Economic Columnist – Edwin Laurent CMG OBE
Venezuela’s Oil Largesse: What Future?
It is not just his friends and supporters who are concerned about the health of Venezuelan President Hugo Chávez, but most of the Caribbean, because of what his absence could mean for the Petrocaribe programme.
Chávez, 58, is reported to be suffering complications following a tracheotomy in Havana. He had traveled to Cuba in the middle of last month to undergo a fourth round of surgery to treat the cancer that he has been battling since at least June 2011 when doctors removed a tumor, the size of a cricket ball, from his pelvis.
Chávez’s critical health problems come at a sensitive time since he is due to be sworn in for a new term as President on 10 January 2013. There is though little likelihood of his being able to recover sufficiently to make it back home for the inauguration so soon.
At the time of writing, the likelihood was that the ceremony would be postponed and according to the country’s Vice President he will continue in office.
Petrocaribe, the flagship programme of the Chávez Presidency, was created in 2005 and permits participating countries in Central America and the Caribbean, to buy oil from state-owned Petroleos de Venezuela (PDVSA), paying as little as 5% upfront and the remainder over 25 years at a rate of 1% interest. Barbados and oil producer, Trinidad and Tobago are the only Caribbean countries to reject PDVSA’s offer of preferential supplies.
The subsidized oil exports are vitally important to users in the Caribbean, especially Cuba where they help prop up the economy. To give an indication of the significance of the facility to the region, according to Washington’s Congressional Research Committee, annual Petrocaribe sales are about three times the quantity of U.S. aid to the entire Western Hemisphere.
Ronald Balza. Photo courtesy rctv.net
Should Chavez not be inaugurated, or for whatever reason is unable to function as president, new elections will have to be held. But who might win?
The foremost concern in the minds of many in the Caribbean is whether a new President will ensure that Petrocaribe honours existing contracts and that the facility itself continues. Can Petrocaribe outlast Chavez.
Before leaving for Havana, Chávez announced on 8th December that if illness prevents him from remaining in office, voters should elect current Vice President Nicolas Maduro, who has vowed to protect Chávez’s legacy and to continue his policies.
If Maduro takes over, Petrocaribe should be safe; but what if the opposition wins? In last October’s presidential election, Chavez comfortably beat Henrique Capriles by a margin of more than 10%, but the latter might well fare better against a less charismatic opponent.
And what will a Capriles’ win signify for the oil concession being enjoyed by the Caribbean countries?
According to Ronald Balza, oil policy coordinator of the opposition Democratic Unity Table Alliance, Petrocaribe will not be disbanded entirely even if the opposition wins. Speaking to a Spanish news agency, he said “We will revise the contracts to make sure they are profitable rather than political.”
His true meaning is not difficult to decipher. Providing petroleum products on such generous terms is obviously not profitable for PDVSA, so if in a post-Chavez era Petrocaribe is to be governed by normal commercial considerations then its favourable payment terms for the Caribbean will clearly not be sustainable.
IMF and Austerity: Jamaica style
Prime Minister Portia Simpson-Miller
Jamaicans are bracing themselves for the harsh conditions that are likely to accompany the International Monetary Fund (IMF) agreement expected to be finalised during this year.
Prime Minister Portia Simpson Miller has acknowledged this; warning in her New Year’s message: “This new year will bring stark realities into focus”.
She however sought to reassure her countrymen that her administration will adhere to sound macro-economic policies whilst at the same time taking all necessary steps to foster increased investment in the economy, particularly in physical infrastructure and tourism.
In his message, leader of the opposition JLP, Andrew Holness, called on Jamaicans to “focus on the imperatives to achieve our economic independence at the heart of this focus must be a collective resolve to reduce the cost of energy, reform out tax and incentive systems, foster greater private and public partnerships and develop new industries and business opportunities”.
Belize: Life After Debt
Mark Espat. Photo courtesy edition.channel5belize.com
After months of financial turmoil following Belize’s failure to make debt repayments that became due in August last year, a resolution of sorts seems in sight.
In the very last week of December Prime Minister Dean Barrow told a press conference that a “comprehensive” and “sustainable” agreement had been reached with the country’s creditors.
Belize’s problems had come to a head in early August 2012, when it missed a US$23 million coupon payment on its US dollar Step-Up Bonds due 2029 and Standard & Poor’s deemed it to be in default on its debt and downgraded its sovereign credit rating.
By 20th August though, after paying US$11.7 million of the amount due, the country was able to secure a 60-day reprieve from bondholders who agreed to refrain from pursuing legal remedies during the period to allow restructuring negotiations to continue.
This heavily indebted country (US$548.3 million) desperately needed the respite from its major creditors to avert the looming financial catastrophe.
The negotiations were held between the Belize negotiating team led by Mark Espat on one side and on the other, an International Creditor Steering Committee and an ad hoc group that included Greylock Capital Management, Steadfast Insurance Co., Capital Markets Financial Services and the Trinidad and Tobago Unit Trust Corporation and 20 other institutions.
However, initial proposals put forward by the government for rescheduling its bond payments, did not go down well with creditors. Apparently they calculated that they could suffer losses of up to 45% on their investments. By 29th November reports indicated that two new proposals were put forward; one entailed a 33% reduction to the debt and the second, the delay of debt repayments for 10 years. Both proposals are reported to have been rejected by creditors.
Continuing negotiations though were constructive for according to Boris Segura of Nomura “both parties seem to have begun negotiations in good faith”. The Wall Street Journal later quoted an unidentified committee adviser as saying that: “The committee is pleased with the progress of the negotiations over the past few weeks and will now be working with the members of the ad hoc group and the government of Belize to achieve closure.”
All of Belize would have heaved a great sigh of relief in the final days of 2012 when Mark Espat announced that agreement in-principle has been reached with the international Creditor Steering Committee and ad hoc group. Details though are still to be finalized and hopefully will be made public soon.
Cover Photo coutesy debt-collection-news.co.uk
