Venezuela President Chavez and the Caribbean

Venezuelans must prepare for “complex and difficult days” ahead, according the country’s Vice President, Nicholas Maduro. It is a message that nations across the Caribbean and Central America that have come to rely on PetroCaribe, President Chavez’s concessionary oil arrangement, would also do well to heed.

In the last week it has become clear that President Chavez’s health is deteriorating and that it would be necessary for him to undergo further surgery for the cancer for which he was being treated.

As is now well known, Mr. Chavez returned to Cuba on 7 December and underwent surgery during which complications arose. Although reports suggest that he is recovering progressively it is far from clear when he might return to Caracas. Initially Ernesto Villegas, the Venezuelan Minister of Information, had said that it was hoped that the President would return home in time for his January 10 inauguration. However, a subsequent less certain statement suggested that the President may require a longer period of time to recover than first thought. It would, the statement said, ‘be irresponsible to hide the delicacy of the present moment and the days to come’.

President Chavez is due to be sworn in 10 January 2013 after winning the October 2012 elections. If he were to fail to be able to do so, the nation’s electoral authority would be constitutionally obliged to hold new elections no later than 11 February until which time, until which time the National Assembly President would temporarily take charge of the government.

What this opens up is the possibility of a period of uncertainty and potential instability. Although President Chavez said before returning to Havana that if an election were to be held, Nicolas Maduro, the current Vice-President and Foreign minister should be elected as President, it is far from clear how, in practice, vying elements within the factions that support President Chavez might react.

By effectively anointing Mr. Maduro as his successor, President Chavez seems to have been trying to ensure certainty and continuity and that National Assembly President, Diosdado Cabello, would not eventually assume the Presidency were Mr. Chavez, to be incapacitated or die.

However, matters may not be so simple. Mr. Cabello, a former officer, derives much of his support from Venezuela’s powerful military while Mr. Maduro, a lifelong socialist, trade union leader, and centrist among the senior figures around Mr. Chavez, derives his political support from civil society.

Whatever the eventual outcome in Caracas, what is becoming clear is that in nations across the Caribbean Basin there is some nervousness about whether, if Venezuela has to go to elections, the terms of the PetroCaribe arrangement for preferential energy supply might be modified in the medium or longer term.

During President Chavez’s tenure in office, Venezuela has become of huge economic and social significance with the PetroCaribe arrangement underwriting the stability and energy security of most economies in the Caribbean and Central America.

Created in 2005, it has as its members, Antigua, the, Bahamas, Belize, Cuba, Dominica, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Nicaragua, Dominican Republic, St Kitts, St Vincent and, St Lucia, Suriname and Venezuela.

It works on the basis that nations receive Venezuelan oil on concessionary terms on a scale that adjusts depending on the world market price of oil. The arrangement operates in such a way that member countries are allowed to retain a part of their payment for balance of payment purposes, budgetary support and for an agreed range of development programmes.


Since its inception the scheme has been extended to incorporate oil exploration, distribution and storage. More recently it has also included a development fund, and the establishment of joint ventures between members, creating a trade in agrochemicals and petrochemicals, and developing a regional gas supply.

According to Petroleos de Venezuela (PDVSA ) the overall arrangement in 2011 involved the supply of 0.2m barrels per day (bpd). The largest share of which has been allocated to Jamaica (21 000 bpd) and the Dominican Republic (50 000 bpd) while Cuba receives somewhere between 64 000 and around 100 000 bpd under a more complex arrangement.

Although the programme has changed the nature of the region’s long-term indebtedness; with Caracas projecting that over one third of the Caribbean’s external debt by 2015 will be owed to Venezuela, it has offset for many nations the real danger of economic collapse during the recession.

The country potentially most at risk from any change in the arrangement is Cuba, where Venezuela supplies more than two thirds of the country’s oil needs, and has a trade relationship that results in a net gain to Cuba, some published figures suggest, of around US$3 500m in 2010. So seriously is this dependency taken in Havana that Cuba has been working for some time now to globally diversify its energy relationships, an objective it has yet to achieve.

Despite criticism from those outside the Caribbean who do not like the implied political leverage the programme gives to Caracas, no other nation at this time has the political will to provide this level of support to Caribbean states. So much so that the US in particular continues to face the paradox of needing, until renewable energy is commonplace, Caracas’ continuing commitment to maintaining economic and social stability through PetroCaribe’s programmes in the region.

The strong probability is that whatever happens, Venezuela will remain for a while yet under the control of its governing party, and will continue to pursue President Chavez’s populist domestic policies. However, independent analysts suggest that PetroCaribe could still under certain circumstances be subject to change as it has limited support within the governing party, the National Assembly, PDVSA and the military.

The debt the region owes to President Chavez is enormous and has been recognised by CARICOM Heads of Government.

What President Chavez’s poor state of health points to is the need for much greater realism and for Caribbean governments to analyse what happens if Venezuela finds itself in the future, for whatever reason, having to significantly change or even end the arrangement.

No one should be in any doubt about the critical importance of Venezuela’s PetroCaribe programme.

Much of the region’s economic stability especially at a time of austerity and IMF programmes depends on the continuation of the PetroCaribe arrangement and its pricing structure.

If it were not for the energy lifeline that it has provided much of the region would by now be in economic free fall.

(David Jessop is the Director of the Caribbean Council and can be contacted at david.jessop@caribbean-council.org
Previous columns can be found at www. caribbean-council.org)