Venezuela To Raise Interest Rates In Petrocaribe Deal

CARACAS, Venezuela CMC – The Venezuelan government is set to increase the interest rate it charges to finance oil purchases by Central American and Caribbean countries under the Petrocaribe deal.

According to reports from online financial news agency Platts, the increase stems from higher administrative and maintenance costs of the loans.

Platts is a division of McGraw Hill Financial, a leader in credit ratings, benchmarks and analytics for the global capital and commodity markets.

Since the creation of Petrocaribe in 2005, 17 member countries have enjoyed an annual interest rate between one and two percent but as of October that will rise to 2.4%.

The source said the planned increases are permitted under the agreements Venezuela signed with the participating countries.

He added that no additional increases in rates are being contemplated in the near term.

The report states that Venezuela is unlikely to reduce or suspend oil shipments to the debtor countries given the political value it sees in the oil alliance. Heads of State and Government of Petrocaribe member countries are set to meet in September.

In reacting to news of the planned increase, Jamaica’s Energy Minister, Phillip Pauwell, said he was not aware of this move. However the opposition Jamaica Labour Party’s (JLP) spokesman on Energy, Gregory Mair said he is not surprised.

“Because of the precarious financial situation that Venezuela is in, I’m not surprised but what is of real concern is what we could see in the future is a tightening of the terms and conditions of the Petrocaribe agreement, meaning that they could reduce the credit lines and probably we would have to find more US dollars to pay them on a monthly basis which would put more pressure on the foreign exchange rate for us here in Jamaica.”

Under the Petrocaribe agreement, members can buy oil or refined products from Venezuela at favourable rates and through a long term financing agreement at low interest rates.

Petrocaribe members are Antigua and Barbuda, Honduras, Bahamas, Jamaica, Belize, Nicaragua, Cuba, Dominican Republic, Dominica, St. Kitts and Nevis, Granada, St. Vincent and the Grenadines, Guatemala, St. Lucia, Guyana, Suriname and Haiti.