuels, as well as extend payment facilities and logistical and technical help, to neighbouring countries that are net oil importers.

The beneficiaries are Antigua and Barbuda, Bahamas, Belize, Cuba, Dominica, Dominican Republic, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Nicaragua, St. Kitts and Nevis, St. Vincent and the Grenadines, and Suriname. Costa Rica was present as an observer at this summit.

Under the Petrocaribe agreement, Venezuela has been sending 92,000 barrels per day (bpd) to Cuba and has made available up to 135,000 bpd for the other countries, although the effective demand has been 86,000 bpd, according to Venezuelan Energy Minister Rafael Ramírez.

In three years, Venezuela has supplied 59 million barrels of crude to its Petrocaribe partners, for which they paid 50 percent of its value within 90 days and the rest on credit over 25 years, with a two-year grace period and an interest rate of one percent a year, saving them 921 million dollars.

Venezuela is also developing joint venture companies to provide infrastructure for storage and distribution costing 550 million dollars, and has invested another 100 million dollars for social purposes in these countries.


But from now on, and as long as the benchmark price for North Sea Brent crude remains above 100 dollars a barrel, beneficiaries will be paying only 40 percent of their oil bill within 90 days, with the rest on the same terms as before. Chávez announced that if the price of oil reaches 200 dollars a barrel, only 30 percent would have to be paid in 90 days.

“If things carry on like this, after a certain point we will have to think about freezing prices,” said Chávez, without elaborating on what he had in mind.

Furthermore, Chávez encouraged the Central American and Caribbean countries to make their down payments for oil “with cattle, beans or tourism services.”

Gonsalves scored a point with his message about fertilisers, which “cost an average of 268 dollars a tonne in 2005, 405 dollars in 2007, 875 in 2008, and is being quoted at 998 dollars a tonne for 2009,” he said.

At those prices, “our farmers cannot produce, and if they do the prices will be higher than for imported food, increasing our dependency,” he said.

Venezuela, which produces two million tonnes of urea a year, offered to sell 100,000 tonnes a year to its Petrocaribe partners at a 40 percent discount, half to be paid on receipt of the product and half when the crop is harvested.

President Álvaro Colom of Guatemala – which became a full member of Petrocaribe at this summit – announced that his country would produce food for export to Venezuela, which imports more than 60 percent of its food.

Petrocaribe has “a new vision, based on complementing our economies on the basis of solidarity and fair trade,” said Colom. In the first quarter of 2008, Guatemala paid 749 million dollars for fuel, 63 percent more than it spent in the same quarter of 2007.

Costa Rican President Oscar Arias, who had a brief verbal spat with Chávez 15 months ago, came to Petrocaribe after his country spent 838 million dollars on oil imports between January and April this year, an amount 88 percent higher than for the same period in 2007.


Dominican President Fernández elaborated on “casino capitalism”, or speculating on futures markets, which he said “has become a destabilising force in the global economy.”

He pointed out that a barrel of crude cost 10 dollars in 1998, and last week reached 147 dollars, an increase of over 1,300 percent. But this year the price has risen by 10 percent a month, fuelled mainly by speculators.

Some days up to 850,000 contracts (for 1,000 barrels apiece) are traded – 850 million barrels are bought and sold – on paper, because the actual daily consumption of crude worldwide is ten times lower.

Furthermore, Fernández stressed, a contract buyer pays only five percent of the face value before he or she has possession of it and can sell it again, for a similar outlay.

“The 57 poor countries of the South that are net importers of oil should form a bloc and insist at the United Nations that the minimum payment for those paper purchases should be at least 50 percent,” said Fernández.

The Dominican president also said: “we thank Venezuela for its solidarity, but we must not leave it to make all the running alone.”

He said the 57 low-income oil-importing countries have seen their fuel bills increase by 40 billion dollars over the last year as a result of the doubling of crude prices.

That is barely three percent of the 1.3 trillion dollars by which the incomes of oil-producing countries have risen over the same period. Therefore, the proposed 57-nation bloc and its allies should work to persuade the oil- producing countries to restore the amount lost by the poorest countries, through soft loans or investment in development, he said.

The outcome document of the Fifth Petrocaribe Summit urges the regulatory authorities of the futures markets in the New York and London stock markets to take the necessary measures to eliminate speculation as a factor in the international prices of oil and other commodities.

Venezuela, for its part, made a commitment, to set aside 50 cents of each dollar for every barrel of oil exported outside Petrocaribe at a price over 100 dollars, in order to create a subregional fund for food security initiatives.

Such a fund would accumulate around one million dollars a day.

Finally, Chávez proposed handing over a crude oil exploration and exploitation block in the Orinoco Heavy Oil Belt – in the southeast of the country – to an association of the state oil companies of the Petrocaribe partners, for their consumption needs. He said Venezuela in turn could build fertiliser plants or refineries in several of these countries.

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