Chavez's oil or Lula's ethanol?
Editorial
Kaieteur News
March 7, 2007
The Government of Guyana has decided that as of May 1, 2007, half of our energy needs will be satisfied by Venezuela . Under the June 29, 2005 Petrocaribe Agreement reached at Puerto la Cruz, Venezuela, we will owe 40% of our fuel bill (at full market prices) to Venezuela - to be repaid (with interest) in twenty-five years.
Since we use some 10,000 barrels of crude oil a day, with the present and projected cost of oil, we will soon be piling up quite a debt with Venezuela .
Just as ominously, the whole Petrocaribe initiative is intended to integrate the energy sectors of Venezuela with the signatory countries of the Caribbean, which includes Cuba . The question is, “Is this in the best interest of Guyana ?”
To Guyana , Venezuela is not just any country. Venezuela claims two-thirds of our national territory and occupies our half of Ankoko Island , which it violently seized in 1966. The controversy, as we have defined it, is supposed to be addressed by the Good Officer Process of the United Nations.
The “good officer” died recently and Venezuela has not commented on his replacement. Instead, last week, at the close of the Rio Summit (which President Chavez chose not to attend) the Venezuela Foreign Minister Nicolas Maduro suggested that we should initiate bilateral discussions. Is he signalling that Venezuela wants to abandon the UN good officer process?
If Venezuela wants to go the route of bilateral bargaining, aren't we therefore giving them a huge leverage by agreeing to create the huge oil debt to them? And by being integrated into an energy consortium, are we not seeking inevitably to be dominated by Venezuela ?
It doesn't matter that we will “only” be taking half of our oil needs from the Venezuelans –securing supplies is not the major issue since we are paying cash at the moment, and Trinidad is more than able and willing to supply us. (Not to mention the huge write-off they gave us for debts owed to them for past oil supplies). Do we believe that Venezuela will ever be as generous?
Some may respond that we cannot afford to pass up on the opportunity to ease the pressure on our foreign currency demands in the short term. But we still believe that we will be placing our security at risk in the longer term.
As our Prime Minister has reminded us, we will still have to pay the debt when it comes due. What tune will the Piper be calling then? But just as importantly, we appear to be inexplicably dragging our feet rather than exploiting an opportunity in front of us to alleviate our longer term energy needs.
We are referring to the agreement we have with the Government of Brazil made during President Lula's visit in 2005, to have the assistance of the Brazilians in the development of the production of ethanol. There has since been a deafening silence from our policy makers – then this plunge into Petrocaribe. The irony is that the development of our ethanol potential offers us so much more than the reduction of our oil bills.
At a minimum, we are talking not only about the salvation of our sugar industry, but its expansion.
The government has rightfully pointed out that it had a jump on the reduction of the European preferential prices because of the strategic modernisation plan launched since 1998. But that plan depended on the production of sugar, which will always face pricing pressures.
Ethanol offers us a way out: we can have our cake and eat it too.
Europe and America , which have launched ambitious programmes to up their production of ethanol, face the hard fact that ethanol from corn and wheat costs 30 cents a litre while the same amount from sugar cane costs 20 cents – even without the subsidies that the former dole out to their farmers.
President Bush has set an ambitious target for reducing America 's dependence on petroleum by substituting ethanol in gasoline, a la Brazil . He will be meeting President Lula this week to sign an agreement on ethanol. He has declared that the US is willing to assist Caribbean countries in the development of their ethanol sector. Whether he is trying to go one-up on Chavez or not, it is in our national interest to take him up on the offer. Combined with President's Lula's prior offer we can get a jump on taking care of our energy need – and even generate foreign exchange. Our ethanol will benefit from a special tariff arrangement into the US market.
Between the lure of Chavez's short term offer in oil for credit and President Lula's offer on ethanol for our longer term energy independence, the choice should be easy. Independence is our birthright.