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Statement to Parliament by the Hon. Bruce Golding re 5th extraordinary PetroCaribe Summit

Release Date: 
Tuesday, July 15, 2008 - 14:45

I take this opportunity to inform the House of the outcome of the 5th Extraordinary PetroCaribe Summit which was held in Maracaibo, Venezuela over the weekend.

The summit considered the unprecedented increases in oil prices which have more than doubled within the last 10 months and the impact this has had on member countries. Members will be aware that under the existing arrangements for the financing of oil imports, once the price per barrel of oil exceeds US$100, 50% of the cost of these imports is deferred for a period of 20 years at a concessionary rate of 2%. Based on discussions at the Summit, the Government of Venezuela has agreed to increase the deferred financing portion to 60% once the price exceeds US$100 per barrel. Further, should the price exceed US$200 per barrel, the deferred portion will be increased to 70%.

As the price of oil has long passed the US$100 level, this will ease the demand for foreign exchange to meet the country's oil import bill which has risen from US$1.5 billion in 2005 to the level, based on projections, of $3 billion in 2008. It will also increase the inflows into the PetroCaribe Fund on which the Minister of Finance reported a short while ago in response to questions asked by the Member for South St. Andrew.

It is to be noted that these robust inflows into the Fund represent a loan from the Venezuelan Government, albeit on very concessionary terms, which become part of the national debt and will have to be repaid. It is therefore of critical importance that the management and use of the Fund be handled in such a way that it generates the income necessary to ensure that the repayments are made when they become due without resorting to the Consolidated Fund. The Government is committed to this approach.

The Summit also considered an appeal made by St. Vincent and the Grenadines and Jamaica regarding the cost of fertilizer and the negative impact this is having on the agricultural sector and our efforts to improve food security. In the case of Jamaica, the price of fertilizer has increased from an average of $46,000 per ton in September to $113,000 per ton in July 2008. Critical ingredients in the mix of fertilizers such as urea are petro-based and the cost has increased as the price of oil has moved.

Earlier representation by the Ministry of Agriculture had resulted in an undertaking by the Venezuelan state-owned company, Petroquimica, to provide a 5% discount on the price of urea. However, based on the submissions made at the Summit, the Government of Venezuela has agreed to make available to PetroCaribe member states 100,000 tons of urea per annum at a discount of 40% of prevailing market price. This discount will provide a significant reduction in the cost of inputs to the local manufacturer. Jamaica currently imports 10,000 tons of urea annually. President Hugo Chavez has insisted - an insistence which we fully endorsed - that the benefit of this significant cost reduction must be fully reflected in a reduction in the price of fertilizer to the farmers. The Minister of Finance has decided to remove all customs user fees on the importation of raw materials for blending fertilizers. This should result in a further reduction of 5% in the cost of these inputs.

I have instructed the Ministers of Agriculture and Industry, Investment and Commerce to conduct a further thorough analysis of the current pricing structure of locally blended fertilizers. This is necessary because of the unfavorable comparison between the price of local fertilizers and that of identical blends imported by other CARICOM countries from the Dominican Republic. It is to be noted that the local fertilizer plant is owned and operated by a company out of the Dominican Republic. Based on discussions I have had with the Prime Ministers of other CARICOM countries that import fertilizers from the Dominican Republic, the price of the fertilizers blended in Jamaica require explanation. While the Government strongly supports local manufacturing, we cannot do so at the expense of the farmers and the need for increased food production especially at the time like this.

A third and very significant initiative arising from the Summit is the decision by President Chavez to establish a Fund to support PetroCaribe member countries in expanding agricultural production and improving food security. President Chavez has decided to contribute to the Fund US 50 cents for every barrel of oil exported. This is estimated to amount to US$760 million per year. A special meeting of Agricultural Ministers will be held in Honduras on July 30th to work out the details as to how these funds will be allocated. The Minister of Agriculture will be attending this meeting to pursue Jamaica's interest in benefiting from this important initiative.

An important part of the initial PetroCaribe agreement was the establishment of the ALBA PetroCaribe Fund to finance development projects in member countries with special emphasis on poverty reduction. The Government of Venezuela started the Fund with a contribution of US$50 million and urged other member countries to make voluntary contributions to expand the Fund. To date, no other country has made any contribution.

The Government is appreciative of the assistance being offered through this Fund. We have submitted a list of 12 projects which have already been evaluated and ranked by the Technical Working Group established for that purpose. Other projects are being prepared for submission to the Fund including a state-of-the-art Eye Care Centre to be established in St. Mary in collaboration with the Government of Cuba.

We believe we have an obligation to make our contribution to the Fund. It is not fair to the Venezuelan Government for us to be going constantly hat in hand without reciprocating the goodwill shown by Venezuela by making our contribution to the Fund. I was therefore pleased to advise President Chavez that Jamaica will be making a contribution of US$5 million to the Fund and this amount will shortly be forwarded. This amount will be paid from profits realized from the investments made by our own PetroCaribe Fund.

I take this opportunity to inform the House of the outcome of the 5th Extraordinary PetroCaribe Summit which was held in Maracaibo, Venezuela over the weekend.

The summit considered the unprecedented increases in oil prices which have more than doubled within the last 10 months and the impact this has had on member countries. Members will be aware that under the existing arrangements for the financing of oil imports, once the price per barrel of oil exceeds US$100, 50% of the cost of these imports is deferred for a period of 20 years at a concessionary rate of 2%. Based on discussions at the Summit, the Government of Venezuela has agreed to increase the deferred financing portion to 60% once the price exceeds US$100 per barrel. Further, should the price exceed US$200 per barrel, the deferred portion will be increased to 70%.

As the price of oil has long passed the US$100 level, this will ease the demand for foreign exchange to meet the country's oil import bill which has risen from US$1.5 billion in 2005 to the level, based on projections, of $3 billion in 2008. It will also increase the inflows into the PetroCaribe Fund on which the Minister of Finance reported a short while ago in response to questions asked by the Member for South St. Andrew.

It is to be noted that these robust inflows into the Fund represent a loan from the Venezuelan Government, albeit on very concessionary terms, which become part of the national debt and will have to be repaid. It is therefore of critical importance that the management and use of the Fund be handled in such a way that it generates the income necessary to ensure that the repayments are made when they become due without resorting to the Consolidated Fund. The Government is committed to this approach.

The Summit also considered an appeal made by St. Vincent and the Grenadines and Jamaica regarding the cost of fertilizer and the negative impact this is having on the agricultural sector and our efforts to improve food security. In the case of Jamaica, the price of fertilizer has increased from an average of $46,000 per ton in September to $113,000 per ton in July 2008. Critical ingredients in the mix of fertilizers such as urea are petro-based and the cost has increased as the price of oil has moved.

Earlier representation by the Ministry of Agriculture had resulted in an undertaking by the Venezuelan state-owned company, Petroquimica, to provide a 5% discount on the price of urea. However, based on the submissions made at the Summit, the Government of Venezuela has agreed to make available to PetroCaribe member states 100,000 tons of urea per annum at a discount of 40% of prevailing market price. This discount will provide a significant reduction in the cost of inputs to the local manufacturer. Jamaica currently imports 10,000 tons of urea annually. President Hugo Chavez has insisted - an insistence which we fully endorsed - that the benefit of this significant cost reduction must be fully reflected in a reduction in the price of fertilizer to the farmers. The Minister of Finance has decided to remove all customs user fees on the importation of raw materials for blending fertilizers. This should result in a further reduction of 5% in the cost of these inputs.

I have instructed the Ministers of Agriculture and Industry, Investment and Commerce to conduct a further thorough analysis of the current pricing structure of locally blended fertilizers. This is necessary because of the unfavorable comparison between the price of local fertilizers and that of identical blends imported by other CARICOM countries from the Dominican Republic. It is to be noted that the local fertilizer plant is owned and operated by a company out of the Dominican Republic. Based on discussions I have had with the Prime Ministers of other CARICOM countries that import fertilizers from the Dominican Republic, the price of the fertilizers blended in Jamaica require explanation. While the Government strongly supports local manufacturing, we cannot do so at the expense of the farmers and the need for increased food production especially at the time like this.

A third and very significant initiative arising from the Summit is the decision by President Chavez to establish a Fund to support PetroCaribe member countries in expanding agricultural production and improving food security. President Chavez has decided to contribute to the Fund US 50 cents for every barrel of oil exported. This is estimated to amount to US$760 million per year. A special meeting of Agricultural Ministers will be held in Honduras on July 30th to work out the details as to how these funds will be allocated. The Minister of Agriculture will be attending this meeting to pursue Jamaica's interest in benefiting from this important initiative.

An important part of the initial PetroCaribe agreement was the establishment of the ALBA PetroCaribe Fund to finance development projects in member countries with special emphasis on poverty reduction. The Government of Venezuela started the Fund with a contribution of US$50 million and urged other member countries to make voluntary contributions to expand the Fund. To date, no other country has made any contribution.

The Government is appreciative of the assistance being offered through this Fund. We have submitted a list of 12 projects which have already been evaluated and ranked by the Technical Working Group established for that purpose. Other projects are being prepared for submission to the Fund including a state-of-the-art Eye Care Centre to be established in St. Mary in collaboration with the Government of Cuba.

We believe we have an obligation to make our contribution to the Fund. It is not fair to the Venezuelan Government for us to be going constantly hat in hand without reciprocating the goodwill shown by Venezuela by making our contribution to the Fund. I was therefore pleased to advise President Chavez that Jamaica will be making a contribution of US$5 million to the Fund and this amount will shortly be forwarded. This amount will be paid from profits realized from the investments made by our own PetroCaribe Fund.

 

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