Anatoly Kurmanaev (Bloomberg) reports that Venezuelan President Hugo Chavez’s battle with cancer threatens $7 billion of subsidized oil exports that help prop up Cuba’s economy and contain inflation in Caribbean nations from Jamaica to the Bahamas with his Petrocaribe program. See excerpts with a link to the full article below:
Chavez, hospitalized in Havana after a fourth operation, sent Cuba $3.6 billion of oil in 2011 through the Petrocaribe program that serves 70 million people across Central America and the Caribbean. [. . .] If Chavez’s successor ends the funding, Caribbean economies still struggling to bolster tourism after the 2008 financial crisis would face further budgetary strains.
“Everyone loves Chavez here,” Salvador Rivas, head of unconventional energy at the Dominican Republic Trade and Industry Ministry, said by telephone Dec. 21. “We are trying to buy more and more Venezuelan oil because terms are very good.” The 58-year-old former paratrooper, who suffered renewed complications from a respiratory infection following surgery last month, created Petrocaribe in 2005. The alliance’s members can buy oil from state-owned Petroleos de Venezuela, or PDVSA, at market prices, paying as little as 5 percent upfront and the remainder over 25 years at 1 percent interest rate. U.S. aid to the entire Western Hemisphere represents about a third of annual Petrocaribe sales, according to Washington’s Congressional Research Committee.
Membership spans the political spectrum with only Cuba and Nicaragua governed by Chavez’s close allies. Oil producers Trinidad and Tobago and Barbados were the only Caribbean countries to reject PDVSA’s offer of preferential supplies. [. . .] “President Chavez’s health is a very large concern for us,” Dominican Republic Economy Minister Temistocles Montas said in a Dec. 4 interview. “The state of his health could affect the Petrocaribe agreement.”
Montas said Petrocaribe finances about 30,000 barrels per day in the Dominican Republic, a U.S. political ally with a quarter of the Caribbean population. PDVSA also has established joint ventures in 11 member states, buying stakes in local refineries, oil distributors and power plants. Petrocaribe is much more about economics than ideology, Daniel Sachs, an analyst at London-based Control Risks, said by telephone Dec. 21. “These countries are concerned with getting the best possible price and not necessarily with socialist solidarity,” he said.
[. . .] Chavez’s latest surgery was followed by a respiratory infection, leading Venezuelan officials to open the door to delaying a Jan. 10 inauguration of his next term and feeding speculation of new elections if he doesn’t return in time.
[. . .] “If the Venezuelan funding dries up, Castro is going to have to speed up the pace of reform, allowing the economy to open up much sooner than he expected,” said [Peter] Hakim. Venezuela accounted for 41 percent of Cuba’s foreign trade in 2011, or $8 billion, four times more than China, according to the Office of National Statistics in Havana.