VIDEO: US$100-m PetroCaribe export potential
Jamaican exporters not taking advantage of supply terms to Venezuela under oil-for-debt deal
JAMAICA can export up to US$100 million in products to Venezuela under the PetroCaribe deal.
What's more, the figure keeps growing as the debt accumulated from the conversion of 50-60 per cent of oil imports from the South American country continues to rise.
Under the deal, through which Jamaica has borrowed over US$2.4 billion, exports can be used to service the loan.
But exporters have been slow to fill the gap that would soften the impact of hard currency repayment.
Jamaica imported just over US$1 billion of goods from Venezuela in 2012, most of which related to mineral fuels , according to latest data from the International Trade Centre. Conversely, Jamaica exported just US$1 million — mostly electronic equipment followed by sulfur and cement — to the South American country over the same period.
"Unfortunately, it is with regret that we have not gone far enough given what is feasible," said PetroCaribe Development Fund (PDF) CEO Wesley Hughes in an Jamaica Observer interview on Monday. "We are paying on average US$100 million in debt [annually], but we have not been able to export more goods and services."
He went on: "It's a win-win situation for everybody. [If] Companies [increase] exports, Jamaica wouldn't have to find the US dollars to pay [Venezuela], but rather pay local firms in Jamaican dollars, and Venezuela would get the debt repaid in goods that they need."
The Venezuelans have provided a comprehensive list of goods and services that qualify under the programme, which include payment in building equipment, cement, chicken, black beans, rice, and animal feed.
Caribbean Cement Company is on the verge of completing three-year-old negotiations and is expected to export 100,000 tonnes of clinker shortly.
"We have come close with consummating the deal between Venezuela and the cement company. There are just some minor technical legal issues," he revealed. "Hopefully in a couple of weeks we should see the export of clinker moving, and that would be very substantial."
The value of the initial supply contract is estimated at US$8 to US$9 million, while a further 400,000 tonnes may be exported through the arrangement next year.
But that still leaves some US$60 million for Jamaican exporters to exploit.
The products entering Venezuela won't benefit from any subsidies, and the companies willing to export there are required to find their own distributors. However, PetroCaribe can facilitate entry of local products into the sometimes protectionist Venezuela.
Hughes said that larger companies such as GraceKennedy and Jamaica Broilers will be targeted, while growing agricultural produce, which are in high demand in the South American country, such as black beans, at the large agro parks that are coming on stream is being considered.
The PDF plans to meet with the Jamaica Chamber of Commerce next month to raise awareness. It follows similar meetings with the Jamaica Manufacturers' Association.
Jamaica spends some US$2 billion on oil imports annually but the deferred oil payments under the PetroCaribe arrangement effectively provide some US$500 million in balance of payment support to Government annually. This is crucial in a cash-strapped economy currently relying on financial support from the International Monetary Fund.
At the end of March 2013 the total loan liability to Petroleos de Venezuela was $240 billion (US$2.4 billion). A total of US$150 million was repaid to Venezuela and the projected repayment for financial year 2013/14 is US$100 million, latest financials indicate.
The fund has total assets of J$261 billion as at March 2013.
PetroCaribe Development Fund was created by the Government of Jamaica in 2006 to manage the proceeds which accrue to Jamaica under a concessionary oil importation arrangement with the Government of Venezuela.
When oil exceeds US$40 a barrel, between 30 and 70 per cent of each invoice is financed and the loan repaid over 25 years at a one per cent interest rate per annum.
Below US$40 a barrel, between five and 25 per cent of each invoice would be financed over 17 years at a two per cent interest rate per annum, according to official documentation from the Fund.