Gov’t. First Year Review: Prime Minister Attends PetroCaribe Summit in Venezuela

Jamaica continues to benefit from the PetroCaribe Agreement, under which the country finds it a little less burdensome to cope with the payment for spiralling oil prices.
Following his participation in the 5th Extraordinary PetroCaribe Summit in Venezuela earlier this year, Prime Minister, Bruce Golding, informed the House of Representatives, that the Summit had considered the unprecedented increases in oil prices, which have more than doubled within the last 10 months, and the impact this has had on member countries.
“Under the existing arrangements for the financing of oil imports, once the price per barrel of oil exceeds US$100, 50 per cent of the cost of these imports is deferred for a period of 20 years, at a concessionary rate of two per cent. Based on discussions at the Summit, the Government of Venezuela, has agreed to increase the deferred financing portion to 60 per cent, once the price exceeds US$100 per barrel. Further, should the price exceed US$200 per barrel, the deferred portion will be increased to 70 per cent,” he informed.
“As the price of oil has long passed the US$100 level, this will ease the demand for foreign exchange to meet the country’s oil import bill, which has risen from US$1.5 billion in 2005 to the level, based on projections, of $3 billion in 2008. It will also increase the inflows into the PetroCaribe Fund,” he informed.
Mr. Golding noted that these inflows into the Fund represent a loan from the Venezuelan Government, albeit on very concessionary terms, which become part of the national debt and will have to be repaid.
“It is therefore of critical importance that the management and use of the Fund be handled in such a way that it generates the income necessary to ensure that the repayments are made when they become due without resorting to the Consolidated Fund. The Government is committed to this approach,” he said.
Based on the submissions made at the Summit, Mr. Golding said the Government of Venezuela, had agreed to make available to PetroCaribe member states, 100,000 tons of urea per annum, at a discount of 40 per cent, of prevailing market price.
“This discount will provide a significant reduction in the cost of inputs to the local manufacturer. Jamaica currently imports 10,000 tons of urea annually. President Hugo Chavez has insisted – an insistence which we fully endorsed – that the benefit of this significant cost reduction must be fully reflected in a reduction in the price of fertiliser to the farmers. The Minister of Finance has decided to remove all customs user fees on the importation of raw materials for blending fertilisers. This should result in a further reduction of five per cent in the cost of these inputs,” he outlined.
The Prime Minister said he had therefore instructed the Ministers of Agriculture and Industry, Investment and Commerce, to conduct a further thorough analysis of the current pricing structure of locally blended fertilisers. “This is necessary because of the unfavourable comparison between the price of local fertilisers and that of identical blends imported by other CARICOM countries from the Dominican Republic,” he said.
Meanwhile, in December at the working session of the fourth PetroCaribe Summit in Cienfuegos, Cuba, Mr. Golding called for the establishment of a team, to explore trading opportunities among PetroCaribe members. He proposed that this team further explores transportation arrangements that would be necessary to support the level of trading opportunities being considered.
The Prime Minister said he was pleased to see the emphasis on expanding the opportunities for trade among member countries of PetroCaribe. He said this was another important area where “we can build co-operation and create areas of mutual benefit.”
However, he said there is an area of challenge, which is the question of the transportation of goods among member countries, as we do not have cost effective means of transportation.
Mr. Golding told the working session that while it may be important for member countries of PetroCaribe to expand their co-operation beyond the question of energy, there is also the need to look at what is happening now, not just in terms of the movement in oil prices, but what is happening with the movement in commodity prices.
He told the delegates that it went beyond just the question of oil prices, because it impacts significantly on the economies of the region. He noted that just recently, CARICOM Heads of Government, had to get together to look at the implications of price increases and the threat that these increases could impose in destabilising the economies of the region.
The PetroCaribe Agreement, represents the strengthening of relations between Venezuela and the countries of the Caribbean, by providing significant support to the petroleum industry in the face of rising oil prices.
Under the agreement, participating countries enjoy short-term financing from 30 to 90 days on oil purchases from Venezuela. Where the cost of a barrel of oil exceeds US$40, the payment period can be extended for up to 25 years, including a grace period of two years, at an interest rate of one per cent.