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Fall of Venezuelan crude oil affects energy cooperation agreements

Fall of Venezuelan crude oil affects energy cooperation agreements

Posted by Dubraswka Aguilar on November 17, 2014

If previously the financial situation of Venezuela reviewing energy cooperation agreements was necessary, it is now even more. The price of oil has been falling steadily in recent weeks, and experts within and outside the country, say the trend is not reversed. Given this scenario, the evaluation of the conditions of funding more than important, it is essential according to experts consulted.

The last modification of Petrocaribe Energy Cooperation Agreement establishes a financing of up to 60% of the oil bill if prices equal or exceed $ 100 a barrel. If they drop to $ 50 a credit payment equivalent to 40% of what is shipped will remain, which means that while trading profit fall is still quite favorable for the recipient nations. Either 100$ or $ 50 a barrel, the remaining conditions prevails: "When the price exceeds $ 40 per pay period will be extended to 25 years, including 2 year grace period and interest will reduce to 1%." Part of deferred payment can be canceled with goods and services, including food. Not surprisingly, these terms have been attractive to the Caribbean Islands, for which the cost of energy is high.

The oil analyst José Toro Hardy believes that maintaining these benefits is unworkable. "With the fall in prices and production, we are faced with an unmanageable fiscal deficit," he said. He agreed with other analysts that Venezuela requires an average price of $ 120 a barrel to balance its fiscal accounts. "It is no longer feasible; Venezuela does not need to wait for the price to fall further. Inflation is the result that PDVSA has cash problems and the Central Bank of Venezuela has to issue inorganic money to fund the oil, "he said.

He added that none of the recipient countries have a deficit of the magnitude of Venezuela. "We are not able to continue to help, we are able to make sacrifices to them," he said.

The reality, however, is that aid has been cut. The report of independent public accountants of PDVSA, for 2013, states that since 2011 the supply of oil through various cooperation (ACEP, Integral Cooperation Agreement between Cuba Venezuela, Energy Cooperation Agreement of Caracas and Trade Treaty People of the ALBA) has declined 19%, from 463,000 to 377,000 barrels per day.

The only countries that received what corresponds to his share were Cuba and Haiti last year, with an average of 99,300 barrels and 14,000 barrels a day, respectively, the report said PDVSA management. Other states such as Nicaragua, Jamaica and Grenada reached very near agreed amounts. In total, 16 countries were benefited from Venezuelan oil through preferential agreements of cooperation.

Since each signatory Petrocaribe country has individual agreements, the government has already tried to change the financing terms with some of the members. For example, last year Honduras reported that Venezuela had proposed raising the interest rate from 1% to 2% in order to resume shipments. This claim was denied in February 2014 by the then president of PDVSA and Minister of Petroleum and Mining Rafael Ramírez: "There was no modification, what happens is that we are migrating to a scheme to create a fund that holds debt to long term".

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