Business
Clean Slate: Jamaica working to pay off oil debt to Venezuela
Jamaica is in talks with financial institutions on a plan to pay off debt it owes Venezuela for oil it received through the Petrocaribe energy program, the island-nations’ Finance Minister Peter Phillips said.
The talks come less than two months after the Dominican Republic struck a deal to pay US$1.9 billion for nearly all of the US$4.1 billion it owed Petroleos de Venezuela SA, which administers Petrocaribe. Phillips said a similar deal makes sense for Jamaica, but he declined to provide details on how the deal would be structured or how soon an agreement could be reached.
“We certainly have valued and continue to value the Petrocaribe arrangement,” Phillips said Wednesday in an interview at the Jamaica Investment Forum in Montego Bay. “We are mindful of the particular needs of our Venezuelan counterparts and in that space there is some prospect for some deal to be made.”
Any accord would provide fresh cash to Venezuela as President Nicolas Maduro struggles to rein in the world’s fastest inflation rate, the government juggles management of multiple exchange rate systems and consumers line up outside markets for basic goods such as soap and detergent. It would also lower the debt burden of Jamaica, which has won praise from the International Monetary Fund for efforts to rebound from a 2013 default on about $9 billion of local bonds, the second in three years.
JPMorgan Chase & Co. estimates Venezuela’s claims on Jamaica’s Petrocaribe debt may be as much as US$3.8 billion. Those claims will have a market value of US$1.8 billion if Venezuela provides Jamaica with the same discount given to the Dominican Republic, the bank said in a January 30 report.
Under Petrocaribe, 19 Caribbean and Central American countries receive petroleum and refined products from Venezuela, paying only a portion of the bill upfront and financing the rest for 1 percent or 2 percent interest over 25 years.
Venezuela’s economic struggles have led some analysts to say the country may need to cut back shipments to its members. Maduro has rejected that speculation, pledging to strengthen the energy program. At a March 6 summit, the Venezuelan leader said the country would provide US$200 million in financing for member countries to develop renewable energies and that PDVSA would search for a dedicated well to keep oil shipments flowing.
“PetroCaribe has become a project of prosperity, development and, most important, stability of the Caribbean,” Maduro said on state television. Buying back its Petrocaribe debt could help Jamaica cut a debt-to-gross domestic product ratio of about 130 percent. The Portia Simpson-Miller administration is nearly halfway through its IMF program.
Jamaica could reduce its debt by an additional 10 percentage points of GDP if it buys back the debt in a deal structured similarly to that of the Dominican Republic.
