Leader of the Opposition, Arnhim Eustace, says he is monitoring the latest economic developments in Venezuela and their implication for the economy of St. Vincent and the Grenadines (SVG), which benefits from Caracas’ oil initiative, PetroCaribe.
Venezuela’s president, Nicolas Maduro, last weekend, unveiled an economic emergency decree in an attempt to reboot the crisis-hit South American country, where inflation has gone past 140 percent.
“… Venezuela, essentially, is under a state of emergency, and President Maduro, for a 60-day period has taken over all basic powers and decisions about the economy and so forth, but he has a congress which is 76 percent opposition party and there is a court. Those institutions he has to deal with,” Eustace said Monday on his weekly radio programme.
“And because of the nature of the crisis, which is economic, it brings into view, into our stark reality, things related to our own economy in St. Vincent and the Grenadines.”
Eustace, an economist, said he has been following what is happening in Venezuela.
“I want our people in St. Vincent and the Grenadines to understand this is a world that is linked. And actions in one country can affect us here in St. Vincent and the Grenadines, and moreso, in a country with which we have deep relations — in that case, I am talking about Venezuela.”
He noted that inflation in Venezuela, at the end of the third quarter of 2015, was 141.5 per cent.
“When we have 5 per cent inflation here, you think it’s high or getting out of control.”
Eustace illustrated, saying:
“You go into a store earlier last year and you could buy something for $100. Now, you pay $241 for it at the end of the year. This is a time when your salary is not going up, at a time when government is not getting enough revenue. … So that is the state of affairs in Venezuela.”
He said that all this is happening at a time when economic growth in Venezuela for 2015 was minus 7.1 per cent, and noted that the congress in Caracas has already questioned whether they can continue PetroCaribe.
PetroCaribe allows participating nations, including SVG, to pay up front for a portion of the oil it buys from Caracas and keep the remainder as a 25-year loan at one percent interest, once the price per barrel of oil remains at a certain level.
The loan component of the arrangement has been used in SVG to fund social programmes and provide low-interest loans to farmers.
“So don’t think this is something you are reading in Argentina and Argentina newspapers. It has direct impact for the St. Vincent and the Grenadines economy, which is very, very serious,” said Eustace, who quoted extensively from an Argentine newspaper report about the development.
Eustace said he has been following developments in Venezuela for some time and knows that they will impact SVG “sooner or later”.
“I have made a lot of documents about PetroCaribe which people don’t like, but I don’t care about that. I was doing that on the basis of my own knowledge, in terms of economics, and what certain things mean to me,” said Eustace, who has repeatedly said that his New Democratic Party would rescind the agreement if it is elected to office.
He noted that when Venezuela bought US$30 billions in arms from China a few years ago, a number of persons questioned the deal, as Caracas was to use oil to pay for the arms, the costs of which were quoted in U.S. dollars.
Eustace noted that Venezuela uses the Bolivar and when the deal was made, oil was US$80-US$100 a barrel and Venezuela has to pay US$30 billion in oil to get the arms.
“When the price of oil now falls to less than US$30 a barrel, they still have to pay for their [arms] in U.S. dollars. So that US$30 billion could easily become US$70 billion that they have to pay back in their own currency.”
He said that this put Venezuela in a crisis and the first thing that Caracas has to do is to cut giveaways.
“And PetroCaribe is already mentioned as one of those things that the Parliament is saying they have to cut back. I can’t blame them for that. That is in line with their economic reality. But we would pay our own price for that too. And, already, I have expressed my concern about how that loan for PetroCaribe is being treated, and now, it has gotten even worse.
“Venezuela cannot afford to be as generous as it had been in the past. They are fighting for their own economic survival. And to the extent that they have been generous, in reality, there is no choice that they will have. They will have to cut back certain things and that is why the congress has already mentioned PetroCaribe as one of those things that they are cutting back,” Eustace told radio listeners.
“They aren’t going to be giving out favours to neighbours when their house is on fire. That is what it boils down to. And, therefore, when we look at this matter, while we have our own difficulties, political and otherwise here, we are in more difficulty of an economic nature because of the situation there in Venezuela.
“Let us not fool ourselves. We are going to pay a price for that because they have loaned us that money and we have to pay it back and the question is, will they even continue the programme? It may be cut out altogether.”
Kingstown’s debt to Caracas under PetroCaribe was last listed at EC$141 million according to a figure given in Parliament last year.