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Petro-Caribe Funds Turning Possibilities into Realities Print E-mail
( 4 Votes )
Written by Shane D. Williams   
Wednesday, 30 April 2014 00:00

In initiating Petro-Caribe, version 2.0, Prime Minister Barrow’s Administration turned the page on another ugly PUP privatization story. The late President Hugo Chavez’s objective was to promote regional solidarity and alleviate poverty in Latin America and the Caribbean when he introduced the Petro-Caribe Agreement for Energy Cooperation. His goal, according to the Ambassador of the Bolivarian Republic of Venezuela to Belize, H.E. Yoel del Valle Perez Marcano, was to stabilize the economies of countries in the region using energy. Unfortunately, Said Musa Administration’s doctrine of crony upliftment (via privatization of national assets) limited the potential of Chavez’s trailblazing initiative. It is only now, with a Prime Minister committed to national development, that Belize is realizing the possibilities of the Petro-Caribe initiative.

Belize signed the Petro-Caribe Agreement for Energy Cooperation on June 29, 2005. The agreement is for the sale of petroleum products on concessionary terms. The price is set at market rate since Venezuela cannot sell at a lower price as a member of the Organization of the Petroleum Exporting Countries (OPEC). Belize can import about 1.46 million barrels of petroleum products per year, about 4,000 barrels per day. Belize currently uses under 1 million barrels of petroleum products per year. The terms are based on the world oil price. If the world oil price is less than US$40 per barrel, Belize has to pay 75 percent of the cost (referred to as the ‘Cash Portion’) within 90 days of importation. The other 25 percent is referred to as the ‘Financed Portion’ and is to be paid over a period of 15 years at an interest rate of 2 percent with a 2 year grace period. If the world oil price is over US$40 per barrel the interest rate on the Financed Portion falls to 1 percent and is payable over a period of 25 years with a 2 year grace period. The higher the world oil price the greater the Financed Portion. At US$40 per barrel the Financed Portion is 30 percent; at US$50 per barrel it is 40 percent; at US$80 it is 50 percent; at US$100 it is 60 percent; and above US$150 the Financed Portion is 70 percent.

All petroleum sales from Venezuela are through PDVSA (Petroleos de Venezuela S.A.) which is a state owned company. Since a Government cannot do business with a foreign company, a local company must be identified under the agreement. Said Musa’s Administration formed a company called Belize Petroleum and Energy Limited (BPEL) to conduct transactions with PDVSA. The first shipment from Venezuela was delivered in November of 2005 for offloading at Esso Depot, though no prior arrangements for purchase were made with Esso or any other local petroleum distributors. After a brief delay, it was eventually offloaded and purchased by Banana Enterprises Limited (the Big Creek Group). Then in June of 2007 the PUP Government gave exclusive rights for purchase and distribution of Venezuelan petroleum products to a company formed by the Big Creek Group, Petro Fuel Belize Limited (PFBL). PFBL at its distribution peak could only manage to access about 20 percent of the market since Esso Belize refused to do business with them. As a result, over the course of 42 months, from 2005 to 2009, PDVSA delivered only 472,994 barrels of petroleum products, valued at  approximately US$46.03 million. The Financed Portion of the sales was approximately US$19.42 million. The PUP cannot point to any signature project that was made possible with that money. Venezuela eventually acted to exert tighter control of the program by demanding that the local state owned company of all Petro-Caribe member countries be replaced by a joint venture company owned by Venezuela and the partnering country. 

PDVSA formed a company called PDV-Caribe to conduct business with Petro-Caribe partners. That company entered into a joint venture with BPEL to form ALBA Petro-Caribe Belize Energy Limited (APBEL). The Office of the Prime Minister entered into a series of negotiations with PDV-Caribe and Trafigura (parent company of Puma Belize Energy) to discuss the importation of fuel supply for Government vehicles. Those negotiations evolved into a proposal to source all of Puma Energy’s imports into Belize through Petro-Caribe. By this time, Puma had become the top player in the local petroleum distribution sector. The first shipment under the new arrangement arrived in Belize on September 8th, 2012. Since then, in just 19 months, Belize has imported 1,428,704 barrels of petroleum products. World oil price has been hovering around the US$100 per barrel mark over that span and the total purchase price is approximately US$179.92 million. The Financed Portion that Belize has been able to access as of March 2014 is around US$103.61 million.

This portion has already been used to establish and finance the National Bank of Belize. A total of $76.72 million will be spent over the next three years for a national road infrastructure project. A new city center will be built in Belize City to host international sporting events at an estimated cost of $30 million. International standard sporting facilities will be built in every district town at $5 million per municipality. These are only a few of the signature projects that have already been launched using the funds from the Financed Portion of Petro-Caribe imports. Prime Minister Barrow says some of the money will be set aside as a contingent liability for the nationalization of BTL, BEL and IMAARBE. He says “we may even look seriously at a buyback of the Superbond debt” using Petro-Caribe funds. The Superbond rate eventually increases to almost 7 percent, while the Petro-Caribe rate is at 1 percent.       

Belize has been recognized internationally for the effective implementation of the Petro-Caribe program. It is believed that Belize and Venezuela will further develop the agreement to include an option in which Belize can offer goods and services instead of cash as payment for petroleum products.