Guyana's ambassador to Venezuela, Dr. Odeen Ishmael writes: The weekend of July 12-13 saw the holding of an “extraordinary” summit of Petro-Caribe member-states in Maracaibo, Venezuela’s second largest city. Leaders of 14 of the 18-member alliance attended this vital forum which discussed the problems surrounding the rapid increase in oil prices and the accompanying rise in food prices in the region. The summit, chaired by President Hugo Chavez, also considered the ways how Petro-Caribe could be of assistance to ease the situation.Notably absent were representatives from Antigua & Barbuda, Bahamas, Grenada and St. Lucia. However, Guatemala participated as a new member while Costa Rica attended as an observer.
Arising out of the deliberations in which countries indicated that soaring oil prices were seriously affect their economies, Venezuela decided to revise the Petro-Caribe treaty by offering easier terms for purchases of oil supplies.
When the agreement was signed three years ago, oil prices were less than half of what they are now. However, it anticipated a rise in oil prices to reach as high as $100 dollars a barrel and the terms specified should the price reach that level, member-states would pay 50 percent within 90 days of their purchase. The remaining 50 percent would then be financed by Venezuela for a period of 25 years at 1 percent interest.
With the revision in Maracaibo, the terms now stipulate that the payment would be 40 percent when prices are between US$100 and US$150 with Venezuela providing 60 percent financing; and should the price climb over US$150, the initial payment will be adjusted to 30 percent.
Chavez also reminded member-states that repayment to Venezuela could be done in the form of commodities such as bananas, sugar, and rice, as well as tourist packages and services.
But the discussions did not focus only on energy supplies. Lengthy deliberations took place on the effects of the high oil prices on food supplies. The Caricom island states, in particular, complained of the impact of rising prices on their tourism industry since they have traditionally depended on imported food to meet the demands of the large influx of foreign visitors.
Currently, every country in the region is attempting to increase agricultural production, but the high costs of machinery, petrol, and fertilizer have been hampering the process. Statistics presented at the summit showed that the price of urea -- a fertilizer produced as a by-product of the oil industry -- increased four times since 2005 when the price was around US$230 per metric tonne.
Commenting on this problem, President Chavez said that the region was consuming more 200,000 tons of urea annually. Therefore, he stressed that work on building Venezuelan-financed fertilizers plants in Nicaragua, Dominica and Cuba must be advanced to meet the demand in the region.
In the meantime, he proposed a Venezuelan offer of 100,000 metric tonnes of urea annually to Petro-Caribe countries with a 40 percent discount at market price. This proposal will be further discussed at an emergency meeting of the alliance’s agriculture ministers on July 30 in Tegucigalpa (Honduras). There they will assess each country’s fertilizer requirements and develop areas of cooperation to improve their agricultural production and encourage intra-regional trade in food products.
Under the newly created body known as “Petro-Food”, the ministers will also work out the mechanisms of a special fund created at the Maracaibo summit to support financing of identified incentives. Venezuela agreed to contribute US$0.50 from its earnings from each barrel of oil exported for more than $100 outside of Petro-Caribe member-states towards this purpose.
Initial estimates indicate that this fund could accumulate more than $700 million annually and it will be used to finance agro-food initiatives in member countries with the aim of achieving food security.
In assessing the achievements of Petro-Caribe, Venezuela’s Minister of Energy, Rafael Ramirez, revealed that in the last three years oil supply from Venezuela to Petro-Caribe's countries amounted to 59 million barrels, with member countries saving an average of US$14 per barrel against the backdrop of the steep oil prices on the world market.
So far, Venezuela’s financing of the oil purchases amounts to US$921 million. Further, eight joint ventures have already been set up within the framework of Petro-Caribe, while the ALBA-Caribe fund has financed social projects in various member-states amounting to US$106 million.
Lauding the success of Petro-Caribe, Jamaica’s Prime Minister Bruce Golding announced a contribution by his country of US$5 million to this fund.
The summit also reviewed the progress of a number of Venezuela-aided projects in member-states, including refineries in Nicaragua and Cuba, storage facilities for oil and gas in Jamaica, St. Kitts & Nevis and Dominica, and the commencement of the construction of an international airport in St. Vincent & the Grenadines. The proposed gas pipeline through Guyana and Suriname is still under consideration and officials of the Venezuelan Energy Ministry have given a tentative date of 2014 for its completion at a cost of more than US$1.05 billion.
Meanwhile, Chavez announced that Petro-Caribe member countries would be given a block in heavy-crude oil Orinoco belt for drilling with the output refined within the region. He also offered those countries without experience in the energy field to send their students for training in Venezuelan institutions.
In analyzing the soaring oil prices globally, the leaders supported Venezuela’s proposal to OPEC for the establishment of a multilateral financing mechanism by the countries with energy surpluses which would allow such a mechanism to assume the cost of the energy bill of the world’s poorest countries.
Further, they voiced their united concern over the excessive speculation and lack of regulation in “futures” contract markets, one of the main causes of the excessive increase in oil prices. In this regard, they urged the regulatory authorities of “futures” contract markets in the New York and London Stock Exchanges to apply measures for the elimination of the speculative factor from international oil prices.
The Venezuelan President had stated earlier that the “speculative bubble” could collapse and send the price as low as US$70 per barrel but, on the other hand, geopolitical tensions, especially the threat of an invasion against Iran, could push it to US$200.
The next summit is billed for St. Kitts & Nevis at a date yet to be determined. But it is hoped that by the time that forum is convened concrete results on the decisions taken at Maracaibo will already be clearly visible.
Odeen Ishmael
embguy@cantv.net
(The writer is the Ambassador of Guyana to Venezuela. The views expressed are solely those of the writer.)
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