A decade-long addiction to oil subsidised by Venezuela may be coming to an end for several Caribbean nations, with a nudge from the United States.
Fears that falling oil prices could knock the wheels off the already wobbly economy of oil-dependent Venezuela have sparked apparent interest in alternatives to Petrocaribe, a trade program created by the late President Hugo Chavez that has kept the region dependent on the South American country for energy.
Evidence of that interest will be on display Monday as Caribbean leaders converge in Washington for the first Caribbean Energy Security Summit, hosted by Vice President Joe Biden. Plans for the event have been in the works for months, but with oil recently falling to below $50 a barrel, a sense of urgency has emerged given Venezuela’s increasingly precarious situation.
“It’s absolutely the case that the economic situation has deteriorated for Venezuela and therefore the risk has gone up for all of these countries,” said David Goldwyn, an energy consultant and former State Department special envoy who has been involved in organizing the summit.
All the countries of the region, except Cuba, are expected to participate in closed talks that will involve Biden and other US officials as well as representatives of the European Union, the UN, and multilateral financing agencies such as the World Bank and Inter-American Development Bank.
The focus will be on exploring ways to help Caribbean countries convert diesel-powered energy plants to natural gas and increase use of other alternative energy sources. Such moves would reduce the nearly complete dependence on oil that has made energy expensive in the region and created the opening for Venezuela in the first place.
In practical terms, the summit is intended to offer technical assistance, help obtaining financing and advice on regulatory changes that can attract investment, said an official with the vice president’s office involved in the event.
The word “Venezuela” may not even get mentioned, but it will be on everyone’s minds. “These folks are in a situation where Petrocaribe is not as sweet of a deal as it used to be,” said the official, who spoke on condition of anonymity to discuss the private, multilateral talks in Washington.
At the moment, there is no sign that Venezuela will end Petrocaribe. Earlier this month, President Nicolas Maduro praised it as a “guarantee of peace, stability, mutual benefit, shared development and fair commerce shared by the entire Caribbean.” Still, a prolonged collapse of oil prices could sink an economy already in a deep recession or Caracas could be forced to commit its exports to China to meet its debt obligations.
Caribbean governments began signing on to Petrocaribe in 2005 as a spike in oil prices sent energy and car-fuel costs soaring. Venezuela, which created the program as part of an effort to counter US influence in the region, provides oil and refined products such as diesel at market prices, but it requires member countries to pay only a small portion of the cost up front and allows them to finance the rest under generous long-term debt agreements, as well as to barter for agricultural products or services.
That has given Petrocaribe members more cash to fund their perennially strapped governments. Haiti alone said in a recent report it has financed dozens of public works projects over the past five years that would have been impossible without Petrocaribe.
But there have been downsides. It has discouraged the Caribbean from trying to become more self-sufficient and shift to natural gas, which produces fewer greenhouse gases and would make their economies more competitive by bringing down energy costs.
“It’s a little bit like addiction. It’s hard for them to break it,” said Goldwyn, who is a co-author of a report on Petrocaribe by the Atlantic Council’s Adrienne Arsht Latin America Center, one of the organisers of a public portion of Monday’s summit.
Petrocaribe also has increased indebtedness, adding $3 billion alone to the obligation owed by Jamaica, where the public debt stands at 130 percent of GDP. And, if the program were to fall apart, it would leave its 17 members struggling for alternatives.
“I just don’t think it’s going to be around much longer, or at least not in its full form,” said Peter Schechter, director of the Atlantic Council’s Latin America Center. “We don’t want our closest neighbors in the Caribbean to suddenly be surprised by a situation in which Venezuela is suddenly unable to provide oil.” (AP)