Petrocaribe to Deepen Integration of Venezuela and other Caribbean Nations

The new regional grouping Petrocaribe is supposed to integrate the countries of the Caribbean more closely by stabilizing the oil prices and economies of oil importers. A US State Department letter that accused Venezuela of being undemocratic appeared to attempt to derail the meeting.

Caracas, Venezuela, June 30, 2005 ( —The Petrocaribe agreement that Venezuela and 13 Caribbean island nations signed yesterday represents “a welcome lifeline,” said Jamaica’s Prime Minister P.J. Patterson. The final document, which was signed by 14 of the 16 heads of state that were present, would create a new regional organization, Petrocaribe, which would coordinate energy imports and exports of the member nations and would work towards their regional integration.

The main purpose of Petrocaribe will be to equalize oil costs for the Caribbean island nations. Venezuela will provide 5% to 50% financing for oil imports, based on the oil price. For example, if the price is at $15 per barrel or below, importer can let Venezuela finance 5% of the cost at a low interest rate. As the price goes up a larger proportion of the total cost may be financed, at longer terms and at lower interest rates, reaching 50% financing if the price of oil reaches $100 or more, at an interest rate of 1%, for a repayment over 25 years.

Another of the agreement’s elements is the creation of the ALBA-Caribbean fund, whose purpose is to provide development grants to less developed Petrocaribe member nations. The fund is modeled after the European Union’s regional equalization fund and has previously been proposed by the Chavez government as a key part of the Bolivarian Alternative for Latin America and the Caribbean (ALBA). This fund would be partly financed out of the savings the countries generate from being members of Petrocaribe. Venezuela launched the fund with an initial contribution of $50 million.

One way Petrocaribe oil costs would be kept lower is by operating its own tanker fleet, which Venezuela would provide. Chavez said that, if necessary, Venezuela would purchase more tankers for Petrocaribe’s use.

Chavez Angry over U.S. State Department Letter

President Chavez forcefully denounced a letter that the U.S. State Department had sent to many of the participating countries during the meeting. The letter, which Chavez read to the 15 heads of state during the meeting, said, “The U.S. is seriously preoccupied by the growing threat to democracy in Venezuela, the concentration of power in the executive, the politicization of the judiciary, a corrupted electoral authority that does not inspire confidence, and the attack on basic civil rights and the rule of law…”

The letter went on to say, “There are increasing proofs that Venezuela is actively using its oil wealth to destabilize its democratic neighbors in the Americas, by means of the financing of extremist and anti-democratic groups in Bolivia, Ecuador, and other places…”

Chavez responded angrily by saying, “If anyone has interfered and trampled on liberty and democracy in this continent, it is the U.S. government. Who supported Pinochet and the most savage dictatorships that have filled these lands with blood? The U.S. government.”

Further, he added that the letter “is a lack of respect to our people and to our government. I am indignant because this is another aggression, another attempt of the savage U.S. imperialism that has filled America with blood.”

According to Chavez, this incident was a repeat of a similar one a few weeks ago, at the General Assembly of the OAS, in which the U.S. State Department tried to convince the countries gathered there that Venezuela was behind the crisis in Bolivia. Chavez said that they were spreading this false accusation while he was Bolivian president Carlos Mesa out of concern of what was happening there. He added that “we would have reasons to break off relations with that government.”