PetroCaribe interest rate may go up by 100% -report

(Jamaica Observer) The Jamaican Government appears to have been taken by surprise by reports on the weekend that Venezuela is contemplating a 100 per cent increase on interest payable on oil it exports to the region under the PetroCaribe agreement.

Both Energy Minister Phillip Paulwell and Finance and Planning Minister Dr Peter Phillips were unable to comment yesterday beyond that they had not received any official information from Venezuela of any such increase.

“Everything is speculative right now,” Dr Phillips told the Jamaica Observer in response to requests for a comment on the development.

Both he and Paulwell have insisted that the Government has not been informed by Venezuela of any such decision. The Office of the Prime Minister was also unable to offer a response. However, indications are that a statement will be released by the Government on the issue.

Platt.Com/McGraw Hill Financial, a highly trusted Internet source in energy information, reported that, according to a source with the state-owned Venezuelan oil company, PDVSA, the Government will increase interest rate on oil purchases by Central American and Caribbean countries who participate in the PetroCaribe arrangement, starting in October.

Platt said its source, who agreed to speak only without being identified, informed that the increase was the result of higher administrative and maintenance costs of the loans. In the past two years, PetroCaribe countries’ debt for oil purchases has risen past US$5.7 billion, with Cuba and Nicaragua accounting for much of the total.

Chief executive officer of the PetroCaribe Fund Dr Wesley Hughes, who also pleaded ignorance of the new development, said that any increase in the interest rate charged on the oil purchases would translate to an increase in Jamaica’s debt payments. He, however, noted that the PetroCaribe arrangement would still be the most economical for Jamaica.

Platt.com said that the interest rate increases are permitted under the agreements Venezuela has with the PetroCaribe member countries, and that the increase would not be uniformed across all countries, and could be lower for the poorest nations.

But, responding to the development, spokespersons for the Opposition Jamaica Labour Party said that they would not be surprised by an increase, considering the current economic climate in Venezuela.

“What is of more concern is that we could see in the future a tightening of the terms and conditions of the agreement,” said Gregory Mair, the Opposition spokesman on industry, commerce and energy.

“It is clear that the economic climate in Venezuela is affecting that Government’s capacity to stick with the original commitment of the PetroCaribe agreement,” added Opposition spokesman on Foreign Affairs and Foreign Trade Dr Christopher Tufton.

Senator Tufton noted that he had raised concerns in questions tabled in the Senate and which were answered recently by Minister of Foreign Affairs and Foreign Trade Senator A J Nicholson in which he assured the Senate that, following recent discussions at the Caricom Heads of Government meeting in Trinidad, the current PetroCaribe arrangements were not endangered.

Prime Minister Portia Simpson Miller also led a Jamaican team to the Summit of Heads of State/ Government of PetroCaribe in Nicaragua at the end of June, but no report has been made on the outcome of those discussions or any document tabled in Parliament. The summit focused primarily on the PetroCaribe Energy Co-operation Agreement and new initiatives to strengthen its operations.
The prime minister was accompanied on that mission by Dr Carlton Davis, special advisor; and Onika Miller, permanent secretary in the Office of the Prime Minister.

Jamaica has received over US$2.4 billion in funding support from Venezuela under the PetroCaribe agreement since the facility was established in 2005. The funds form a loan allocation, spanning 25 years at one per cent per annum, with a twoyear grace period.

Apart from Jamaica, the other PetroCaribe members are Antigua and Barbuda, Honduras, the Bahamas, Belize, Nicaragua, Cuba, Dominican Republic, Dominica, St Kitts and Nevis, Grenada, St Vincent and the Grenadines, Guatemala, Saint Lucia, Guyana, Suriname, Haiti, and Venezuela.

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