Local firms continue to seek deals under TCM, says HughesFriday, November 04, 2016
BY AVIA COLLINDER Observer Business reporter email@example.com
Local providers of goods and services continue to seek deals under the Trade Compensation Mechanism (TCM) with Venezuela, according to Dr Wesley Hughes, CEO of the PetroCaribe Development Fund.
The TCM, which falls within the PetroCaribe agreement, allows exports to the Bolivarian Republic on preferential terms.
Recently, the University of the West Indies (UWI) and the Venezuelans entered into a new arrangement for English to be taught to Venezuelan nationals under the TCM at a cost of US$2.78 million, Hughes told the Jamaica Observer.
Also, Carib Cement Limited recently concluded its second arrangement to supply the South American country with clinker and is currently negotiating a new deal.
The PetroCaribe Agreement provides that loan repayments to Venezuela may be made by way of goods and services, valued at preferential rates under the TCM.
Under PetroCaribe, Jamaica buys oil from Venezuela with cash paid for a portion of the invoiced value for each shipment, and the remainder is loaned to the Government of Jamaica at one per cent annually over 25 years.
The arrangement is co-ordinated through the PetroCaribe Development Fund which facilitates the commercial transactions.
At mid-year, the communications unit of the Office of the Prime Minister disclosed that Cabinet had approved a reactivation of the TCM up to a value of US$4 million, under bilateral arrangements in place.
"Following the debt buy-back arrangement of 2015, there is now very little debt we have to pay back to Venezuela over the next two years," Dr Hughes stated.
But even though very few loan payments are now due, Dr Hughes pointed out that "the TCM is an integral element of the PetroCaribe arrangement, so it remains in place".
The island purchased its US$3-billion debt from Venezuela at a significant discount last year.
There is a current moratorium on loan payments, lasting two years from the time of debt settlement.
Dr Hughes noted that loan amounts due at the end of the period will reflect the number of shipments made during the period.
"We have a two-year moratorium and then we start paying for each shipment over the next 23 years based on the promissory notes," he outlined.
Meanwhile, companies are free to seek deals under the TCM.
"The last agreement for Carib Cement to export clinker was fully executed," Dr Hughes said. "I am aware that the company is in the process of trying to negotiate a new arrangement with Venezuela."
Carib Cement told Caribbean Business Report on Wednesday it has been a proud partner with the Jamaican Government since 2013 in providing clinker as part of the PetroCaribe deal. "Since then, Carib Cement secured a second contract in 2014 to supply 240,000 tonnes of clinker, which was completed in February 2015," the company said.
"At present, the Government of Jamaica, the Government of Venezuela and Carib Cement have been [in dialogue] to resume this deal that has proved extremely worthwhile to all parties."