His funeral attracted an eclectic mix of international mourners: Iranian President Mahmoud Ahmadinejad, Ecuadorean President Rafael Correa, center-right presidents of Chile and Colombia, Belarussian President Alexander Lukashenko, President Donald Ramotar of Guyana, Brazil’s former leader, Luiz Inacio Lula da Silva, Oscar winner Sean Penn and U.S. civil rights leader Rev. Jesse Jackson. For Guyana it was a more bilateral affair: a century old border controversy between an oil producing giant with a population 27.7 million and a neighbour with about 775,000 persons and equally important for Guyana, the beneficiary of the generous oil facility extended by Venezuela to mainly more than a dozen Caribbean countries.
In his 2007 Budget Speech Minister of Finance Dr. Ashni Singh announced that the Government had signed a bilateral agreement with Venezuela allowing the Government to secure a part of its oil supplies in a manner that stabilises the country’s balance of payments position in face of high and rising prices for crude oil and petroleum products.
A reciprocal feature of the wider PetroCaribe initiative facilitated exports from the PetroCaribe beneficiaries into the Venezuelan markets. In Guyana’s case a rice exportation agreement was signed in 2011 that saw 30,000 tonnes of white rice at the cost of US$800 per metric tonne and 50,000 tonnes of paddy at the cost of US$480 per metric tonne going to Venezuela, well above international prices.
In the nature of Chavez, there is much flexibility under the PetroCaribe Agreement which he pioneered. In his Budget Speech of 2012, the Minister of Finance reported what was in effect a set-off arrangement of oil for rice although he described it as “an agreement on the procedure for the cancellation of a significant portion of Guyana’s oil debt.” The Minister said that the debt compensation agreement would result in the cancellation of Guyana’s oil debt to Venezuela equivalent to the value of rice shipped, which amounted to US$143.4 million at the end of 2011, thus contributing to an overall reduction of Guyana’s debt stock at the end of 2012.
Guyana with a tendency to take any credit facility available is keen on ensuring that the arrangements with Venezuela continue. Of all the foreign heads that went to Chavez’s funeral our own President Ramotar stayed the longest, earning special mention from acting President Maduro. Ramotar realises how important it is to strike a deal with Venezuela for the current year in which rice production is expected at historical levels. The quantity of rice sold depends on the value of oil imported: in 2012 two-thirds of Guyana’s bumper crop of 422,000 tons of rice was exported to Venezuela. If a deal on rice is not reached there will be double problems for Guyana: no preferential price for rice and no setoff for oil.
Obligations to Venezuela rose by 52.7 percent or G$99 million to G$287 million at the end of 2011 and accounted for 23.7 percent of total external debt compared to 18 percent one year before. At June 30, 2012, Guyana’s total bilateral obligations of US$638 million represented 49.1 percent of total external debt, or amounted to, 36.7 percent more than the end-June 2011 level. In the same period, obligations to Venezuela increased by 69 percent or US$151 million to US$368 million.
Even if PetroCaribe survives Chavez it is unlikely that it will do so in its current form. If that happens, Guyana should neither be caught by surprise nor without options. The reports are that Venezuela has been facing shortages of many goods, including hard currency forcing Mr Maduro to devalue the bolivar by 32% in February. A big chunk of Venezuelan aid goes to Cuba where doctors had tried in vain to cure Chavez’s cancer. Jamaica is another major beneficiary.
Faced with its own domestic challenges Venezuela and its new President will have to decide whether and to what extent it can continue to finance PetroCaribe. And to then decide which countries it will prefer. President Ramotar made sure he stood in line and waved. That Maduro acknowledged him is a plus.
The question is whether that will be enough. Even with the closer trade relationship friendship between Guyana and Venezuela over the past dozen years there was little acknowledgment of the border controversy between the two countries. Let us not be complacent: if Chavez did not seek to settle it his successor is unlikely to be able to do so. It is something of which we must be mindful.
