Jul 31, 2013 News Comments Off on Venezuela set to raise Petrocaribe interest rates: Report
The Venezuelan government will increase, starting in October, the interest rate it charges to finance oil purchases by Central American and Caribbean countries that participate in Petrocaribe supply agreements, a source with state-owned oil company PDVSA said Monday.
The source, who agreed to speak only if he not be identified, said the increase was the result of higher administrative and maintenance costs of the loans, according to http://www.platts.com news website.
Guyana is one of several countries benefitting from the Petrocaribe deal, introduced under the administration of former President Hugo Chavez.
Since Petrocaribe was created in June 2005, 17 member countries have enjoyed an annual interest rate between 1% and 2%. Beginning in October that will rise to 2-4%, the source said.
He said the increase will not be uniform across all countries and could be lower for poorer nations.
Under the programme, Petrocaribe members can buy oil or refined products from Venezuela at favorable rates and through a long-term financing agreement at the low interest rates.
The source said the planned interest rate increases are permitted under the agreements Venezuela signed with the member nations. He added that no additional increases in rates are contemplated in the near term.
Venezuelan exports an average of 180,000 barrels per day (b/d) to Petrocaribe nations, of which 143,000 b/d is oil and 37,000 b/d is refined product, the source said.
In the past two years, Petrocaribe countries’ debt for oil purchases has risen to $5.7B, with Cuba and Nicaragua accounting for much of that total.
The source added that Venezuela is unlikely to reduce or suspend oil shipments to the debtor countries, given the political value it sees in the oil alliance.
Petrocaribe members are Antigua and Barbuda, Honduras, Bahamas, Jamaica, Belize, Nicaragua, Cuba, Dominican Republic, Dominica, St. Kitts and Nevis, Grenada, St. Vincent and the Grenadines, Guatemala, Saint Lucia, Guyana, Suriname, Haiti and Venezuela.
Guyana has a rice-oil-deal with Venezuela in which the former sells rice using a network of farmers. Guyana would then discount the money it owes Venezuela for oil to pay farmers.
In 2008, Guyana’s oil imports of US$284.6M were equivalent to 42 % of its export earnings of 2007.
According to Finance Minister, Dr. Ashni Singh, towards the end of 2012, Guyana signed its first debt compensation agreement with Venezuela which reduced the Petrocaribe debt owed to that country by US$100.8 million, equivalent to the value of rice and paddy shipped from December 2009 to July 2011.
Government expects to conclude imminently a second debt compensation agreement which will reduce the Petrocaribe debt to Venezuela by a further US$186 million, equivalent to the value of rice and paddy shipped from July 2011 to January 2013. At the end of last year, Guyana owed US$364M.
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