PetroCaribe deal well-intentioned but lacks transparency

Mar 16, 2015 News

---

– Dr. Clive Thomas, Greenidge

Economist Dr. Clive Thomas says that the PetroCaribe deal between Guyana and Venezuela may be well intentioned but lacks enough transparency, and it’s a view that A Partnership for National Unity (APNU)’s financial point-man, Carl Greenidge shares.
The PetroCaribe deal signifies an alliance of several Caribbean member states, including Guyana, which purchase oil on conditions of preferential payment from Venezuela. The deal was launched in June 2005.
The payment system allows for purchase of oil at market value for five percent to 50 percent up front, with a grace period of one to two years. The remainder can be paid through a 17-25 year financing agreement with one percent interest if oil prices are above US$40 per barrel.

Under the deal, Guyana is supplying rice and using some of the outstanding oil monies to pay local farmers, through the Ministry of Finance and the Guyana Rice Development Board. The account for these monies are held and managed by the Central Bank. But its Governor General, Dr. Gobind Ganga, told Kaieteur News that he is unable to disclose the details of the withdrawals and the current status of it.
Meanwhile, this newspaper understands that the PetroCaribe deal is renewed annually and officials at this point are currently in talks with Venezuela to iron out arrangements for Guyana to supply the country with more rice.
The Minister of Finance, Dr. Ashni Singh, usually refers to the PetroCaribe deal through his budget speeches and speaks to how much Guyana has been able to write off in terms of debt. This has attracted criticism from the political opposition who are demanding more information about the arrangement.
However, Dr. Thomas said that despite criticisms, in his view, it remains one of the most generous inter-governmental efforts to promote regional integration among poor countries, especially small ones.
The renowned economist said that Caribbean members of the initiative benefitted so much between 2005 and mid-2014 that he believes someone ought to have cautioned Venezuela to be more prudent in dispensing largesse to them at a time of high oil prices and for them to have behaved more in a spirit of regional solidarity.
Dr Thomas asserted nonetheless that the greatest weakness of the initiative is its lack of transparency, particularly in its management operations and provision of timely public financial information and records for all of its transactions in all of its participating member states.

Greenidge on that point said that the account being held by Bank of Guyana is expected to hold the monies to be paid to Venezuela.
“Since the government is not expected to pay for the oil immediately, a portion of the money which is in the account is supposed to take care of the rice farmers and millers. But obviously, we have heard the complaints of the rice farmers not being paid and owed millions.
“As such, it is believed that government either uses monies from the account on other projects or/ and some of it is siphoned off and does not go where it is intended to. So the lack of transparency is from Guyana’s part and the farmers are not receiving their fair share from the deal nor benefitting as they should from the PetroCaribe arrangement as they ought to. So that is just part of where the opaqueness lies.”
Further, Dr. Thomas noted that thus far, it appears that Venezuela expended since its inception approximately US$28 to 30B to members of PetroCaribe. The Spanish speaking country he noted seems to have disbursed during the past three years, approximately 120,000-140,000 barrels of oil per day to PetroCaribe members.
Dr. Thomas said that the generous oil agreement costs Venezuela as much as US $6 to7B annually. And while it may aim to promote fair trade and the development of energy security, the economist opined that it may be placing too much economic and political pressure on the Venezuela economy and society, especially in the period since mid-2014 which saw rapidly declining global crude oil prices.
Minister of Finance, Dr. Ashni Singh had said that Guyana last year, completed a fourth debt compensation agreement with Venezuela in the form of a partial write off of the debt it owned in exchange for rice exports.
But there remains much worry surrounding the sustainability of the PetroCaribe deal and its implications for Guyana which is heavily dependent on oil.
However, Guyana Rice Development Board (GRDB) General Secretary Dharamkumar Seeraj, told Kaieteur News last week that Guyana is not completely reliant on the deal. While Guyana has benefitted immensely from the alliance, Seeraj said that the government does have other options at its disposal and should the programme fall through for any reason, Guyana would not be detrimentally affected by it.

---

---