Long term debt to PetroCaribe $140 million – PM

The long term debt of St Vincent and the Grenadines to Venezuela, under the PetroCaribe agreement is $140 million and all short term payments are up to date.

This disclosure was made by Prime Minister Dr Ralph Gonsalves, as he gave an in depth analysis of the PetroCaribe agreement{{more}} during his ‘Ask the Prime Minister’ radio programme on December 11.

Under PetroCaribe, St Vincent and the Grenadines buys oil at a percentage of the actual cost and is allowed to keep a portion of the oil payment, which is transformed into a loan over a 25-year period at an interest rate of one per cent.

“We have paid everything which we are supposed to pay immediately and the long term debt, we are also up to date and it has a balance of $139.6 million. That’s why I round it off to $140 million,” the Prime Minister said.

Gonsalves noted that the PetroCaribe agreement was signed on June 29, 2005 and this country received its first shipment of hydrocarbon products, which include oil and liquefied petroleum, in December 2005. He revealed that the agreement is executed through two local companies: PetroCaribe St Vincent and the Grenadines Ltd. and PDV SVG Ltd. which is a branch of Venezuelan oil company, PDVSA.

“PetroCaribe SVG is our company, so PDVSA sells products to PDV SVG and … the percentage of the money which will go to Venezuela goes to them within 90 days and the balance of the money is put into the account of PetroCaribe St Vincent and the Grenadines Ltd for us to use in purposes that we see fit in accordance with the agreement which we signed with Venezuela,” Gonsalves said.

Under PetroCaribe, there is a financed portion that is reflected on each invoice of products received to show a long-term and a short-term debt.

“The finance portion of the agreement, that is reflected on each invoice, according to the price of the product at that particular time, is deposited in the PetroCaribe SVG Ltd. account to be used for the social development for the people of St Vincent and the Grenadines,” the Finance Minister explained.

“The financing mechanism of the agreement operates in direct relationship with the amount of products invoiced. This is done in two categories, namely the long term portion and the short term portion. The short term portion is paid within 90 days, so …when the invoice comes, VINLEC pays for all of the fuel, but that portion, that short term portion, which amounts to 50 or 60 per cent or some other percentage, which I will shortly describe, is paid directly to Venezuela for the commodity, but they put into our PetroCaribe SVG Ltd account, the other monies for us to be used for other purposes of social development.”

With regard to the long-term financing, the Prime Minister pointed out how the figures are calculated.

Using an example, he explained that if a barrel of fuel costs $15 then the percentage of money that will be transferred into the PetroCaribe SVG Ltd account is 5 per cent of that cost.

Gonsalves further noted that percentages can fluctuate, moving anywhere between 5 per cent and 50 per cent, depending on the cost of fuel.

“So in recent times, before the falling prices, if you have more than $100 or more a barrel, 50 per cent will go and 50 per cent will stay. If it is between $50 and $100 a barrel, 60 per cent will go and 40 per cent will stay so that is how it functions,” he said.

“I just want to say, in December 2005 when the first shipment came and then until 2009, VINLEC was the entity which dealt with PetroCaribe…and in 2009, PetroCaribe SVG would have begun in earnest to deal with the matter. For the first three years plus of the arrangement, they sent the fuel and they didn’t even send the invoices. They (VINLEC) had to make approximate payments. When we took over, 14 million of the debt which was there with VINLEC came over. I’m talking now the long term debt.”

However, the Finance Minister declared that all of this country’s short term debts have been paid fully and that all long term debt payments are up to date.

“I want to give some details about what we have paid; the debt payment to PDV SVG from the year 2010 right up to 2014. We have paid for the short term, that is to say what we have to pay right away; $95 million which is for the fuel that we get,” Gonsalves said.

“The long term payment which we have paid to them on the long term debt is nearly $6 million. We have paid principal of – that is for the 25 year money at 1 per cent – we have paid a total of 5.2 million and we have paid $760,980.75 in interest, giving you 5.973 million.”

Additionally, Gonsalves took the opportunity to highlight some areas in which the money from the long term debt was spent.

From these funds, central government received $61.195 million, which was spent on a variety of areas, including the retrofitting of the immigration office, repairs on the James Mitchell airport, relocation of the Mental Health Facility to Orange Hill and a poverty reduction programme to deal with the Black Sigatoka disease.

The Roads, Bridges and General Services Authority (BRAGSA) received $5 million to help with road repairs, the International Airport Development Company received $60.4 million, the St Vincent and the Grenadines Port Authority received in excess of $415,000 while the Housing and Land Development Corporation received $125,000 and the fast ferry company, Jaden Inc received $264,000.

Gonsalves noted that other areas benefitted from the long-term funds including Pan Against Crime, which received a series of donations totaling $1.5 million, the displacement of the Lowmans Bay Housing benefitted from $912,000 and $1.3 million was spent on operating and administrative expenses while $8.5 million is in cash resources and bank balances.

“I want you to tell me that I shouldn’t spend money on any of those things and without the PetroCaribe monies, we wouldn’t be able to do these things that we have done and we have done them very cheaply,” Gonsalves said.(BK)