Election-minded Caracas prioritizes food for oil

OREANDA-NEWS. July 09, 2015. Cash-hungry Venezuela is prioritizing food imports in exchange for oil in its increasingly strained regional relations ahead of key legislative elections.

While Venezuela oil largess under PetroCaribe and other preferential oil supply agreements has traditionally been seen as a way of garnering regional political support, the country reliance on the food and other basic goods that several countries provide in exchange is growing in response to chronic shortages.

Replenishing basic goods could help the government to drum up support ahead of 6 December legislative elections that are widely seen as a referendum on President Nicolas Maduro controversial rule.

In a deal reached this week, the Uruguayan government will pay back a \\$400mn debt to Venezuela for oil supplies in the form of 265,000 tonnes of food, after reducing the size of the debt by 38pc.

The agreement effectively cuts Uruguayan state-owned oil company Ancap's debt with its Venezuelan counterpart PdV, accumulated since 2009, to a net \\$248mn.

"A satisfactory agreement has been reached," a senior economy and finance ministry official in Caracas with knowledge of the government-to-government negotiations tells Argus.

Uruguay will pay down the debt in the second half of 2015 with rice, powdered milk, frozen poultry, soybeans and cheese valued by Uruguay at \\$300mn that will start to arrive in Venezuelan ports by September.

The agreement also commits Venezuela to pay Uruguayan food exporters about \\$38mn in past-due invoices for imports over the past year.

Uruguay's president Tabare Vazquez said the agreement benefits both countries, since Venezuela is experiencing critical food shortages and Uruguay has substantial food surpluses it has been unable to place in other foreign markets.

PdV was not directly involved in the negotiations with Uruguay's government, Venezuelan officials said.

The priority Venezuela is placing on restocking food supplies is also evident in its tense relations with neighboring Guyana.

Guyana continues to receive about 5,000 b/d of refined products from PdV under Venezuela?s PetroCaribe oil supply program, even as Maduro levies harsh criticism on Georgetown for allowing oil exploration in a swath of maritime territory it claims as its own.

Guyana pays for the Venezuelan oil products with rice under the preferential terms of PetroCaribe, a regional oil supply program founded by Maduro late predecessor Hugo Chavez in 2005.

Venezuela also receives food for oil from Nicaragua, the Dominican Republic and Argentina. Other goods in short supply in Venezuela are also bartered for oil. Earlier this year, Caracas agreed to resume crude and asphalt shipments to Trinidad and Tobago in exchange for toilet paper and machine parts. Jamaica sends clinker in exchange for Venezuelan oil.

The value of food imports under PetroCaribe jumped by 511pc between 2008 and 2013, a Venezuelan energy ministry official says. The value rose from \\$580mn in 2013 to about \\$650mn in 2014.

The ruling socialist party (PSUV) has a majority of seats in the 162-member national assembly that is subject to the December poll.