Venezuelan President Hugo Chavez’s demise yesterday, Tuesday 5 March, opens up the debate on the future of PetroCaribe, the preferential oil deal through which the Venezuelan strongman supported countries in the Caribbean, mainly Cuba and the Dominican Republic with favorable financing conditions in the purchase of oil since 2005. The higher the price of oil, the better the deal has been for the Dominican Republic. The payment system allows for the purchase of oil at market value for 5%-50% upfront with a grace period of one to two years; the remainder can be paid through a 17-25 year financing agreement with 1% interest if oil prices are above US$40 per barrel. The DR has accumulated a debt of around US$3.029 billion with Venezuela under these conditions, and this has been increasing at around US$600 million a year.
The deal was signed for 20 years, and would thus end in 2025, but it is uncertain if a new government in Caracas would continue it.
Chavez also donated for the construction of 100 homes in Monsenor Nouel province after many families were left homeless with the passing of Noel and Olga tropical storms in 2007.
Other considerations are the new government position regarding the local oil refinery, now under Petroleos de Venezuela that operates the refinery after making a US$133.5 million investment. The late President Hugo Chavez made a last visit to the DR on 5 May 2010 on occasion of the Venezuelan state petroleum entity’s purchase of the 49% stake in the refinery. President Chavez had visited on five other occasions.
Diario Libre writes that while the pact states that Venezuela would supply 50,000 barrels of crude per day to the Dominican Republic, the local refinery (Refidomsa) only has the capacity to process 14,000 barrels a day and 34,000 if it is semi-processed crude.
Economist Alejandro Fernandez highlighted that Chavez made possible contributions to the country that were fundamental to maintaining economic stability. He said the country benefitted with the preferential treatment for US$3 billion in 7 years time, comparative to borrowing from the InterAmerican Development Bank for US$2 billion over a longer 20 year period. Fernandez commented that the DR has also benefitted from Venezuelan investors that have injected much capital here as these sought to diversify their risks.
www.alianzabolivariana.org/pdf/AcuerdoDominicana.PDF
http://www.hoy.com.do/economia/2013/3/6/470162/VIDEOQue-pasara-con-Petrocaribe-en-el-contexto-dominicano-tras-la