Caribbean & Central America - April 2006 (ISSN 1741-4458)

In another example of Venezuela's oil diplomacy, left-wing mayors in both El Salvador and Nicaragua signed agreements with the state-owned Pdvsa oil company to receive fuel under favourable terms. Much like Pdvsa's US subsidiary, Citgo, which is providing cheap heating fuel to impoverished US communities, the deal has the effect of enhancing Venezuela's standing and undermining the elected governments of these two countries. Both governments are close to the US.

The San José Pact

Currently Mexico and Venezuela supply 160,000bpd of oil to Central American and Caribbean countries on relatively easy terms under the San José pact, first signed in 1980 but renewed annually. However, the launch of Petrocaribe, Venezuela's offer of subsidised oil to Caricom countries in September last year, has shaken up the competition between Venezuela and Mexico for influence in the region. Now Venezuela appears to be turning its attention towards Central America.

El Salvador

On 20 March mayors representing the leftwing Frente Farabundo Martí­ para la Liberación Nacional (FMLN) signed an agreement with President Hugo Chávez in Caracas. Under the terms of the deal Pdvsa will supply cities headed by the FMLN with oil at preferential rates. The cities must pay 60% of the bill within 90 days at a 2% rate of interest, but the remaining 40% can be paid over 23 years at a 1% annual rate of interest. Chávez did not specify the exact amount of oil he would be supplying but said it would be approximately 100,000bpd a month.

The deal was a further boost for the FMLN after its strong showing in the legislative elections on 12 March and irritated President Tony Saca. Following the deal Saca warned the mayors not to raise false expectations by promising cheap oil to Salvadoreans living in their municipalities. He said that buying and selling oil was not the principal concern of mayors in El Salvador and they would need to build processing plants and a refinery to make it work. This is all envisaged under the agreement. Carlos Ruiz, mayor of Soyapango, who represented the mayors, said the deal should benefit about 22 cities and towns in the country.

Nicaragua

The El Salvador deal was clearly modelled on an earlier agreement struck between Pdvsa and the Frente Sandinista de Liberación Nacional (FSLN) mayor of Managua, Dionisio Marenco, in September 2005. Marenco, acting in his capacity as head of the association of municipalities in Nicaragua (Amunic) said on 18 April that a deal should be signed by the end of the month to supply oil at similar rates to the El Salvador agreement to 153 municipalities across the country. He will lead a delegation of mayors from Amunic to Venezuela to negotiate the deal on 25 April.

Petrocaribe

Meanwhile, also on 18 April, the president-elect of Haiti, René Préval returned from a five-day visit to Cuba to announce that Haiti would soon be joining the Petrocaribe initiative. While Préval was in Cuba he met Adán Chávez , the Venezuelan ambassador to the island and brother of President Hugo Chávez . 

High oil prices have exacerbated the severe energy shortages from which Haiti suffers; with only 30 megawatts available in the capital, Port-au-Prince. Some neighbourhoods in the capital only have electricity for four hours a day. Préval said Cuba agreed to send technicians to help resolve the power blackouts - although Cuba is yet to solve its own power problems - and to send more doctors to boost healthcare in Haiti.

On 19 April Antigua and Barbuda's Prime Minister Baldwin Spencer described Petrocaribe as "a sustainable energy initiative that would result in significant environmental and social benefits" to a meeting of the Organisation of Eastern Caribbean States. 

Petrocaribe is still far from being realised, however, and there remains confusion over the status of Trinidad and Tobago and Barbados; the only two Caricom countries to have refused the deal, but who now seem to have changed their minds.

* Towards the end of 2005, Citgo, the US oil company owned by Venezuela's state-owned Pdvsa, began offering cheap oil to poor people in the US in what critics described as a ploy to boost President Hugo Chávez 's image in the US. Citgo officials insisted the discounted heating oil programme was simply a corporate initiative. Donations by Citgo to Maine, Massachusetts and New York now total an estimated US$38m.