The Caribbean After Chavez

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Sir Ronald Sanders

Sunday, 10 March 2013 08:14

By Sir Ronald Sanders

Seventeen countries of the Caribbean face a heightened period of economic uncertainty now that Venezuelan President, Hugo Chavez, has died. 

Twelve of the 17 Caribbean countries are members of the Caribbean Community (CARICOM). They have become highly reliant on their oil supplies from Venezuela on a part payment-part loan scheme, called Petro Caribe, without which their difficult economic circumstances would be decidedly worse.

Of the $14 billion worth of oil that Venezuela provided under Petro Caribe to the 17 dependent countries up to last year, $5.8 billion constituted long-term financing. Cuba is the principal beneficiary but, in per capita terms, so too are a number of CARICOM countries – Jamaica particularly.

The attendant ALBA Caribe Fund (ACF) and ALBA Food Fund (AFF) – both financed almost entirely by Venezuela – are also significant contributors to the welfare of the beneficiary states.  In six years up to 2012, the ACF had invested $178.8 million on 88 projects ranging from education to water.   In 9 countries, the AFF had invested in 12 projects worth $24 million.

These were all the projects of Hugo Chavez personally.  He carried his government along, but the ideas and their execution were entirely of his making.  There are many theories about Chavez’s motivation.  One is that he wished to exercise control over reliant Caribbean countries in his passion to contest the influence of the US government and US companies in Latin America.  Another is that he was genuinely concerned about the plight of the poor in all these countries and wanted to alleviate their suffering.  It was very probably a mixture of both.

His relationship with Cuba is somewhat different.  There, his ambition appeared to be to stop the 50-year US embargo of Cuba from being successful.  In this regard, the economic support he provided to Cuba was as generous in its quantity as it was unstinting in its delivery.  Estimates put delivery of oil to Cuba at 100,000 barrels a day at a subsidy of $3 billion a year.

Whatever the motivation for Chavez’s economic support for Caribbean countries other than Cuba, the reality is that – apart from Barbados and Trinidad and Tobago which did not join Petro Caribe or ALBA - their governments must all now be very nervous.  The big question for them is: will the Petro Caribe and ALBA arrangements, on which they are reliant, continue under a new Venezuelan President?

More than likely if Chavez’s chosen successor, Nicolas Maduro, wins the Presidential election, the arrangements will continue for a while longer even if under amended arrangements.  However, if the election is won by the opposition candidate, Henrique Capriles, both Petro Caribe and ALBA will unwind fairly rapidly.  Capriles, who lost last year’s Presidential contest against Chavez by a 10-point margin, has already indicated that the two schemes would end and the money focussed instead on the needs of the Venezuelan people.

For Venezuela’s neighbouring CARICOM country, Guyana, there is a further dimension to the uncertainty.  Until Chavez’s Presidency, Venezuelan governments had maintained a sometimes aggressive claim to two-thirds of Guyana.  While the claim was never dropped under Chavez, and maps of Venezuela continue to include the claimed Guyana territory, he did not pursue it, choosing instead to involve Guyana in the Petro Caribe arrangements.

Maduro would be the most desirable winner for the Caribbean countries that rely on Petro Caribe and ALBA, and he probably will be elected the next President. It would be extremely difficult for Capriles to achieve a 6 per cent swing in the vote from last year’s elections in the context of the outpouring of grief over Chavez’s death, and in a short election campaign period.

However, Maduro does not have the grass-roots support that Chavez personally built-up over 13 years as President, and even if he is elected, unless he balances delivering benefits to the people of Venezuela with keeping the military content, he will be hard-pressed by a virulent opposition to continue Chavez’s programme of spending Venezuela’s oil revenues on foreign countries.

Prudence dictates that no Caribbean country – except perhaps Cuba and Haiti – should expect the Petro Caribe and ALBA schemes to be business as usual.  Venezuela has severe internal problems that are masked by its 5.6 per cent growth last year.  These problems include: a crisis in power supply; a recent devaluation of the bolivar that has increased the cost of living; a huge black market in US dollars at almost eight times the official rate of exchange; shortages in shops; rising inflation and most importantly stagnation in oil production.  Additionally, as a result of Chavez’s nationalisation of both foreign and local businesses, Venezuela is near the bottom of international rankings for attractiveness to foreign investors and ease of doing business.  

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Whoever is elected to the Presidency will have to tackle these urgent problems, and the money will have to come from cutting foreign give-away programmes such as Petro Caribe and ALBA.

While 12 CARICOM countries have good reason to mourn the passing of Hugo Chavez and to be thankful that he shared his country’s oil assets with them, the time has long past for collective investment in, and joint implementation of, projects for their energy security that are not a repeat of this enormous dependence not even on one country, but on one man.   No time should be lost in addressing this joint CARICOM task on which a crucial aspect of their economic survival depends – and both Trinidad and Tobago and Barbados must be included in the discussions.  New mutually beneficial arrangements with Venezuela and other oil and gas producers in all the Americas should be part of the joint strategy that is considered, as well as investment in renewable energy sources such as solar, wind, and hydro and geo-thermal power.

In the meantime, let us salute Hugo Chavez.  Whatever the polarised attitudes to him in his own country, he made a meaningful contribution to many countries of the Caribbean region, and he embodied a fearlessness on the hemispheric and international scene that we would be grudging not to acknowledge and admire.

Sir Ronald Sanders is a Consultant, former Caribbean diplomat and Visiting Fellow, London University

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