Venezuelan political shift elevates doubt about Petrocaribe

For countries enjoying soft oil financing under the 10-year-old Petrocaribe program, Venezuela’s political pivot aggravates worry.

Even before the opposition Democratic Unity Movement won 112 of the Venezuelan parliament’s 167 seats on Dec. 6, doubts were high about Pertocaribe’s durability.

Although President Nicolas Maduro remains in office and retains considerable influence over foreign affairs, the program represents one of many leftovers of Hugo Chavez’s disastrous socialism that the victors will try to expunge. Maduro, a piece of that wreckage, eventually will be a target. He became president when Chavez died in 2013.

Chavez created Petrocaribe to curry favor with regional neighbors. Under it, Venezuela provides concessionary financing for oil sales.

The accumulated costs of that generosity now weigh heavily on a country with a contracting economy, high inflation, precarious financial balances, and rampant shortages. Venezuelan dissatisfaction was evident in participation in the recent election: 74% of eligible voters.

What now, then, for Central American and Caribbean beneficiaries of Petrocaribe?

Effects of the program’s end, according to Adrienne Cheasty, deputy director in the Western Hemisphere Department of the International Monetary Fund, would be mixed.

In a Mar. 18 blog, Cheasty noted that Petrocaribe support is proportionate to the oil price. For most participants, the benefits of lower oil prices offset the consequently reduced access to cushy loans.

They also make the prospective end of Petrocaribe more manageable for the countries than it would have been when prices were high.

“Governments receiving large flows and without alternative financing sources, like in Nicaragua and Haiti, would be most affected—although less so than they would have been in a world of higher oil prices,” Cheasty wrote.

“Governments that have built buffers, like Guyana, or that have alternative financing sources, like the Dominican Republic and Jamaica, should be affected less. Belize would be particularly affected as the lower oil prices negatively impact the value of its exports of crude oil.”

As someone once said, elections have consequences. Often, those consequence cross national borders.

(From the subscription area of www.ogj.com, posted Dec. 11, 2015; author’s e-mail: [email protected])