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Petrocaribe

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  • 1. Petrocaribe Initiative: A reflection By S. Scott & Paul Andrew Bourne In 1980, the San Jose Petroleum Accord, an energy cooperation programme was created to facilitate the supply of petroleum products on favorable terms to eleven developing nations within the Central American and Caribbean region. It arose out of the need to help reduce the heavy oil import burden on non-oil producing countries in the region. The agreement, jointly administered by Mexico and Venezuela and renewed annually, provides signatory nations up to 160,000 bbl/d, with 80,000 bbl/d coming from Mexico, and 80,000 bbl/d from Venezuela. Under the original Agreement, there was provision for 20% of the cost of the crude oil to be made available as a low interest loan for development projects when the price of oil exceeds US$15 per barrel. The Agreement is reviewed annually and the terms have been modified, making the Accord less concessional. The Signatory countries to the San Jose Accord include: Barbados, El Salvador, Costa Rica, Guatemala, Honduras, Dominica Republic, Venezuela, Haiti, Panama, Jamaica and Belize. The agreement which complements the San Jose Accord of 1980 is dubbed the Caracas Energy Agreement. It is a regionally-inclusive bi-lateral cooperative energy
  • 2. agreement administered by Venezuela, which expands the coverage of the San Jose Accord, and has been designed to function parallel to it. It establishes preferential price levels and percentages for financing long term low interest loans to the various countries based on the quantity of oil purchased. Loans range from 10-25% of the payment for the oil based on the prices paid. There is a one-year grace period on repayment, extending over 15 years at an interest rate of 2%. The Accord was originally extended to the original beneficiary countries of the San Jose Accord, and has since been expanded. Signing on to the new accord in 2000 were Belize, Costa Rica, Dominican Republic, El Salvador, Guatemala, Haiti, Honduras, Jamaica, and Nicaragua. Cuba signed on shortly after, and Guyana is expected to join in May of 2004. All members of the Association of Caribbean States (Colombia, Mexico, Venezuela, all Central American Countries, CARICOM, Dominican Republic, Cuba, Panama, France {associate membership on behalf of French Guiana, Guadalupe, and Martinique}, Aruba, and the Netherlands Antilles, which combined represent 71% of all Latin American and Caribbean states, a combined GDP of some $751 billion) are eligible to receive the benefits of the Accord. Continued favorable relations will encourage the region to explore other areas of mutual cooperation. At meeting of Caribbean energy ministers held in Caracas, Venezuela on July 10 2004, Venezuela expressed concerns about the prevailing high prices of oil and its adverse effects on non-oil producing countries. Concerns were expressed regarding the high margin applied to petroleum products, which drive up the retail prices. Venezuela
  • 3. expressed a strong desire to see more of the benefits of the energy agreements accruing to the social sectors including health and education in beneficiary countries. Accordingly, Venezuela proposed a “Petrocaribe Initiative” to support Caribbean and the other countries within the Americas. The PetroCaribe model is based on the concept of state involvement in the energy sector whereby surpluses achieved will be used to meet expenses via subsidies. Launched in June of 2005, it is aimed at facilitating the development of energy policies and plans for the integration of the nations of the Caribbean through the sovereign use of natural energy resources to directly benefit their peoples. In this regard, Petrocaribe is responsible for coordinating and managing all issues associated with the energy-related links between the signatory countries in accordance with this Agreement. Essentially, Petrocaribe is seen as a replacement and an enhancement of the Caracas Agreement. The oil alliance allows for participating nations to purchase oil on conditions of preferential payment. This payment system allows the purchase of oil on market value, however, only a certain amount is needed upfront the remainder may be paid through a 25 year financing agreement on 1% interest. The deal allows for Caribbean nation to purchase up to 185,000 barrels of oil per day on these terms. Also nations are allowed to pay part of the cost with other products for example bananas, rice and sugar. Twelve out of the fifteen members of Caricom along with Cuba and the Dominican Republic signed onto the agreement on September 7, 2005. The only countries that chose not to sign were Barbados and Trinidad and Tobago. Initially, Haiti
  • 4. was not invited to participate in the talks essentially because Venezuela refused to recognize its “U.S installed government”. However with the president-elect Rene Preval, Chavez has discussed the possibility of Haiti’s entry into the project. The conclusion of this paper is your assessment of what is written therein.

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