We have discussed Petrocaribe a few times on this blog. The basics are here. To recap, under the scheme, Venezuela sells Caribbean countries oil on credit. At current prices, receiving countries pay 70% up front; the rest they can pay off over 25 years at 1%. (Some of the new adherents to the agreement pay 2%.) In addition, the recipients can pay in kind, if they desire: Guyana has paid in rice and the Dominican Republic in beans. (Page 6.)
The Caribbean buyers have to establish state-owned entities to handle their end; the price difference, in effect becomes a long-term cheap loan to the entity, which uses it to finance development projects. That is how Nicaragua uses Venezuelan money to pay for the prep work on the Gran Canal.
Occasionally the Venezuelans give an even bigger subsidy than that. In 2011, for example, Caracas decided that countries participating in its subsidized oil schemes would not be liable for the royalty payments that PDVSA owed the Venezuelan government. That effectively transferred $13.1 billion to Venezuela’s putative allies. (It is not well-known that Venezuela has extended this arrangement to non-Caribbean countries: frex, here is Uruguay’s. Here is Paraguay’s.)
And what does Venezuela get?
Not much. Caricom just declared that they support Guyana in its border dispute with Venezuela. (It is a big border dispute; Caracas claims half the country.)
This is only the latest failure in Venezuela’s attempt to buy influence. In 2009, the Caribbean countries politely told the Bolivarian Alliance that they were not interested in military integration, they would stick to their own Regional Security System, thank you. In 2010, when Nicaraguan troops blundered into territory claimed by Costa Rica, the West Indian nations backed Costa Rica rather than their fellow Bolivarian in Managua.
Hey! St. Lucia is backing Caracas against U.S. sanctions!
Oh, wait, that article says that some individual St. Lucians back Caracas.
There must be something.
ADDENDUM (March 15): No, not Security Council membership. In the 2014 UNSC election, Venezuela won its seat on a vote of 181-1 with no serious opposition; Caribbean support was entirely irrelevant.
It's half the country, but only about 10-15 % of the population -- most of Guyana Esequeiba is pretty rugged, and there aren't any big towns.
That said, the current border is guaranteed by both the US and Britain. So attempts to change it by force would be pretty stupid. Not quite unthinkable -- I can imagine a Venezuelan government under heavy domestic pressure getting desperate enough for a distraction -- but stupid.
Doug M.
Posted by: Doug Muir | March 14, 2015 at 08:11 AM
From the map, it looks rather more than half of Guyana -- maybe even closer to 2/3 than 1/2? That's a pretty impressive claim.
Posted by: Peter Erwin | March 14, 2015 at 11:33 AM
"the current border is guaranteed by both the US and Britain"
*cough* Budapest Memorandum. *cough*
Posted by: Will Baird | March 14, 2015 at 01:14 PM
Point taken. But to be frank, that is because the U.S. does not want to go to war with Russia over Ukraine. On the other hand, the United States would be perfectly happy to go to war with Venezuela over Guyana.
The reason isn't really Monroe Doctrine related (although that is part of it). Rather its because Russia has the capability to start a much wider war even if you ignore the nuclear weapons. Venezuela, on the other hand, can't do much. They already played the FARC card, which is rapidly becoming obsolete. From Washington's POV, there is nothing to lose in a Gulf War 1 style operation to eject Venezuelan forces from Guyana.
That said, Venezuela doesn't currently have the operational capacity to pull off an invasion. So I don't stay awake wondering if Maduro might try to emulate Galtieri or Putin and unite his people around a foreign expedition.
Posted by: Noel Maurer | March 14, 2015 at 10:31 PM
A while back, Doug and I asked why Venezuela just didn't buy the territory, considering as they could probably compensate Guyana for the loss without around $4 billion:
http://noelmaurer.typepad.com/aab/2008/08/bolivarians-and.html?cid=127547310#comment-6a00e3933590d5883400e55445bee68833
The consensus was that Guyana would reject it, and that would leave Caracas with egg on its face, especially since offering compensation would involve a de facto admission that Venezuela doesn't own the territory.
Posted by: Noel Maurer | March 14, 2015 at 10:43 PM
Well I don't see why Caricom states would be expected to change their historic support for Guyana on this issue because of a one-off transfer of $13.1 billion and a whole bunch of super cheap loans.
Posted by: J.H. | March 15, 2015 at 07:31 PM
Using oil money to buy friendship, or at least diplomatic mojo, seems to be a lot harder than one might think. Qaddafi tried it, and in the end all it got him was an offer of refuge in Niger. The Russians... um?
The Saudis are the big big big exception here.
Doug M.
Posted by: Doug Muir | March 16, 2015 at 11:20 AM
An article from a fellow voluntary refugee from HBS:
http://www.hbs.edu/faculty/Publication%20Files/AEJ_How%20is%20Foreign%20Aid%20Spent_49bf2595-c60e-4c6d-8af2-1d5be57ad215.pdf
Posted by: Noel Maurer | March 16, 2015 at 12:04 PM