Caribbean Investigative Journalism Network (https://www.cijn.org/2019/page/2/)
A hotel. A highway. A port. The prime minister’s house. For Caribbean countries, one of the most visible, expansive, and expensive forms of Beijing’s engagement with the region is its financing of large-scale infrastructure projects.
In general, there are two types of funding offered by China. The first is in the form of Chinese government grants. Recipient countries do not foot the bill of these projects.
The second frequently tends to come in the form of Chinese-set market-rate loans from Chinese banks. In particular, the China Export-Import Bank (China EXIM) and the China Development Bank (CDB) – two Chinese state-owned banks, have pledged, disbursed or partially disbursed a large proportion of Chinese loans to Caribbean projects and countries.
The banks administer foreign aid loans using subsidies from the foreign aid budget to soften the loan terms. These loans usually have fixed interest rates of 2-3%, maturity of 15-20 years with grace periods, and 2 payments per year. The majority of past and on-going projects in the Caribbean are funded by concessional loans from the China Export & Import Bank.
These loans are often framed as resource-secured loans.
China’s ambitious Belt and Road Initiative was first raised by President Xi Jinping in the last quarter of 2013. Six years later, China had signed 173 cooperation agreements with 125 countries and 29 international organizations.
Five of the 17 countries, globally, that currently recognise a sovereign ‘Republic of China on Taiwan’ (ROC) are member states of the Caribbean Community (CARICOM). They include Belize, Haiti, St Kitts and Nevis, St Vincent and the Grenadines, and Saint Lucia.
With A Little Help From My Friends — How a Tiny Island Weathered Hurricanes and Storms of Political Controversy
In March 2015, at a PetroCaribe Summit, Venezuelan President Nicolas Maduro reaffirmed his commitment to the 17 participating Caribbean and Latin American countries, even calling for greater socio-economic development and more integration among its members. Fast forward just three years later and the entire framework has collapsed.
It wasn’t hard to see it coming. After riding on a crest of US$ 100+ for 4 years, oil prices would plummet in 2014 and would come to rest at US$40 two years later before recovery. Aging infrastructure and poor management would cripple the oil output of neighboring Venezuela. Both were the very lifeblood of PetroCaribe.
The program was designed to pump oil at market prices to Venezuela’s neighbors but with a lucrative repayment plan that empowered political leaders with social spending beyond their former means. In return, Caracas expected it would enjoy political cover from all those sharing the riches. While PetroCaribe clung to dear life, the oil in its veins was quickly running dry.
The PetroCaribe accord offered Haiti a unique chance to turn around economically.
“It was a Bonanza!”- Kesner Pharrell, leading Haitian Economist. CIJN Interview
Summary
Decades of violent political rivalries and instability, devastating natural disasters, and a dependence on external aid held hostage the island’s capacity to grow. In the past thirty years, there have been over thirty governments. Natural disasters have wiped out its agricultural sector. It remains dangerously underdeveloped.
Three years after Venezuelan President Nicolas Maduro declared he would continue to supply oil and cheap financing to Jamaica under PetroCaribe, the deal has collapsed. Blame falls on the troubles in Venezuela’s oil economy and the tough U.S. sanctions that have isolated its regime. But save some of the blame for corruption, malpractice and nepotism that undermined its core. The arrangement signed between oil-rich Venezuela under the leadership of the late Hugo Chavez and several Caribbean countries, among them Jamaica, to purchase oil on preferential payment conditions, has fizzled — save somewhat for Cuba. Launched in 2005, the PetroCaribe Arrangement allowed participating countries to purchase oil at market value, paying a percentage of the cost upfront with the balance being paid over 25 years at one per cent interest.
Jose Chalhoub was leader of International Analyses for PDVSA (Petroleos de Venezuela South America) between 2004 and 2016 in its Loss Prevention and Risk Control Unit. In that position, he travelled to countries where the Venezuelan oil giant was operating PetroCaribe joint ventures. In an interview with CIJN, Chalhoub outlined his concerns that senior management of PDVSA turned a blind eye to corruption. In his view, the decline of PetroCaribe and PDVSA itself was a product of the political favoritism and nepotism that kept skilled oil experts from crucial management posts. WHAT WAS THE GOAL OF THAT LOSS PREVENTION AND RISK CONTROL UNIT? Basically, fighting against corruption, physical security, risk analysis of facilities, intelligence analysis of facilities, situation room monitoring of operations. All things dealing with the business continuity of the whole company and internationally. That’s how the operations of this department grew up in support of PetroCaribe.