- A total of US$1.2 billion in concessional financing has been provided to Jamaica in the form of long-term loans, based on oil purchases from Venezuela under the PetroCaribe Energy Co-operation Agreement.
- The multifaceted arrangement, which commenced in 2005, seeks to promote energy security in the region, by guaranteeing supplies of petroleum products from Venezuela through an innovative repayment system, which allows for payments to be made over 23 years, and using goods and services.
- Member countries are allowed to retain part of their payment in the form of a low interest loan.
A total of US$1.2 billion in concessional financing has been provided to Jamaica in the form of long-term loans, based on oil purchases from Venezuela under the PetroCaribe Energy Co-operation Agreement.
The multifaceted arrangement, which commenced in 2005, seeks to promote energy security in the region, by guaranteeing supplies of petroleum products from Venezuela through an innovative repayment system, which allows for payments to be made over 23 years, and using goods and services.
Member countries are allowed to retain part of their payment in the form of a low interest loan.
Manager of the PetroCaribe Development Fund, which was established to manage the proceeds from the arrangement, Sharon Weber, tells JIS News that five years on, Jamaica has benefitted significantly and will continue to make maximum use of the benefits available to support its economic and social stability.
“The financial resources received so far have been invested primarily in improving the country’s physical infrastructure (including mining infrastructure), financing the productive sector (through public sector development financing institutions), investing in renewable energy resources (wind energy, including the Wigton Wind Farm project in Manchester) and to support the operations of certain public entities which provide critical services to the economy,” she informs.
Specific projects include the expansion and upgrade of the country’s road network (Marcus Garvey Drive); upgrading of the Norman Manley International Airport; and expansion of the port infrastructure.
Resources have also been allocated for the refinancing of domestic public sector debt, which a significant factor in preventing job losses and keeping key entities afloat; to support the public transportation system including the Jamaican Urban Transit Company (JUTC) and projects designed to stimulate economic expansion as in the case of the Petrojam Refinery Upgrade Project.
Within the ambit of the agreement, Venezuela purchased 49 per cent of the shares in the Petrojam Refinery in 2008, and since then has been instrumental in efforts aimed at expanding and upgrading the processing capacity at the Marcus Garvey Drive facility.
The refinery upgrade will lift the capacity of the 40-year-old facility from 35,000 barrels to 50,000 barrels a day and result in numerous benefits for Jamaica, including savings of approximately US$100 million in foreign exchange.
Additionally, the improvement will ensure the viability of the refinery for the long-term and allow for the installation of treatment facilities to meet new environmental specifications for diesel oil and gasoline.
Meanwhile, Mrs. Weber states that going forward, Jamaicans can rest assured that “financing, including resources derived from initiatives undertaken by Venezuela, such as through its joint venture activities, will continue to support the most critical development priorities within the context of achieving the objectives of Vision 2030 (National Development Plan, which aims to make ‘Jamaica, the place of choice to live, work, raise families, and do business’ by the year 2030).”
On August 23, 2005 Jamaica and Venezuela signed the historic and development-driven PetroCaribe Energy Co-operation Agreement.
The bilateral agreement followed the signing of a multilateral agreement between Venezuela and 13 Caribbean countries on July 29, 2005 which created the PetroCaribe Initiative. Subsequently the membership was increased, bringing the total to 18 countries.
The brainchild of Venezuelan President, Hugo Chavez, the objective of the initiative is to alleviate the burden of rising oil prices and its negative impact on Caribbean countries. It seeks to contribute to their energy security, foster regional integration, and promote the social and economic development of the region.
A key aim is to strengthen food security throughout the region through the creation of a special fund from oil proceeds when prices exceed US$100 per barrel. The fund will support member countries in expanding agriculture.
Even with the numerous benefits from the undertaking, there have been concerns with respect to debt servicing that could result in modifications being made to the arrangement.
“Given concerns about the indebtedness of beneficiaries, Venezuela is exploring other mechanisms to manage the financed portion of the oil bill. It is understood that discussions are taking place internally on a proposed mechanism, which will be presented in due course to beneficiaries,” Mrs. Weber explains.
Mrs. Weber however assures that Jamaica has been servicing its debt on time in accordance with the arrangement.
“We commenced debt servicing to Venezuela in 2008 and have made provision to continue to meet Jamaica’s obligations under the agreement as they fall due,” she says.