PetroCaribe – All is quiet and the market is working

First Published: 2005-12-30

It appears international pressure is mounting against Venezuela's PetroCaribe initiative.

At a press conference on Regional Outlook on December 7, 2005, Mr. Augustin Carstens, Deputy Managing Director of the International Monetary Fund said: "…But our recommendation would be to look and analyze seriously this option and weigh it for the impact on debt, on social expenditures, and on the involvement of the government in some sectors where they might not be involved today."

On Saturday, December 17, 2005 The Miami Herald ran a story under the headline: Caribbean Community Criticizes Oil Deal. The brief article quotes CARICOM Secretary-General, His Excellency Edwin Carrington as saying "…that some ministers didn't understand the details before signing the agreement in September." See this link for the full story:

It came as a surprise that CARICOM would express these views publicly, particularly as they confirm what we have been saying, so it prompted a call to Mr. Carrington.

H.E. Carrington was very cordial in a telephone interview where he indicated that on December 13 the press was invited to view the new CARICOM building and enjoy an informal discussion at the end of the tour.

While he would not go into detail on his discussion with the press he advised us that; "PetroCaribe brings benefits to countries by delaying payment for purchases of crude oil." However, he did point out that, "on the other side of the equation is the build up of debt for the participating countries."

Regarding the position of Trinidad and Tobago Mr. Carrington added that, "As a region, there was not enough time to review the arrangement on a regional basis to discuss implications for Trinidad and Tobago." "Of course," the CARICOM head continued, "Ministers came to sign to meet their national objectives."

The headline from the Trinidad & Tobago Express screamed "Carrington: Caricom far too quick to join Chavez oil scheme" and the story is very much as printed in the Miami Herald.

Mr. Leslie Miller, Minister of Trade and Industry has been very quiet on this matter in recent weeks. Is it too early to think that common sense has now prevailed in The Bahamas' haste to sign on to the PetroCaribe agreement with Venezuela?

Of course, Mr. Miller has been shouting from the rooftops that the price of gas would reduce considerably once the deal with Venezuela was finalised. However, Jamaica was the first country in the region to sign and their gas has actually increased in price according to a source in Kingston.

So in the final, we prefer to think that Mr. Carrington and his CARICOM staff have now had an opportunity to review the details of the PetroCaribe agreement and the potential debt that could accrue to the member countries for an expendable product and they are now advising the ministers of the pitfalls.

In any event, the price of oil here has dropped considerably without implementing the deal with Venezuela, proving that the market has worked – yet again – without government interference.

The Nassau Institute

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