Petrocaribe: The Inefficient Regional Organization


On June 29, 2005, Petrocaribe was created as a vehicle for energy cooperation between Venezuela and several Caribbean states. However, since its founding, the organization has been accused of being a political instrument of the Venezuelan government. Likewise, the organization has lost influence and its commercial capacity. So, what happened to Petrocaribe?

Petrocaribe was promoted by the government of Hugo Chavez (1999-2013) as a revolutionary instrument that would allow consolidation of commercial ties between Venezuela and the Caribbean. One objective proposed during the negotiations was the development and economic and social progress of the Caribbean states. Indeed, Chavez and Caribbean leaders sought to transform Latin American and Caribbean societies via Petrocaribe – making them more just, educated, participatory and supportive. With oil and support from Venezuela, the Caribbean islands could hope to improve their economies and solve some social problems.

At present, Venezuela and 16 other countries have been integrated into the organization. These states benefit from an ease of payments regarding Venezuelan oil imports. The payment system allows the purchase of oil at prices below market price, provides ample time lapses to make the payments, and opens the possibility for the states to use alternative currencies such as food to settle their debts with Venezuela.

From this perspective, one might believe that Petrocaribe is an organization that fosters cooperation and achieves its social objectives. However, the real reason for its inception has political impetus. The Chavez’s foreign policy – which has continued through Nicolas Maduro – consisted in strengthening Latin American and Caribbean states through a political and economic model called Socialism of the 21st century.

Through providing support to the Caribbean states, Venezuela sought to alienate these states from the influence of the United States and convince them to apply the socialist policies that characterize Venezuela and Cuba. In addition, the agreement created a state of dependence of the Caribbean islands on Venezuelan oil. This has allowed Venezuela to exert pressure on regional governments and force them to support Venezuela in other international organizations, such as the Organization of American States.

At present, however, Petrocaribe has reduced commercial exchange as a result of the fall in the price of oil. During the first seven years after the foundation of the organization, the price of oil increased to a scale never before seen, reaching figures above $120 per barrel.  After 2013, the price of a barrel has decreased and is around $45 to $55. The fall of Venezuelan oil production also affects trade with the Caribbean islands.

As a consequence of the aforementioned commercial loss due to violations of Human Rights in Venezuela, several Caribbean states have reduced their support of Venezuela in the OAS – demonstrating the failure of Venezuelan foreign policy in the last 15 years. Indeed, the creation of Petrocaribe did not give Venezuela economic benefits as even the organization has decreased its commercial exchange. Not only has Caracas failed to transfer the “Socialism of the 21st Century” model to the Caribbean islands, but it also does not maintain the unconditional support of the Caribbean in international organizations.

Venezuela must use oil as a diplomatic mechanism to achieve its objectives. However, the nation must have a coherent and realistic foreign policy through which it could obtain economic benefits and/or true allies in the Caribbean region.