Venezuela’s State Oil Co. Forms Joint Venture with Nicaraguan Mayors

Nicaragua's Mayors' Association and Venezuela's state owned oil company PDVSA signed an agreement to provide oil to Nicaraguan communities at preferential financing terms. The agreement mirrors earlier agreements signed with Caribbean nations.

Caracas, Venezuela, April 26, 2006—The Venezuelan state oil company PDVSA signed agreements with 153 Nicaraguan mayors yesterday in Caracas, forming the joint venture Alba Petróleos de Nicaragua, which will sell Venezuelan crude to the Central American country at preferential rates.

Yesterday’s event was held at the Venezuelan Presidential Palace Miraflores and was attended by Venezuelan President Hugo Chavez, Nicaraguan Presidential Candidate and Sandinista leader Daniel Ortega, and the mayor of Managua and president of the Mayors’ Association of Nicaragua (AMUNIC), José Dionisio Marenco, representing the 21 Nicaraguan municipalities participating in the energy agreement; and approximately a third of the participating mayors.

Alba Petróleos de Nicaragua, whose head office will be in Nicaragua, was formed with an initial social capital of one million dollars, of which the PDVSA subsidiary PDV Caribe will have 60% ownership and AMUNIC, 40%.

“We are taking a great step forward towards the energy integration being developed by the Bolivarian government.” declared Alejandro Granado, PDV Caribe President. “This initiative goes further than just mere commercialization, because it has the end goal of contributing to the complementary integration and cooperation among the peoples of Latin America and the Caribbean.”

According to the Venezuelan daily El Universal, Nicaragua could receive 10 million barrels of oil annually.  The Nicaraguan mayors would then have 90 days to pay off 60% of the Venezuelan crude, with the remaining 40% to be liquidated over a period of 23 years at 1% fixed annual rate and two years interest-free.

The creation of this joint venture comes nearly 3 weeks after an almost identical agreement between PDVSA and a group of mayors from El Salvador. Although Venezuela has recently formed various joint ventures, these are the first two cases where PDVSA has done so with representatives of local governments, and entities other than a national government or private business. Similar agreements have been made as part of Petrocaribe with nearly all Caribbean nations.

Meanwhile, in seemingly unrelated news, the Nicaraguan government yesterday expressed concern over a shipment of 10,000 tons of Urea (fertilizer) that Venezuela recently sent to Sandinista agricultural producers.  According to the Venezuelan Daily, El Universal, the Nicaraguan Chancellor, Norman Caldera, warned that the agricultural fertilizer “could be used as prime material for explosives.”  Caldera added that the Nicaraguan government would ensure that the Sandinista producers use the Urea correctly, and that this donation would not be permitted as an electoral donation.   Presidential elections in Nicaragua are set for November 5. Nicaraguan Electoral Law prohibits foreign donations in support of electoral campaigns.

Last Sunday, President Chavez, on his weekly TV show, declared jokingly to Nicaraguan Presidential hopeful Daniel Ortega, “I’m not going to say I hope you win, because they’ll begin saying I’m interfering in Nicaragua’s internal affairs. I’m not going to say you will win, but I do hope you win.”

See also: Venezuela and FMLN Mayors of El Salvador Form Joint Venture