Venezuela is Latin America’s largest oil producer, and its economy depends heavily on oil exports. It’s been been hit hard by the tumbling oil prices.
“Venezuela is in desperate straits. The oil sector has been deteriorating, and now with the slumping oil prices, they needed cash desperately,” says Michael Shifter, the president of the Inter-American Dialogue.
Shifter says it’s no surprise that Venezuela is trimming back a program that provides cheap oil at favorable rates to many of its Caribbean neighbors that are dependent on energy imports. Petrocaribe was created a decade ago by late Venezuelan president Hugo Chavez. It provided subsidized oil to countries such as Belize, Haiti and Jamaica.
The discounts helped the other nations balance their budgets, and finance schools, social programs, and small businesses and farms.
“This was part of his broader strategy to extend his influence to consolidate support and also to curtail influence of the United States in the region,” Shifter says. But he says when prices dropped, Venezuela “couldn’t sustain this, it was impossible.”
The Miami Herald, citing a report by Barclays investment bank, says the subsidy cuts are down by about half for most countries from what they were in 2012. But the report says those cuts deepened when crude oil prices began to drop in August 2014.
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