Jamaica to pay its Venezuela oil debts with food, medicine
Jamaica has recently announced that it will be paying its oil debts to Venezuela with food, medication and fertilizers instead of cash.
Venezuela is currently suffering from acute shortages of these basic products due to major economic and political crisis. Jamaica’s government announced the barter agreement on July 29, saying that the transfers will take place in the last quarter of this year and amount to US$4 million.
The oil-for-basic products exchange is taking place within a regional agreement known as PetroCaribe that was signed in 2005 by Venezuela and 12 Caribbean States. The deal requires the Caribbean nations to pay for half of the oil at market prices immediately. The remaining 50% can be paid up to 25 years later. A special “compensation mechanism” within the agreement allows for cash substitutes to be used to settle that delayed payment.
According to RolínIguarán, an oil expert from the University of Zulia in Venezuela, Jamaica has been accumulating debt from the country since 2006 and it is legitimate to pay the debt with products. “In this period of economic recession, Venezuela is returning to practices that were used in the 1940s,” he added.
Shortages of food and other basics are at the heart of Venezuela’s current crisis, with few signs that things would get any better in the near or medium term.
Iguarán, the energy expert, stressed Venezuela’s long-running dependence on oil revenue to pay for importing basic goods. In the current context of falling oil prices, and falling production, he said barter deals like the kind just announced with Jamaica may soon spread around the Caribbean.
“They need oil and may also be producing something that Venezuela needs,” he said.
Many details of the deal — which the Jamaican prime minister’s office announced with a statement while Venezuela’s presidential office kept silent — remain unclear. These include what food products will be involved and where the medication will come from, given that Jamaica does not have a significant pharmaceutical industry.