The Tribune

IN HIS column on page 12 of today’s Tribune, Sir Ronald Sanders asks: “Petro Caribe: are Caribbean countries prepared for the worst?”

He suggested that Caribbean governments now “members of the Petro Caribe Agreement with Venezuela would be prudent by beginning to adjust their budgets to take account of the loss of benefits now derived from the oil arrangement”.

Sir Ronald listed the Bahamas as one of the signatories to the agreement. Fortunately for the Bahamas, this is not true – although initially the Bahamas’ signature was on the first document. It was a case of being saved by the bell.

In other words, the Bahamas’ representative enthusiastically crawled into the lion’s den by the front door to put pen to paper, but when the heat was turned on at home, he just as quickly tip-toed out by the back door.

Yesterday, Bahamas Electricity Corporation chairman Leslie Miller, confirmed that although the Bahamas had signed the first Petro Caribe agreement in Venezuela on July 10, 2005, it was not a signatory to the final agreement, later signed in Montego Bay, Jamaica. The first signing was to launch the programme. The Montego Bay signing was for representatives to commit their countries to participate in the programme. Although, Mr Miller signed the first document, he did not sign the second.

“There will be no repercussions,” said Mr Miller last night. “The Bahamas will have no problems from what is now happening in Venezuela.

“The Bahamas buys all of its fuel from Shell West in Barbados,” he said.

According to Professor Anthony Bryan, senior fellow at the Institute of International Relations, University of the West Indies, St Augustine, “under a separate supply agreement with Venezuela, Cuba receives about 115,000 barrels of oil per day to meet half of its consumption needs. The arrangement is worth about US$3.2bn a year…

“It also receives billions of dollars in infrastructure investment from Venezuela. Nicaragua receives almost all of its 12 million barrels a year from Caracas, worth about US$1.2bn.

“The Dominican Republic gets more than 40 per cent of its oil through PetroCaribe, estimated to be worth about US$600m in 2012.

“Jamaica receives 22,000 barrels of oil per day, roughly two-thirds of its crude demands, through PetroCaribe.

“It has used the Venezuelan oil it receives daily to produce 95 per cent of its electricity.”

“The impact of PetroCaribe,” said the professor, “has been very dramatic… today Jamaica’s accumulated debt to Venezuela is estimated at J$164bn (1JM$=US$0.013578)”.

Unfortunately, it will be even more dramatic should the scheme collapse and these indebted countries be called on to repay their accumulated debt. Fortunately, for the Bahamas, now being spooked by VAT, Petro Caribe will not be another burden.

In 2005, Mr Miller, Trade and Industry Minister in the first Christie government, was as anxious then as he is today to bring fuel prices down for the consumer. At that time, he was intent on getting rid of the middle man — the oil companies— and tying up with Petro Caribe, which represented a Caribbean/Latin American partnership to buy cheap oil from Venezuela. Already, the world had experienced Venezuela’s general strike of 2002 that had shut down the country’s oil industry. It was the world’s fourth largest oil exporter. At the time of the strike, Venezuela was also the third largest supplier of oil to the United States.

In this column at the time, we pointed out what would happen should there be a change of government in Venezuela, or, as the 2002 strike showed, oil delivery was cut off to the rest of the Caribbean, the Bahamas included. We also pointed out the serious political implications of joining a scheme designed by Chavez and Castro to gain control of the Caribbean region through cheap oil. What would happen in the United Nations, for example, when a Bahamas, enrolled in the Petro Caribe scheme, was called on to vote on a measure that benefitted Venezuela to the detriment of the United States? Bahamians had to remember that their country was almost completely dependent on the United States for all of its supplies, assistance and tourists? Had the Bahamas cabinet considered what would happen should Venezuela call on it to vote on an issue that would not be in this country’s best interest? That would be the day when cheap oil would be weighed in the balance against our only industry — tourism.

What would happen we asked, should Mr Miller be successful in removing all the oil companies that had kept this country’s fuel supply flowing for all these years? Was government to be the new middle man - a middle man without experience, without distribution facilities, its only credit a note for long-term financing from Hugo Chavez of Venezuela?

Someone remarked at the time that instead of paying for our oil up front as we now do, the Bahamas would be like the man who enjoys a running tab at the bar. Happily, he drinks himself silly until the day of reckoning arrives and the bartender bellows: “Come on buddy, it’s pay up time?”

Unfortunately, with the current instability in Venezuela, that day is fast approaching for all of the Caribbean countries who saw the glitter of cheap oil in 2005, but failed to see the pitfalls further down the road.

Fortunately, this is one bill that the Bahamian taxpayer will not be called upon to pay – VAT is a sufficient nightmare.