When Moody’s Investors Service speaks about economic and financial challenges confronting the Caribbean, Barbados usually listens.
After all, anything to do with the island’s credit rating or its prospects for economic decline or recovery would be of paramount interest.
But when the Wall Street credit rating giant released a report on PetroCaribe, Venezuela’s oil deal with more than a dozen Caribbean and Latin American countries, Barbados and Trinidad and Tobago didn’t have any sleepless nights. It was one of the few occasions these days that Barbados didn’t have anything to worry about.
With anti-government student protests continuing on Venezuela’s streets and the economy remaining in a tank, Moody’s warned that Jamaica and many of its Caribbean and Central American neighbours may face varying degrees of economic risks and damage if the fall-out from the economic crisis in Venezuela spreads to Petro-Caribe. That’s because Barbados and Trinidad and Tobago aren’t members of the arrangement and therefore are immune from its troubles.
Not so for Jamaica or Cuba and, to a much lesser extent, the Bahamas. Opposition forces in Venezuela have been pressing for cut backs or the elimination of PetroCaribe and with the country in economic and financial “turmoil,” Moody’s has put Jamaica, Cuba and Nicaragua on a list of countries that face considerable risks should the oil deal run into serious trouble.
“The most vulnerable countries are Cuba, Nicaragua and Jamaica,” warns Moody’s in a report entitled Petro Caribe: Answers To Frequently Asked Questions About Risks To Credit Quality Of Petro Caribe Countries Due To Venezuela’s Ongoing Turmoil.
However, Moody’s was quick to state that the Bahamas, Guatemala, Honduras, Bolivia, Argentina and Paraguay were the “least vulnerable” to shocks from PetroCaribe should it collapse.
Last December, Moody’s took the crucial step of downgrading Venezuela’s credit rating to Caa1 with a negative outlook and it blamed “unsustainable and a materially higher risk of an economic collapse” as the “key drivers” for its action.
“If these risks materialise, some of Venezuela’s trading partners will be hurt,” Moody’s warned.
PetroCaribe is one of several oil trade agreements Venezuela negotiated with its Caribbean and Latin American neighbours. It allows member countries that range from Antigua & Barbuda, the Bahamas, Belize, Cuba, Dominica, the Dominican Republic, Grenada, Guatemala, and Guyana to Haiti, Honduras Jamaica, Nicaragua, St Lucia, St Kitts-Nevis, St Vincent and the Grenadines and Suriname to purchase oil from Venezuela at market prices and in return, receive long-term concessional loans.
“These loans have provided balance of payments support, reduced the recipient government’s costs of funding, and in many cases led to higher levels of production and social investment,” Moody’s explained.
The Wall Street warning to Jamaica, the Bahamas and other countries was based on Moody’s own analysis of each nation’s current account balance, dependence on oil imports and reliance upon Venezuela for those oil imports.
An economic analyst in Washington had previously issued a somewhat similar warning to English-speaking Caribbean states, Jamaica in particular, after the street protests erupted in Caracas and other Venezuelan cities, costing more than 40 people their lives.
Recently, scores of students again took to the streets of the Venezuelan capital voicing their opposition to the government of President Nicolas Maduro, who succeeded Hugo Chavez, the architect of PetroCaribe.
But instead of the tens of thousands of marchers who battled police and soldiers in earlier demonstrations in February, March and early April, the students and their supporters numbered hundreds, an indication that the protests have lost much of their momentum.
The students had vowed to ignore a high court ruling that limited the protests by staying but they decided not to go downtown to avoid any confrontation with government security forces. Instead, they staged their actions in the wealthier eastern districts of the capital.
The high court ruling gave the police the right to disperse crowds that don’t have a permit to march but the students described the court’s decision as an attempt by the government to end all protests against Maduro, who recently celebrated his first anniversary in office since last year’s election which he narrowly won.
The students are protesting against sky-high inflation which runs at about 56 per cent; rising unemployment; scarce basic foodstuffs; and a seemingly out-of-control homicide rate which is the second highest in the world behind that of Honduras.
But the main opposition and the government have started talks aimed at cooling the social protests. Although Maduro hasn’t budged from his strong position that protest leaders who are now behind bars should remain there until they have a day in court, he offered the business community a concession and that was to give them access to financing through state investment funds in an effort to kick-start a rapidly declining, if not, bankrupt economy.