September 02, 2008
CARACAS (Reuters) - Venezuela's socialist President Hugo Chavez has won over some of the United States' closest allies in the Caribbean and Central America with oil credits and aid that match similar efforts by Washington.
Hundreds of millions of dollars in food aid and billions in low-interest loans to buy Venezuelan oil put Chavez neck-and-neck with the United States as a major financier in a region that U.S. officials once called their backyard.
Chavez, who has clashed with the White House on everything from free trade to fighting drugs, is now a top benefactor even to Washington allies who welcome his aid offers to offset rising energy and food import bills.
With oil prices expected to stay high, analysts say Chavez's influence will grow in a region that was once a Cold War battlefield and remains impoverished.
"The economic relationship with Venezuela now appears to be central to the region's short-and medium-term stability," said Anthony Bryan, a senior associate at the Center for Strategic and International Studies think-tank in Washington.
Many Caribbean and Central American countries rely on the United States for much of their trade, including food imports, and they generate electricity with pricey fuel oil.
Chavez this year launched a $450 million fund to combat soaring food prices in the region.
That sum rivals the roughly $500 million slated by the U.S. Agency for International Development, USAID, for those countries in 2008, according to USAID documents.
In a show of his growing influence, Chavez in August convinced Honduras, for long a U.S. ally, to join a Venezuela-led alliance of leftist countries called the Bolivarian Alternative for the Americas, or ALBA, which was originally set up to counteract a U.S. free trade proposal.
Guatemala, part of a group of Central American countries that has a free trade pact with the United States, now receives oil credits from Venezuela. And Costa Rican President Oscar Arias, another Washington ally, has also asked for the financing, despite his past criticism of Chavez.
Through ALBA and related agreements, Venezuelan money has paid for an airport expansion and a fuel storage tank in Dominica, power generators in Nicaragua and, according to media reports, Jamaica's government bailout of an airline.
Venezuela has extended billions of dollars in credit lines to countries that buy its oil and fuel through an accord called Petrocaribe, which lets 18 member nations finance the payment of up to 70 percent of imports at 1 percent interest.
Petrocaribe, which sells oil at market price but with cheap credits, as of 2007 had provided $1.2 billion in financing -- similar to the Washington-based Inter-American Development Bank's soft loans in that period.
OIL AND POLITICS
Since 2001, Venezuela has provided cut-rate oil and fuel to Cuba, and now delivers more than 90,000 barrels per day, helping the communist island survive a decades-old U.S. economic embargo and recover from an economic collapse in the 1990s.
Jorge Pinon, an energy expert with the Center for Hemispheric Policy at the University of Miami, estimates Cuba's long term debts of 15 years or more for financed oil purchases from Venezuela have reached at least $2.9 billion.
Venezuela's oil minister, Rafael Ramirez, said he could not confirm financing figures for Cuba or Petrocaribe nations.
Chavez is not the first Venezuelan leader to use oil for political purposes in the Caribbean and Central America.
In 1980, Venezuela and oil producer Mexico teamed up in a deal called the San Jose Accord to provide those countries with low-cost oil and financing for domestic development projects.
Caracas structured the deal to curry favor with Washington, excluding Cuba and seeking to prevent the growth of leftist movements in the region.
Chavez is now using the same tactics to advance his political goals but critics at home say they harm Venezuela, which is in an oil-driven consumer boom but suffering from problems like rampant crime and dilapidated hospitals.
Analysts question Chavez's capacity to deliver on promises such as investment for a refinery in Nicaragua and a new refinery in Cuba, but say Venezuela's growing role in the region should be taken seriously.
"Chavez may make a lot of promises that he can't keep, but the magnitude of the debts that are building up is quite significant," Pinon said. "This will have serious consequences, both for small countries like Dominica and for Venezuela itself."