If the PetroCaribe deal collapses…
The long, slow demise of Hugo Chavez has been a tragedy for his family and the people of Venezuela. But it also has serious implications for Latin America and the Caribbean as a whole. The most pressing issue is the future of the PetroCaribe oil deal.
The oil deal was launched in 2005. Under the terms of the agreement Venezuela allows Jamaica (and 16 other counties) to buy oil on favourable terms. In some cases Jamaica only has to pay between five and 50 per cent of the cost up front. The remainder is paid over a period of between 17 and 25 years under a special financing arrangement which attracts interest of only one per cent.
Approximately two-thirds of the crude oil imported by Jamaica comes from Venezuela. So a withdrawal of the PetroCaribe deal could be catastrophic for Jamaica. It is estimated that, if the deal is discontinued, it could cost Jamaica an extra $600 million a year in foreign exchange.
The problem is that the Venezuelan economy is in a precarious state, with skyrocketing inflation. A recent devaluation has made arrangements like PetroCaribe even more expensive for the Government.
There is already a question mark over the funding of some social programmes for the domestic population. It seems unlikely that the winner of the forthcoming presidential election would be willing to keep the PetroCaribe deal going at the expense of local social programmes. This is certainly true if the Opposition wins. But even if Chavez’s chosen successor Nicolas Maduro wins the election, he may choose to prioritise domestic expenditure over foreign programmes.
Hugo Chavez’s fervent internationalism was part of a very personal political vision. It was one of the things that made him so unpopular with the Americans, because it posed a serious challenge to their long history of neo-imperialism in Latin America. After decades of American domination of the continent through right-wing dictators like General Pinochet, the election of Chavez signalled the beginning of a wave of populist progressive leaders coming to power.
Leaders ranging from Lula in Brazil to Evo Morales in Bolivia all owed their inspiration to Chavez. And the man himself was hugely popular throughout Latin America. His international role is the reason his death was such a tragedy for the region. But his successors may well decide that, whilst they may be prepared to pay lip service to Chavez’s internationalism, expensive programmes like PetroCaribe are a luxury they cannot afford.
The uncertainty about PetroCaribe arrangements could not come at a worse time for Jamaica. The effects of the IMF agreement will include job losses, cuts in government expenditure and a range of tax hikes. And it will be the poorest Jamaicans who will be affected most severely. Coming at the same time as an international economic recession, the collapse of PetroCaribe could prove to be one of a triple series of economic hammer blows for the Jamaican people.
As leaders from across the region travel home after Chavez’s funeral last Friday, the Venezuelan nation is still in mourning. But if the PetroCaribe deal collapses, the Jamaican people may have very specific reasons to mourn the passing of Hugo Chavez.
— Diane Abbott is a British Labour party MP and spokeswoman on public health
