Costa Rica and Guatemala are the latest to sign up with Petrocaribe
Nineteen Caribbean Basin nations now receive subsidized oil shipments from Venezuela
The future could not look brighter for Petrocaribe, a Venezuelan-led oil consortium that offers preferential financial terms on crude oil to signatory nations. In the past few of weeks, both Guatemala and Costa Rica have joined, bringing its total membership to nineteen. Costa Rican President Oscar Arias, otherwise an ally of the U.S., sent his official request on July 16 to join the organization, perhaps because the cost of importing oil has doubled between 2007 and 2008 to $2.8 billion. Guatemala, one of two Central American countries to have its own domestic oil supply, turned to Petrocaribe on July 11 in order to reduce its internal debt by curbing imported oil costs.
Subsidized Oil Shipments
Petrocaribe’s members pay 40 percent of the bill within three months and 25 years to pay off the rest, at a one percent rate of interest. Because the conglomerates asking price undersells the international price of oil per barrel by 23 percent, it is estimated that Guatemala will save $2,043,300 and Costa Rica $1,255,170 annually if the price of oil remains around $130 per barrel.
Dubbed “oil diplomacy” by its critics, Petrocaribe ships approximately 200,000 barrels of oil a day to member countries and it expects to hold $4.5 billion worth of oil-importing countries’ debt by 2010. The recent additions of Guatemala and Costa Rica to Petrocaribe’s membership roster highlight the possible shift in the regional balance of power in the near future. The U.S. has failed to take a leadership position in addressing the current local food and fuel crisis, creating a power void that Petrocaribe has risen to fill. With the island nation of St. Lucia currently entering into negotiations with Petrocaribe, the budding conglomerate is emerging as a realistic mechanism through which Caribbean Basin countries can politically and economically cooperate to mitigate the effects of the oil crisis.