Low oil prices are forcing Venezuela to cut a generous subsidy program to Cuba and a dozen other Caribbean nations.
Venezuela is Latin America's largest oil producer, and its economy depends heavily on oil exports. It's been been hit hard by the tumbling oil prices.
"Venezuela is in desperate straits. The oil sector has been deteriorating, and now with the slumping oil prices, they needed cash desperately," says Michael Shifter, the president of the Inter-American Dialogue, a Washington, D.C.-based group that studies the region.
Shifter says it's no surprise that Venezuela is trimming back a program that provides oil at subsidized, deferred payment rates to many of its Caribbean neighbors that are dependent on energy imports. Petrocaribe — an alliance of Venezuela and Caribbean nations — was created a decade ago by the late Venezuelan president Hugo Chavez. It provided subsidized oil to countries such as Belize, Haiti and Jamaica.
The subsidies helped Caribbean nations balance their budgets and finance schools, social programs and small businesses and farms.
"This was part of his broader strategy to extend his influence to consolidate support and also to curtail influence of the United States in the region," Shifter says. But he says when prices dropped, Venezuela "couldn't sustain this, it was impossible."
The Miami Herald, citing a report by Barclays investment bank, says shipments of subsidized oil to Petrocaribe members are down by about half for most countries from what they were in 2012.
Caribbean nations have been bracing for the steep cutbacks in shipments of cheap crude oil, according to The Wall Street Journal. The newspaper quotes the governor of Jamaica's central bank saying his government is adjusting by being more cautious about what to expect from Petrocaribe.
Even Cuba — the nation most closely-aligned ideologically with Venezuela — is seeing cuts to its subsidies. The Barclays report says Cuba paid for its oil by sending doctors and teachers to Venezuela.
But IHS Jane's Intelligence Review says ties between the two countries remain very strong.
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Transcript
DAVID GREENE, HOST:
For Venezuela, influence comes in the form of oil. The country is Latin America's biggest oil producer, and it provides cheap oil at favorable rates to Caribbean neighbors, like Cuba. But low oil prices and now a troubled economy are forcing Venezuela to scale back. NPR's Jackie Northam reports.
JACKIE NORTHAM, BYLINE: For the past decade, countries such as Belize, Haiti, Jamaica and others depended on discounted oil prices from Venezuela to help balance their budgets and finance schools, social programs and small businesses and farms. It was part of a program called Petrocaribe. It was created by late Venezuelan President Hugo Chavez, says Michael Shifter with the Inter-American Dialogue.
MICHAEL SHIFTER: This was part of his broader strategy to extend his influence, to consolidate support and also to curtail the influence of the United States in the region, and he really achieved it. When oil prices were high, it worked very well.
NORTHAM: But Venezuela's economy, which depends heavily on oil exports, has been hit hard by the tumbling oil prices. Shifter says it's no surprise Venezuela has trimmed subsidies by about half for most countries.
SHIFTER: Venezuela is in desperate straits, and now with slumping oil prices, they needed cash desperately. So they just couldn't sustain this. It was impossible.
NORTHAM: Even Cuba, the closest aligned ideologically to Venezuela, is seeing cuts to its subsidies. Shifter says Cuba paid for its oil by sending doctors and teachers to Venezuela. Jackie Northam, NPR News. Transcript provided by NPR, Copyright NPR.
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