Venezuela's elections and PetroCaribe
PetroCaribe website
Is revision of PetroCaribe on the way?
 

             By David Jessop

 
                                        
Over the last few years Venezuela has, through its PetroCaribe oil and development facility, provided an economic lifeline for most Caribbean Basin economies - extending support in a manner that no other country has been willing to replicate.
 
It is therefore scarcely surprising that the outcome of the recent election in that nation has resulted in varying levels of uncertainty in virtually all 17 PetroCaribe member states.
 
As is well known, President Maduro’s ruling Partido Socialista Unido de Venezuela (PSUV) lost control on 6 December of the country’s National Assembly with the opposition coalition, Mesa de la Unidad Democrática (MUD) taking 112 of the parliament’s 167 seats.
 
This slim super-majority potentially offers the country’s opposition the opportunity to undertake far reaching reforms. They could dismiss recently appointed Supreme Court judges, change the country’s 1999 socialist constitution, restructure institutions such as the election board, remove ministers, and even approve a recall election against President Maduro in 2016 if they were able to obtain the 4 million signatures needed to trigger a referendum.
 
These are of course domestic issues that only indirectly touch the Caribbean; but they have also resulted in concern about how Venezuela’s newly elected legislators will respond to the deep-seated production problems of the state oil company Petróleos de Venezuela (PDVSA), the continuing fall in the global oil price - down to US$37.79 per barrel and still falling as this is being written - and by extension, the future of the PetroCaribe programme.
 
Reviewing PetroCaribe
 
According to some Central and South American publications an urgent review of the agreements between Caracas and PetroCaribe beneficiary nations is to be undertaken.  
 
In a telephone interview with La Prensa, the centre-right Nicaraguan newspaper, the Secretary General of MUD, Jesús Torrealba, said that they “will refine and revise the agreements on oil, given the ailing economic situation facing Venezuela”. 
 
“Faced with such criticism as we live with in Venezuela, for us it is clear that we must seek the redefinition and re-orientation of some agreements that fit the current reality of Venezuela,” Mr Torrealba was quoted as saying.
 
“These exercises in international solidarity literally take away the bread from the mouths of Venezuelans to help some brothers abroad. It would be important to verify whether in fact these dollars, that drop of oil that is not directed to hospitals or Venezuelan schools, is reaching those who need it”, the MUD leader told the publication.
 
That said, the opposition’s bigger initial concern is more likely to revolve around falling production and inefficiencies at PDVSA and the implication this has for turning around the country’s failing economy.
 
Although estimates vary, the PetroCaribe programme is believed to have cost Venezuela about US$2bn a year in lost income in the period from 2011-2013, although the subsequent more recent fall  the price of oil and a significant reduction in the volume of oil supplied to Cuba have significantly lessened the subsidy element of PetroCaribe in recent years.
 
The greater likelihood is therefore that, at most, the new legislature may only seek a variation in the terms of the existing PetroCaribe arrangement as it is likely that - Cuba apart - many MUD legislators will want to retain the regional economic and political influence that PetroCaribe has delivered should they win the Presidency in three years time.
 
Energy transition
 
Some PetroCaribe member nations such as Haiti, and for different reasons Cuba, might be disproportionately affected by any precipitate end to the programme, but the low world oil price, the Caribbean’s diversification into renewables, and the external support now available to create a new regional energy matrix, suggest the region should, if it wishes, be able to effect a challenging but achievable energy transition out of PetroCaribe.
 
That said, a bigger issue for nations such as those in the Eastern Caribbean would be a loss of the development component or any change in the longer term PetroCaribe related investment and infrastructural support programmes that are underway, or the more recent new programmes that President Maduro has been discussing regionally and with individual Caribbean Heads of Government.
 
Far more potent however, are the political and economic issues within Venezuela that could indirectly touch the whole region if there is gridlock between the legislative and executive branches of government and this were to lead to internal instability.
 
Accounting period
 
Following the election, MUD’s leadership have focussed on what is practical, establishing working committees; on requesting information from the directors of the Central Bank of Venezuela (BCV), the National Statistics Institute (INE), the state-run oil company PDVSA, and the Ministry of Finance, in order to establish accountability, enable the questioning of ministers and to obtain better understanding the state of the economy in order to control budget implementation. 
 
It is an approach which would seem to suggest that, if it can retain coalition unity, MUD may chose to tread lightly and avoid any early direct confrontation, especially in relation to the PSUV’s populist policies. 
 
However, opposition leaders have also indicated a number of domestic issues they want to remedy rapidly when they take control of the National Assembly in January, including the granting of an amnesty for prisoners held for political reasons; an issue that could lead to an early confrontation.
 
President Maduro has made it clear he would not sign any such change into law.  He has also warned the country’s powerful military in a speech on December 12 that the country was “facing a large-scale crisis, a counter-revolutionary crisis that is going to generate a power struggle”. “This is no time for cohabitation or coexistence with the bourgeoisie”, he said.
 
There are many other potential flashpoints: the Executive branch of Venezuela’s government may not accept that MUD has a super majority in the National Assembly; the present view of the Venezuelan military is unclear, as is the effect of the loss of control of the National Assembly may have on existing divisions within the PSUV; the MUD coalition may not hold; a variety of external actors may seek to play a role; the border dispute with Guyana, which has almost all-party support in Venezuela, may escalate; and plunging oil prices could result in new internal social tensions if the economy deteriorates further.
 
The Caribbean should prepare for what may be a long, bitter and at times ideological struggle.
 

 
David Jessop is a consultant to the Caribbean Council and can be contacted at
Previous columns can be found at www.caribbean-council.org
18 December, 2015
 

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