One Region
March 1, 2011

The galloping hooves of history: Lessons from strongman politics

The Caribbean will not escape the amazing events the world has witnessed in North African and Middle-Eastern countries over the last few weeks. The first impact the region will face is economic, as both oil prices and aviation fuel escalate in price rapidly.{{more}}

As I write this commentary, crude oil future prices have reached US$116 per barrel, with the chances that they will rise still further as the popular resistance against Libyan autocrat Muammar Gadaffi grows and his violent response expands. The market is also jittery over worry that the mass protests that have swept across several Middle-Eastern countries will spread to Saudi Arabia, which had earlier pledged to increase oil production in order to meet short-falls in demand created by disruption to output in Libya, Egypt, and Bahrain. Middle-East experts are declaring themselves by no means certain that Saudi Arabia, will escape social disruption.

The worry is that the heightened prices for oil will feed its way into the world’s economies, causing a leap in inflation and dragging down the still fragile recovery in the United States and European Union countries, from which the vast majority of tourists to the Caribbean come.

Apart from a decline in tourism, airlines have begun to slap increased fuel charges on their already expensive air fares, discouraging travel from Europe to the Caribbean. The worst effect of this will be felt by tourism travel from Britain, whose government already has in force an Air Passenger Duty that is higher than a similar duty on US destinations as far away as San Francisco and Hawaii.

Many Caribbean economies – including those in the clutches of an International Monetary Fund progamme – had been relying on quicker economic recovery in the US and European Union countries to bolster their tourism revenues this year and so improve both their economic growth and employment, both of which have declined. Measured by the effects of higher oil prices and costs of aviation fuel, a dramatic increase in tourism now looks unlikely this year.

Worse yet, once the global increase in oil prices permeate through Caribbean economies, prices for food, electricity, transportation and manufacturing will all increase, putting pressure on populations that are already experiencing a decline in their earnings in real terms, increased taxes and growing unemployment.

For the Caribbean, therefore, what’s happening in the Middle-East is not simply a television drama or a distant uprising; it’s a disastrous development in real time that will have tough consequences for the region’s economies.

Higher oil prices will also create even greater reliance by some Caribbean governments on the largesse of Venezuelan strongman, Hugo Chavez. Under the Petro Caribe arrangement, the Venezuelan government provides oil to participating Caribbean countries under a system by which they pay a portion of the price upfront, with the balance converted to a loan on concessionary terms. The problem about this is that the debt of these countries to the Venezuelan government is rising exponentially, placing them increasingly in thrall to Chavez and his domestic and international policies.

If this arrangement continues, beyond the greater influence that Chavez will be able to exercise over the Caribbean countries that are highly indebted to his government, the size of the actual monetary debt will become a larger burden to many of these nations. At some point, in the future the debt will have to be paid.

It may be that some Caribbean governments are operating under the expectation or hope that Chavez will eventually write-off the debt. If this is the thinking, it is dangerous not only because Chavez may not be in a position to write off the debt, but he may not even be in power, and a Venezuelan government more focused on its domestic development could both insist on repayment, and bring the Petro Caribe arrangement to an end. The region cannot pursue its energy security and its debt strategy on a policy of flying on a wing and a prayer.

Chavez himself is no longer the undisputed populist leader of Venezuela. His resort to expropriating private businesses, including Venezuelan-owned small and medium-sized enterprises; his closing down of media on the claim that they oppose him; his jailing of political opponents; and his attack (not for the first time) on the Secretary-General of the Organisation of American States, Jose Miguel Insulza, over concern about his actions in Venezuela that contradict the spirit and letter of the OAS Charter – all of these indicate an element of desperation and instability in the regime, and certainly speaks to disaffection in the Venezuelan community, not unlike the brew that had been steaming in the Middle-East for some time before it boiled over.

Chavez’s detention of a female judge, Maria Lourdes Afiuni, has caused the United Nations Working Group on Arbitrary detention to add her to its list of arbitrarily detained persons and the Inter-American Commission on Human Rights has called for her to be tried or released. But, it seems that Chavez is deaf to the hooves of history that have galloped through North Africa and the Middle-East, toppling those who treated civil and political rights with scant regard.

In this connection, the policy of successive Barbados governments to stay out of Petro Caribe and to meet payments for oil as necessary, may prove beneficial to that nation’s autonomy in policy formulation and decision-making. Trinidad and Tobago, of course, as a producer of oil and gas itself, did not need to engage Chavez on Petro Caribe and remains outside of his debt.

The current volatility in oil prices caused by these political developments should cause Caribbean countries to address the problems of energy security and the effect of high oil prices in a collective manner, and to start that process by studying in a rational and mature way what they could do amongst themselves, and then how they could engage collectively in the international market.

There remains room for sensible and meaningful discussions between Trinidad and Tobago and the others members of the Caribbean Community and Common Market (CARICOM), and maybe even for oil swop deals with Belize and Suriname who now produce some oil, if there is a genuine will for regional cooperation.

What is certain is that the Caribbean region which prides itself on upholding democracy and human rights cannot stand by regimes that are despotic. The tide is beginning to turn, and not even the United States has been able to support its long-time allies in the face of popular revolt. Promises were made to several Caribbean countries by Gaddafi. It is doubtful that he can now help himself, let alone them.

(The writer is a Consultant and former Caribbean Diplomat)

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