The brainchild of late Venezuelan president, Hugo Chavez, PetroCaribe was launched in June 2005.
Hinds spoke of the benefits that have accrued from Guyana’s association with the PetroCaribe during a special programme on the National Communications Network (NCN).
The prime minister, under whose purview the energy sector falls, explained that this initiative came at a time when many Caribbean countries were having difficulties in purchasing petroleum. At that time, crude oil prices on the world market was moving up from US$30 per barrel and peaked at about $150 per barrel.
A table was established at a certain price for petroleum. The government of Venezuela will offer a portion on credit (co-financing) and a portion that will have to be paid for in cash immediately.
Through this mechanism, a 50 percent co-financing is offered for oil sold at $80 per barrel; $100 per barrel — 60 percent co-financing; and over $150 per barrel — 70 percent of co-financing.
According to the prime minister, PetroCaribe was established to be a cushion, giving countries time to adjust their rates of consumption, make lifestyle changes, and move towards renewable energy sources. It also created a mechanism, whereby a fund could be established to be used for the development of the energy sector as well as other areas.
“Our total fuel bill was about $400 million per year and at 50 percent co-financing, we could be developing a debt of about US$200 million per year. So we took the position that for every shipment, payment has to be made available in full. The fuel company that is buying has to pay the full price to the Guyana Energy Agency, which acts as the agent to purchase and at the level of the government, we put aside the financed portion in a special account and the ministry of finance issues a promissory note,” the prime minister outlined.
The money that accumulated in this account has been used to finance two power plants for the Guyana Power and Light (GPL) Incorporated; while some went towards the financing of the Hope Canal.
The intention behind PetroCaribe was also to promote trade amongst member countries; whereby some of the fuel cost would be met by supplying goods and services. This led to Guyana’s rice trade agreement with Venezuela.
Only recently, agriculture minister, Dr Leslie Ramsammy signed the official 2013 agreement in Venezuela, which will see the continued export of rice and paddy.
The prime minister explained that the rice and paddy supplied to Venezuela is discounted against what Guyana owes on fuel.
Chevon Wood, an economist attached to the GEA, said that under the first round of agreement signed with Venezuela, Guyana was able to cancel over US$100 million of fuel debt; this was completed in December 2012. In the coming months, it is envisioned that a similar amount will be negated through this export agreement.
Wood said, “Fuel is a very important input in any economy, and given that Guyana’s economy is rapidly expanding, there is a greater need for fuel. PetroCaribe provides a significant opportunity for South to South relationships and it also provides a unique mechanism in order to pay for the fuel.”
At the recently held ministerial meeting of PetroCaribe and the summit of heads, Venezuela proposed the establishment of a PetroCaribe Economic Zone (PEZ) through an alliance with the Bolivarian Alliance for the Peoples of Our America (ALBA).
ALBA is an international cooperation organisation based on the idea of the social, political and economic integration of the countries of Latin America and the Caribbean.
The PEZ is intended to deepen the progress made by the Organisation, with a view to developing the production sectors of member states, based on the linkage of production chains which would generate economic surplus, and would make co-operation sustainable in the context of PetroCaribe.
It is designed to boost regional development between Petrocaribe member states by promoting joint investments in trade, tourism, industry, and agriculture.
Wood said, “With the introduction of an economic zone there are many opportunities to get into greater markets…it is a good area to venture into, not only because you are able to reduce the amount of oil debt periodically, but you are also able to expand your market, introduce economies of scale in terms of technology, increase job creation and many other benefits.”
PetroCaribe now consists of Antigua and Barbuda, The Bahamas, Belize, Cuba, Dominica, El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Nicaragua, the Dominican Republic, St Kitts and Nevis, Saint Lucia, St Vincent and the Grenadines, Suriname and Venezuela.