El Salvador Joins Petrocaribe

Monday was Sanchez Cerén’s first full day on the job as El Salvador’s President and one of his first acts was to fulfill a campaign promise to join Petrocaribe, a Venezuelan program that sells oil to member countries under favorable conditions.

Petrocaribe will allow El Salvador to purchase oil and pay 50% of the cost within a month of delivery. El Salvador can pay off the other 50% over 25 years or by providing Venezuela with goods and services such as food or other agricultural products. Deferred or alternative forms of payment will allow El Salvador to invest those funds on other social and economic development initiatives.

Foreign Minister Hugo Martinez said this week that “[joining Petrocaribe] will help with the integral development of El Salvador with equality, social justice, and free determination, contributing to improving the quality of life, and for that we are very pleased.” He also sought to reassure those who are not in favor of the agreement that by joining Petrocaribe El Salvador will maintain its independence, sovereignty and identity as a country.

Last year candidate Sanchez Cerén and the FMLN party presented their plan for governing, and it was financed in part by joining Petrocaribe. At the time Sanchez Ceren projected would inject $640 million annually into the Salvadoran economy and allow El Salvador to double its investments in education and public security. At the time, Roberto Lorenzana, spokesperson for the FMLN party, said that if elected the Sanchez Cerén administration would join Petrocaribe in part because El Salvador “could pay [for oil] with national products,” such as food and other goods and services.

Hugo Martinez also said this week that the Salvadoran Government still has to decide whether any purchases from Petrocaribe would need to be approved by the Legislative Assembly. If El Salvador were to purchase Petrocaribe oil and agree to pay 50% sometime in the future, it would be a debt and likely need approval from the Legislative Assembly. If El Salvador is paying the other 50% with goods and services, it seems less likely that the deal would need to approval from the legislature.

Venezuelan President Hugo Chavez launched Petrocaribe in 2005 to promote energy sovereignty and social and economic development in Latin America and the Caribbean. When the Sanchez Cerén and the FMLN announced their intentions last fall, Latinnews.com said this was “not a radical step,” pointing out that the program “offers oil at preferential rates and many members do not share the left-wing ideology of its progenitor.” The article cited Guatemala and Honduras as examples of conservative governments that were members of Petrocaribe. Two months after the article was published, Guatemala pulled out stating that they were not getting the favorable interest rates they were promised.

The right-wing ARENA party responded this week by articulating concerns that the new administration may be trying to cover debts that ALBA El Salvador owe to Venezuela with Petrocaribe or state money.

Calderon Sol, Honorary President of the ARENA party and former President of El Salvador, sounded less concerned about fraud and more concerned about how strong Petrocaribe is. He said this week that “Petrocaribe had its chance and didn’t act, and now it will die soon. He continued, [Petrocaribe] is full of problems and Venezuela is unable to say that the future will be because we are getting into Petrocaribe very late.

If it works out, favorable payment plans for buying oil may be a great way to free up some funding for education in El Salvador. Despite increased spending by the Funes Administration, mostly in school uniform programs, too many Salvadoran youth still lack sufficient access to quality education and other social programs. We’ll see if it pans out.

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