Category Archives: Venezuela

CARICOM Foreign Policy Coordination: Priority or Pipe Dream?

Posted on by Leave a comment

Alicia Nicholls

It has been generally recognized by most Caribbean Community (CARICOM) countries, at least in principle, that a coordinated voice on foreign policy issues endows our small countries with bargaining power beyond our size constraints. Indeed, foreign policy coordination is one of the four pillars of CARICOM, with economic integration, human and social development, and security being the other three. However, given the current and increasing discord among CARICOM countries on key international developments, is CARICOM foreign policy coordination still a priority, or is it merely a pipe dream?

An exercise of foreign policy is an exercise of a State’s sovereignty. In general terms, a State’s foreign policy is its strategy in interacting with other States, and is influenced by what that State determines to be its strategic national interests, values, goals and priorities. The key words here are “national interests”, and they may be underpinned by ideology, pragmatism or a combination of the two. A State’s foreign policy is not static, and may change depending on the ideology of the Government in power (for example, whether right-wing, left-wing or centrist) and changing national interests, values, goals and priorities.

As a State’s foreign policy is determined by its national interests, this means that a regional coordinated foreign policy inevitably necessitates the strategic alignment of the national interests of the countries concerned.

Rationale behind the goal of a coordinated CARICOM foreign policy

From as early as the days of CARIFTA (the Caribbean Free Trade Area), the predecessor of CARICOM, the founding architects of the Caribbean regional integration project viewed a coordinated foreign policy as a life raft for assisting our small, then newly independent Caribbean States, to navigate often hostile international Cold War waters in which powerful big country sharks would prey on us little small state ‘sprats’.

Our founding fathers, and later the drafters of the Revised Treaty of Chaguaramas which established the CARICOM Single Market and Economy (CSME), saw a unified foreign policy position as an insurance policy against bullying tactics and the politics of ‘divide and conquer’ – the practice by major powers of playing off CARICOM States against each other, or picking them off one by one through inducements such as aid and other financial support in order to secure votes on hemispheric and international issues. It recognises the old adage of “strength in numbers”. For example, Article 6(h) of the Revised Treaty of Chaguaramas states as one of the Community’s objectives “enhanced co-ordination of Member States’ foreign and [foreign] economic policies”.

Indeed, there have been several instances where Caribbean countries have successfully leveraged their collective voice and numeric strength to their own benefit. Comprising nearly half of the membership of the Organisation of American States (OAS), CARICOM countries are a crucial voting bloc which powerful countries deem necessary to court for voting support on critical hemispheric issues. In the United Nations (UN), CARICOM countries are a smaller but still critical voting bloc.

But do CARICOM member States’ national interests really align to such an extent that a coordinated foreign policy on all issues is still (or was ever) achievable? CARICOM comprises fourteen independent countries and one British Overseas Territory (Montserrat). This necessitates balancing national interests, values, goals and priorities which do not always necessarily align. Indeed, CARICOM countries, while all small States, have their differences, whether in terms of language, geography, economic structure, population, resource endowment or size. All of these factors impact on each State’s perceived national interests, values, goals and priorities.

Foreign policy coordination has been successful in areas like climate change where Caribbean countries see their national interests as inextricably linked. But even on this important issue, there is some policy incongruence. On the one hand, CARICOM countries have demanded more urgent global action to fight climate change, while on the other, some CARICOM member States are still pursuing hydrocarbon exploration and exploitation, as part of their economic development strategy.

There have also been increasing (and frankly, embarrassing) instances of CARICOM foreign policy disunity, from as far back as the infamous US Ship Rider issue in the 1990s, the inability to unite around a single candidate for Commonwealth Secretary General in 2015, to as recently as the UN vote on the US’ controversial motion to recognize Jerusalem as the capital of Israel (instead of Tel Aviv). There is also the still unresolved issue of the region’s position on the One China Policy – some States recognize the People’s Republic of China, while a few still recognize the Republic of China (Taiwan).

The Venezuela Humanitarian Crisis

The latest example of foreign policy disunity relates to the devolving political, economic and humanitarian crisis in the Bolivarian Republic of Venezuela – a country which, despite some differences, has been an important friend to the region in terms of aid and other support. I highlight the Venezuela crisis not just because it is one of the biggest hemispheric crises affecting the region, but it is a nuanced issue which clearly shows the divide in CARICOM countries’ national interests, and hence their diverging positions on the perceived solution.

The suffering of the Venezuelan people wrought by the incompetence of the Maduro regime, and made no better by western countries’ economic sanctions, have caused spill-over security, health, economic and other risks for neighbouring countries. According to the UN, over three million Venezuelans have fled that South American country since the start of the crisis. Many have migrated (illegally in many cases) to neighbouring countries, including Trinidad & Tobago. It is, therefore, in CARICOM countries’ interest for the humanitarian crisis to be solved. However, CARICOM countries differ on what they believe the solution should be.

On January 10, 2019, the OAS Permanent Council approved a resolution not to recognize the legitimacy of the second term of current Venezuelan President, Nicolas Maduro Moros. CARICOM’s disunity on this issue was again on full display for the world to see. The Bahamas, Guyana, Haiti, Jamaica and Saint Lucia were among the 19 OAS member states which voted to approve the resolution. Dominica, St. Vincent and the Grenadines and Suriname were among the 6 (including of course, Venezuela) which voted against the resolution. St. Kitts and Nevis, Trinidad and Tobago, Antigua and Barbuda, Barbados and Belize abstained, while Grenada was the only OAS member State which was absent for the vote.

What explains this disunity? To my mind, mainly national interests, exacerbated by the fact that CARICOM remains an inter-governmental organisation. For instance, Guyana is currently embroiled in a long-standing border dispute with Venezuela, which has been inflamed under the current Maduro regime. This may explain Guyana’s vote in favour of the resolution. Ditto could be said for Jamaica which had recently decided to reacquire Venezuela-owned shares in Petrojam. On the other hand, some other CARICOM Member States are members of the Bolivarian Alternative for the Americas (ALBA) and recipients of assistance from Venezuela through, inter alia, the PetroCaribe Initiative. This may explain why they voted against the resolution. National interests not only dictate a country’s position on an issue, but are what determine whether a CARICOM member State will change its vote based on the promise of aid or support.

Moreover, while the majority of CARICOM member States appear to have adopted a position of non-intervention, some member States (the Bahamas and Haiti) have decided to follow major Western powers in recognizing Opposition leader, Juan Guaido, as interim president of Venezuela.

Given the region’s friendship with Venezuela and the implications of the ongoing crisis for many CARICOM countries, it is commendable that some CARICOM governments have assumed a leadership role on this issue. Some CARICOM governments have vociferously challenged the pronouncements of the OAS Secretary General His Excellency Luis Almagro as not speaking for all OAS member states. A CARICOM delegation led by current CARICOM chairman Dr. the Honourable Timothy Harris, Prime Minister of St. Kitts & Nevis, recently initiated a visit to the UN to discuss the crisis. It should be noted, however, that not all CARICOM governments took part in this meeting, which shows that even on this very important issue, the region still cannot sing from the same hymn sheet.

Is a coordinated CARICOM foreign policy merely a pipe dream?

There appears, at least in rhetoric, a renewed interest by CARICOM leaders in advancing the regional integration process, of which foreign policy coordination has traditionally been a major pillar. This has been aided no doubt by the initiative taken by Jamaica in the commissioning and publication of the Report of the Commission to Review Jamaica’s Relations within the CARICOM and CARIFORUM Frameworks, more popularly referred to as the ‘Golding Report’, and the reinvigorated leadership displayed by Barbados under its new Prime Minister (lead for the CSME in CARICOM’s quasi-cabinet).

The Golding Report identified the glaring failures in foreign policy coordination as one of several challenges currently confronting the regional integration process. The report rightly cites several of the issues which account for this policy disunity, including offers of aid in exchange for votes, lack of political will, inability of diplomats to get clear policy instructions from their capitals, and of course, national interests. As such, recommendation 26 of the Report is to “review the procedures for foreign policy consultation and coordination in order to avoid as far as possible, the types of conflicts and embarrassing positions that have emerged from time to time among CARICOM members depriving it of the collective force it is capable of exerting”.

However, I would go further. In this time of increased introspection by our leaders on the regional integration process, I think there needs to be reconsideration of whether a coordinated foreign policy is really an achievable goal for the region or are we merely chasing a lofty pipe dream which our diverging national interests, values, goals and priorities may be unable to bridge. Indeed, can we really say that the region is any closer to a unified position on the One China policy? Moreover, given the current ideological divide in the region on the issue of citizenship by investment programmes (CIPs), can we really mount an effective and unified CARICOM approach against the EU’s targeting of CIPs in the region?

Let me clarify that I staunchly support our founding fathers’ conviction that there is strength in unified foreign policy positions. Indeed, the enormity of the global challenges confronting the region, whether from Brexit, the possibility of another global downturn, Venezuela, rising populist and nationalist sentiments internationally, blacklisting etc, means that a unified CARICOM front, to the extent possible, should be the desired default position for helping us navigate these challenges.

On the flipside, I also recognise that we must be honest with ourselves. We must face the reality that the goal of a coordinated foreign policy on all issues may be too ambitious given divergent national interests which have accounted for the increasing track record of foreign policy disunity. Indeed, these all too public displays of foreign policy disunity only serve to undermine the Caribbean public’s faith in the sincerity of our leaders’ commitment to the regional integration process, and to empower CARICOM-skeptics. We, perhaps, are setting ourselves up for failure.

An alternative and more achievable approach, therefore, could be for CARICOM member states to clearly identify specific foreign policy priority areas on which they would strive to present a unified policy position. The European Union (EU), for instance, has sought to harmonise its foreign policy (Common Foreign and Security Policy) primarily around security and human rights issues. For CARICOM, priority areas for foreign policy coordination could be more straightforward “low-hanging fruits” such as foreign trade, security, the loss of correspondent banking relationships due to de-risking by global banks, tax issues, and climate change. These are areas in which a unified CARICOM foreign policy position is perhaps most achievable and most effective.

I appreciate that my view may be unpopular and differs from traditional orthodoxy, but in these times of increased economic and geopolitical uncertainty, the continued desirability of pursuing a coordinated foreign policy is an issue which CARICOM will need to resolve and do so quickly, even if we decide we will only coordinate on certain foreign policy issues.

Alicia Nicholls, B.Sc., M.Sc., LL.B., is an international trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

Advertisements

Petrocaribe: Triad of Issues Puts Future of Existing Arrangement in Doubt

Posted on by One comment

Alicia Nicholls

On June 29th 2005, fourteen of the Caribbean countries which met with the late President Hugo Chavez Frias in the beautiful northern Venezuelan port city of Puerto La Cruz signed an energy cooperation agreement which would seek to be a beacon of south-south cooperation and solidarity. Nearly eleven years after the ink has dried on the Agreement, a triad of developments has added fuel to the growing fire of concerns about the sustainability and viability of the Petrocaribe Agreement which provides beneficiary countries in the Caribbean and Central America with Venezuelan oil on very generous terms.

First, oil prices this month have continued their months-long slide, dropping to twelve year lows. In light of current geopolitical realities, a recovery in prices is unlikely any time soon. Secondly, in December last year the United Socialist Party of Venezuela (PSUV), the party of the late President Chavez and his successor President Nicolas Maduro, lost its majority in the Venezuelan National Assembly. The newly elected Opposition majority is calling for a review of Venezuela’s oil agreements. Thirdly, Venezuela’s continued economic turmoils have prompted President Nicolas Maduro to decree a 60-day economic state of emergency. This decree is currently being debated by the National Assembly, Venezuela’s unicameral legislature.

This article argues that despite Petrocaribe’s popularity in the region and President Maduro’s pledge of continued support for the initiative, the triad of developments above will eventually force a revision of the terms of the arrangement. Beneficiary countries in the Caribbean should prepare themselves for this eventuality.

“Petrocaribe, towards a new Order in our America”

This was the title of President Chavez’s speech at the opening session of the Fourth Petrocaribe Heads of Government Meeting in Cuba in 2007 and sums up the philosophic underpinning of the arrangement. The Petrocaribe Energy Cooperation Agreement was the brainchild of President Chavez as part of his thrust towards creating an alternative, development-friendly model of integration based on the principles of solidarity and development as opposed to exploitation and neo-imperialism.

The stated goals of the Petrocaribe Initiative are to guarantee energy security, promote social and economic development and promote the integration of Caribbean countries “through the sovereign use of energy resources, sustained by the guiding principles of the Bolivarian Alternative for the Americas (ALBA)”, which President Chavez offered as an alternative to the US-initiated and now shelved Free Trade Area of the Americas (FTAA). Petrocaribe has been continued under his successor, President Nicolas Maduro, after President Chavez’s death from cancer in March 2013.

Petrocaribe has largely benefited the Region

Seventeen countries of the Caribbean and Central America, plus Venezuela, are signatories to Petrocaribe. This includes Cuba and the Dominican Republic and all countries of the Caribbean Community (CARICOM), except for Barbados and oil-exporter Trinidad & Tobago. Barbados and Trinidad & Tobago had declined to join, stating it would prejudice their other arrangements.

Venezuela’s state-owned oil company Petroleos de Venezuela (PDVSA) provides Petrocaribe beneficiary countries with oil on extremely generous terms in keeping with Petrocaribe’s aim of facilitating development and not profit. Beneficiary countries pay only a percentage of the price of the oil up front (within 30-90 days) and are given grace periods of between one-two years, and up to twenty-five years to repay the remainder of the loan at interest rates of one percent if oil prices are above $US40 per barrel and two percent if they are below. The higher the price of oil per barrel the higher the percentage of the loan which may be repaid long term. The loan may be repaid in cash or in services and goods. Cuba has used medical and educational services as a way of repaying its loan, while until recently Guyana had a rice for oil arrangement with Venezuela.

These generous terms have made Petrocaribe extremely attractive, particularly to the small island developing States of the Caribbean which are highly dependent on imported fossil fuels (with the exception of Trinidad & Tobago). Fuel imports comprise a large portion of Caribbean countries’ import bills and high electricity costs have an impact on business competitiveness. Petrocaribe’s financing terms make oil much cheaper.

In a context where Caribbean countries are finding it increasingly difficult to access concessional financing, Petrocaribe has been an alternative source of financing. In the countries of the Organisation of Eastern Caribbean States (OECS), Venezuelan support under ALBA has provided investments in social programmes, including the provision of eye care treatment services by Cuban and Venezuelan doctors under Mission Miracle. In Jamaica, the Government established the  Petrocaribe Development Fund which uses inflows accruing to Jamaica under Petrocaribe to finance critical development projects.

However, while the Petrocaribe arrangement allows cash-trapped governments more leeway to spend money on social and development programmes, the accumulation of Petrocaribe debt has added to beneficiary countries’ already high debt burdens. Critics also argue that despite its stated goal of improving Caribbean countries’ energy security, the cheap oil provided by Petrocaribe has arguably lessened Caribbean islands’ impetus towards transitioning to alternative energy sources.

…But Petrocaribe makes little financial sense to Venezuela

While largely economically beneficial to the Caribbean and rooted in a development-oriented philosophy, Petrocaribe’s generous terms have made little financial sense for Venezuela. The main benefit of the Agreement to Caracas is the diplomatic support it has been able to secure from Caribbean countries on hemispheric and international issues. The CARICOM bloc is an important voting bloc in the Organisation of American States and Caracas has benefited from CARICOM countries’ support. Petrocaribe has also expanded Venezuela’s sphere of influence in a region historically regarded as the United States’ backyard.

Although Venezuela has the largest proven reserves of crude oil in the world and oil accounts for about 95% of its exports, economic stresses have plagued the country for some time now and have only deteriorated as oil prices continue their plunge. At the time of Petrocaribe’s signature in 2005, oil prices hovered around $50 a barrel. As at the time of writing this article, the price of brent crude oil is $28 a barrel. In its October 2015 forecast, the IMF forecasted Venezuela’s economy to contract in 2015 and 2016 by 10% and 6% respectively.

Venezuela’s oil exports and international reserves are down and the country has been reliant on loans from China. According to El Universal, President Maduro has called for an emergency meeting of OPEC before the next meeting scheduled for June this year and has decreed a state of economic emergency.

Petrocaribe’s Terms will likely be revised

Petrocaribe’s generous terms were steeped in Chavez’s philosophy for an alternative integration model which was based on development and solidarity as opposed to profit and exploitation. Without doubt Petrocaribe has brought social and economic benefits to beneficiary countries, a fact recognised by Caribbean leaders who continue to speak  favourably of the Agreement and by President Maduro who has sought to reassure Caribbean countries of Venezuela’s continued support for Petrocaribe. In the midst of an escalation of Venezuela’s border dispute with Guyana, President Maduro undertook a Petrocaribe tour in October last year where he reiterated Venezuela’s commitment to the region.

However, as economic pressures continue to mount in Venezuela so has the internal opposition to the generous terms of the Petrocaribe deal. Back in 2013 Opposition Leader Alfonso Marquina had called on the Venezuelan Government to modify the terms of the Petrocaribe agreement as it was “seriously hurting Venezuela”. More recently in December last year, the newly elected Opposition majority in the Venezuelan National Assembly  announced its intention to  review Venezuela’s oil agreements, including Petrocaribe.

In light of the diplomatic and geostrategic importance of the Caribbean to Venezuela, it is likely the Petrocaribe Agreement will not be discontinued but modified in the short term. Modification of the Agreement’s terms could take various forms, including increasing the percentage of the loan which must be paid in the short term, raising the interest rate, reducing the repayment term, among mechanisms.

To some extent Petrocaribe’s numbered days have been recognised by some beneficiaries. Last year the Dominican Republic used money raised on bond markets to redeem a large portion of its outstanding debt to Venezuela under Petrocaribe, while Jamaica did a debt buy-back. Caribbean countries must also place renewed importance on reducing their dependence on fossil fuels and developing renewable energy options. Low oil prices at the moment should not be a reason for complacency. The plan by St. Vincent & the Grenadines for a geothermal plant by early 2018 is therefore encouraging.

Petrocaribe beneficiaries will have to brace themselves for the inevitability of its revision and for the eventual loss of this concessional financing.

Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

2015 Year in Review for Caribbean Region: Triumph, Tragedy and Hope

Posted on by Leave a comment

Alicia Nicholls

2015 has been a year of both triumph and tragedy for the countries which make up the Caribbean region. This article reviews some of the major political, diplomatic and socio-economic challenges and gains experienced by the Region in 2015, many of which would have been covered on this blog throughout the year. It also speaks to the prospects for 2016.

Political/Diplomatic issues

General elections led to changes of government in St. Kitts & Nevis, Guyana and Trinidad & Tobago, while voters in the British Virgin Islands, Belize and St. Vincent and the Grenadines bestowed the incumbent governments with a fresh mandate.  In October Haiti held its first round of presidential elections, as well as local elections and the second round of legislative elections. The second round of presidential voting which was slated to occur on December 27, was postponed indefinitely in December.

On the international stage, the election of Prime Minister Justin Trudeau in Canada was widely welcomed in the Caribbean Region as possibly heralding a new era in Caribbean-Canadian relations. However, the electoral defeat of President Nicolas Maduro’s United Socialist Party of Venezuela (PSUV) in the Venezuelan legislative elections in December has caused concern in the Caribbean about the future of Petrocaribe, a legacy of the late President Hugo Chavez under which Venezuela provides oil to participant Caribbean States on preferential terms.

In international diplomacy, the Region had two major triumphs. The first was the historic election of Dominica-born Baroness Patricia Scotland as the first female Secretary-General of the Commonwealth of Nations.  The second was the conclusion by 196 parties of an international climate change agreement in Paris, which though not perfect, paid consideration to the interests and needs of small states.

The catastrophic human and economic devastation inflicted by Tropical Storm Erika in Dominica in August and Hurricane Joaquin in the Bahamas in September-October, and the prolonged drought and water shortages being experienced across the Region are sharp reminders that climate change is an existential threat to the Region’s survival. Access to climate change finance will be critical in financing Caribbean countries’ mitigation and adaptation strategies. Despite the triumph of small states at Paris, this is only just the beginning and a major hurdle will be the ratification of the Agreement by all parties, critically the US.

Caribbean low tax jurisdictions’ battle against the tax haven smear made by metropolitan countries continued in 2015 after several Caribbean countries were included in blacklists by the European Union and the District of Columbia. At the 8th meeting of the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes held in Barbados in October, there was acknowledgement made that the Global Forum was the “key global body competent to assess jurisdictions as regards their cooperation on matters of transparency and exchange of information for tax purposes”. However, the fight is not over.

On the international front, the border disputes between Guyana and Venezuela and Belize and Guatemala remain unresolved.  The Guyana-Venezuela dispute came to a boiling point after the announcement that Exxon Mobil Corp had discovered large oil and gas deposits in waters of the disputed region pursuant to a contract made with the Government of Guyana. While CARICOM countries have pledged their support of Guyana’s sovereignty, Venezuela’s more aggressive diplomatic engagement of the region in recent months has raised questions about where CARICOM states’ loyalties will truly reside; with a fellow CARICOM state or with a major financier. To further complicate matters, Suriname, a fellow CARICOM State, has restated its claim to a portion of Guyana’s territory. Indeed, the expeditious and peaceful settlement of both disputes will be important for the economic future of Guyana.

While the US embargo of Cuba remains despite an overwhelming United Nations vote (191 to 2) yet again in favour of ending it, the United States and Cuba made significant advancements in 2015 in the quest towards “normalization” of relations. These included the easing of several travel and trade restrictions, the mutual re-opening of embassies in August and the announcement in December of an agreement to resume commercial flights between Cuba and US for the first time in more than half a century. The future resumption of air links between Cuba and the US is a welcomed development and instead of simply fearing the impact this will have on their US arrivals, Caribbean States should see this as an impetus to increase their marketing efforts in the US market and to improve the competitiveness of their tourism product.

Socio-economic issues

Lower oil and commodities prices have had a mixed impact on the region. They have been a blessing for services-based, import-dependent Caribbean countries struggling to overcome the lingering effects of the global economic crisis on their economies by slightly reducing their import bills and narrowing their current account deficits somewhat. For commodities exporting Caribbean states, however, the impact has been negative. Low oil prices have had a deleterious impact on the Trinidad & Tobago economy which is dependent on the export of oil and petrochemicals and was recently confirmed to be in recession after four consecutive quarters of negative growth.

The tourism industry, the lead economic driver for most Caribbean countries, saw a strong rebound in 2015 with several Caribbean countries, including Barbados, registering record long-stay and cruise ship arrivals, buoyed by increased airlift and cruise callings and stronger demand from major source markets and lower fuel prices.

However, the Caribbean continues to confront an uncertain global trade and economic climate. As recently as December, Managing Director of the International Monetary Fund (IMF), Christine Lagarde, was quoted as stating that global growth for 2016 will be “disappointing” and “uneven”. Another arena Caribbean countries must watch is the troubled Canadian economy and the depreciation of the Canadian dollar as Canada is one of the major tourism source markets for Caribbean countries and an important market for Caribbean exports.

According to an Inter-American Development Bank (IDB) report released in December, Caribbean exports are estimated to decline 23% in 2015, with Trinidad & Tobago accounting for the bulk of the decline. A bright spark is that St. Lucia, Grenada and Guyana signed on to the World Trade Organisation (WTO)’s Trade Facilitation Agreement, joining Trinidad & Tobago and Belize. The on-going reforms being made by these countries pursuant to the Trade Facilitation Agreement should help facilitate and increase the flow of trade in these countries. Barbados, Guyana and Haiti underwent their WTO trade policy reviews in 2015.

The Caribbean region continues to be one of the most indebted regions in the world. Aside from high debt to GDP ratios, several Caribbean countries continue to face high fiscal deficits, wide current account deficits and sluggish GDP growth. Regional governments will have to continue measures to lower their debt, broaden their exports and lower their import bills.

In September, the world agreed to the 2030 agenda for sustainable development in the form of the 17 ambitious sustainable development goals and their 169 targets. A critical factor for achieving these goals will be access to financing for development. Caribbean countries already face several challenges in accessing development finance owing to declining inflows of official development assistance, unpredictable foreign direct investment inflows and limited access to concessionary loans due to their high GDI per capita. Caribbean States should continue to vocalize their objection to the use of GNI/GDP per capita as the sole criterion for determining a country’s eligibility for concessionary loans.

The alarming rise in crime across the Region remains an issue which Caribbean countries must tackle with alacrity not just for the safety of their nationals but for the preservation of the Region’s reputation as a safe haven in a world increasingly overshadowed by terrorist threats. 2015 was a year marked by an escalation in terrorism, with deadly attacks in Egypt, Kenya, Paris and Beirut capturing international headlines. Moreover, the news of recruitment of some Caribbean nationals by ISIL (Daesh as ISIL calls itself in Arabic) is an issue which Caribbean States must confront.

The growing threat of terrorism has caused some concern about the security and robustness of the Economic Citizenship Programmes offered by some Caribbean countries. St. Kitts & Nevis revamped its programme and in light of the Paris attacks, the Kittitian Government announced in December that Syrian nationals will be immediately suspended from its programme. However, the fact that St. Lucia has forged ahead with the establishment of its own programme, accepting applications from January 1st 2016, shows that some regional governments strongly believe the gains outweigh any potential risks.

High unemployment and youth unemployment rates continue to be major social issues threatening the sustainability of the Region, with consequential implications for crime and poverty reduction and political engagement.

Prospects for 2016

Without doubt there are several issues and challenges which confronted the Region in 2015 and will continue to do so in 2016. Moreover, since the “pause” taken years ago, CARICOM continues to face the threat of regional stagnation and fragmentation. While Dominica must be applauded for signing on the appellate jurisdiction of the Caribbean Court of Justice, it is only the fourth out of fifteen  CARICOM States to have done so nearly fifteen years after the Court’s establishment.

However, in spite of these challenges the Caribbean Region has several factors still going in its favour, including high levels of human development, well-educated populations, political stability and a large diaspora. These are factors which it should continue to leverage but should not take for granted. No doubt a critical success factor will be the ability of regional governments, individually and together, to formulate effective and innovative solutions to the challenges faced, working towards the achievement of the SDGs, and their ability to mobilize domestic and international resources to finance these solutions. Let us also hope that 2016 will be the year where there will be a greater emphasis on increasing the pace of implementation of the Community Strategic Plan 2015-2019. The unity displayed by CARICOM during the Paris negotiations should be a reminder that the Caribbean is at its strongest when united.

Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. Please note that the views expressed in this article are solely hers. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

Is ALBA a threat to CARICOM integration?

Posted on by 6 comments

Alicia Nicholls

CARICOM countries could soon make up the majority of member states in the Bolivarian Alliance for the Peoples of Our America (ALBA). At the bloc’s 11th Summit last month in Caracas, both Suriname and St. Lucia  formally expressed their intention to become members of the eight-member group. They would join four other CARICOM countries which are already ALBA member states: Antigua & Barbuda, Dominica, St. Vincent & the Grenadines and more recently, Haiti.

The wave of interest in ALBA, a regional bloc which like CARICOM envisions deep integration between its members, comes against a backdrop of stagnation and crisis in the CARICOM integration process.  While ALBA leaders at their 11th Summit agreed to move full speed ahead to deepen their integration with the creation of a single monetary union – ECOALBA, CARICOM Heads of Governments caught most people by surprise last year when they inexplicably put the CARICOM Single Market and Economy (CSME) on ‘pause’ during their retreat in Guyana. It was a decision for which Prime Minister of St. Vincent and the Grenadines, Dr. Ralph Gonsalves recently expressed regret. In a candid letter sent to the Secretary General of CARICOM which effused both lament and frustration at the current ‘standstill’ in CARICOM, Dr. Ralph Gonsalves made mention of the augmented interest by CARICOM countries in courting ALBA. He predicted that more CARICOM countries were likely to follow suit and rhetorically asked what would be the implications of this for CARICOM.

ALBA is one of the most well-known South-South trade initiatives in the Western Hemisphere, not just because it was the brain child of the outspoken and no-nonsense President of Venezuela, Mr. Hugo Chavez, but because it potentially represents a more equitable alternative to the traditional neoliberal model of regionalism. It was launched by Venezuela and Cuba in 2004 originally as the Bolivarian Alternative for the Americas, and as an alternative to the now moribund Free Trade Area of the Americas which had been pushed by the United States. Drawing inspiration from the political thought of freedom fighters Jose Marti and Simon Bolivar, ALBA’s stated aim is to be a political, economic and social alliance which seeks to protect the independence, sovereignty, self-determination and identity of its Member States, and to protect the interests of the peoples of the South from political and economic domination.

If the question of ALBA’s threat to the CARICOM integration process is considered purely on the compatibility of ALBA CARICOM countries’ obligations, the flexibility which ALBA gives its members in terms of the initiatives which they can choose to be a part of means that ALBA CARICOM countries are free to refrain from initiatives which could conflict with their CARICOM and OECS obligations.  In the declaration of accession signed by St Vincent and the Grenadines for example, the Gonsalves Government made clear that as a regional movement ALBA does not alter but complements its obligations in other regional movements such as the OECS and CARICOM.  Thus, St Vincent and the Grenadines, like the other OECS members of ALBA, has not introduced the new regional trading currency – the sucre in light of its membership in the OECS’ monetary union.

A more immediate domain for conflict between ALBA and CARICOM obligations appears to be in the area of foreign policy. Foreign policy coordination is one of the stated objectives of CARICOM per the Revised Treaty of Chaguaramas and one of the pillars of functional cooperation.  While ALBA Members are given flexibility in foreign policy, ALBA as a group has been outspoken on several current conflicts, including throwing support in a recent declaration solidly behind Argentina in the recently escalating Falkland Islands dispute between that country and the United Kingdom.  The decision was made to join several other Latin American countries, including Argentina, to prevent Falkland-flagged ships from docking at their ports.  Although the ALBA CARICOM countries have not all come out and said whether their individual stance was in consonance with that of ALBA’s, one would not be unreasonable by taking their silence as agreement with the ALBA position. This position however is diametrically opposed to that taken by the non-ALBA members of CARICOM which have supported the Falkland Islands’ right to self-determination, that is, their right to remain British. Dr. Gonsalves’ stance on the issue caused some controversy in his country. However, on a larger scale, such divergence in policy position could be evidence of the potential threat of further fragmentation in the region’s foreign policy coherence.

Politics aside, there is no doubt that the main attraction of ALBA to those CARICOM countries which have acceded so far  is the developmental support provided by its founding countries Venezuela and Cuba. Havana has long been a development partner of many countries in the region. Through bilateral cooperation agreements signed between the Cuban government and the governments of the region, the people of the wider Caribbean have benefited from free eye care in Cuban hospitals under Operation Miracle, scholarships to study medicine at Cuban universities and free health care by Cuban doctors.  Haiti has also benefited from food and literacy programmes.

Under the Chavez administration, Venezuela has also taken a more active developmental role in the region. Since the establishment of the PetroCaribe Initiative in 2005, some 17 Caribbean countries, most of which are non-ALBA members, have benefitted from this arrangement which allows them to purchase oil on preferential terms of payment. Only part of the cost is paid up front and part can also be paid through the provision of agricultural goods. The remainder is repaid over a 25 year period at a 1% interest rate. The PetroCaribe deal has not been immune to criticism, and both Barbados and Trinidad & Tobago have not joined. Though such an arrangement helps in the short term to conserve much needed foreign exchange, it means that those countries which take oil on these terms are indebted to Venezuela in the longer term. Moreover, while PetroCaribe aims to promote energy security through the provision of “cheap” oil, Venezuelan fuel exports under the Agreement have decreased over time due to less available supply. Another criticism raised is that the ‘cheap oil’ provided under PetroCaribe increases the region’s dependence on the importation of fossil fuels. This latter argument is less persuasive given the increasing interest shown by CARICOM countries in renewable energy generation, through for instance geothermal, solar and wind energy.

The financial support offered by ALBA is  highly attractive to debt-ridden CARICOM countries faced with an uncertain global economic and financial climate. Loans are given at favourable terms and without most of the usual conditionalities insisted on by traditional donors. Through its loan funds, ALBA has provided funding for projects, including infrastructure, housing and agriculture projects in Dominica for example. St Vincent and the Grenadines also received a loan from the ALBA Bank for the construction of a new international airport.

The availability of credit under ALBA’s several funds can be contrasted with the limited capitalization of the CARICOM Development Fund. The CDF is provided for under Article 158 of the Revised Treaty of Chaguaramas as a fund to provide financial and technical assistance to disadvantaged countries, regions and sections within the grouping. The limited capitalization of the CDF, plus problems with the Petroleum Facility and the perceived lack of sensibility to the OECS countries’ unique vulnerabilities, were some of the many shortfalls of CARICOM about which Dr. Gonsalves complained in his previously mentioned letter. Frustrations like these over ill-functioning regional aid mechanisms plus the more readily available economic aid under ALBA, could lead to more CARICOM countries turning their attention to ALBA.

One area in which CARICOM arguably maintains an upper-hand over ALBA is in trade. With a population of 70 million people, ALBA represents a larger market for regional goods than does CARICOM. That being said though, the export capabilities of the ALBA CARICOM remain too weak to effectively take advantage of this.  It is true that over the period 1999-2008, it is reported that average yearly trade between Venezuela and Antigua & Barbuda was USD 6.5 million, between Venezuela and Dominica, USD 179 million and between Venezuela and St. Vincent and the Grenadines, 4.5 million dollars. However, given that petroleum trade accounts for most bilateral trade between Venezuela and ALBA CARICOM countries, the balance of trade is skewed in Venezuela’s favour.  While trade asymmetries do exist within CARICOM as well, the regime created by the Revised Treaty of Chaguaramas envisions the freedom of movement of goods, services, people (skilled) and capital within the Community, the right of Community nationals to establish businesses in other territories, as well as a competition commission which is charged with ensuring the rules of the market are respected.  ALBA has not as yet reached this level of integration. That being said, however, the large gulf between what the Revised Treaty provides for and what operates in practice in CARICOM has led to frustration that the expected benefits are not being seen.  Moreover, ALBA does intend to become an economic union, something which continues to elude CARICOM.

Although there is an undisputed role for ALBA as a development aid and trade partner for our countries, their main integration focus should be on deepening CARICOM integration. CARICOM is more than a trade group. It was founded on the vision of our regional founding fathers who believed that strength comes not through parochialism but through the political, economic and social unification of a people already united through a common history and a shared culture and values. Regardless of its many shortcomings, CARICOM, its organs and associated bodies, have played a tremendous role in the region for the past nearly forty years and can play an even greater role once a serious attempt is made at reform by our Heads of Government.

Moreover, although Venezuela is a useful ally for countries in the region by virtue of its stronger bargaining power in the international community, CARICOM’s interests as small states and those of Latin American countries, including Venezuela’s are not always complementary as seen in the Banana Wars in the WTO. It should also not be forgotten that Venezuela continues to have border disputes with two CARICOM States (Guyana and Dominica) which have still not been resolved and for which Venezuela has not changed its position.  A further caveat to bear in mind is that given the strong ideological divide in Venezuelan politics, there is no guarantee that whichever president eventually succeeds President Chavez would be leftist in political orientation or that he or she would be as sympathetic as his or her predecessor to the region’s concerns, or be committed to continuing ALBA and its component programs. Therefore, there is some concern about ALBA’s survivability in a post-Chavez era.

The real threat to CARICOM is not ALBA though, but CARICOM itself.  Impatience with the slow process of integration and its associated benefits at the CARICOM level has had as its natural corollary a desire to explore more seemingly attractive alternatives. It is not surprising therefore that the poorer countries in the region, and some of the larger countries like Suriname as well, have set their compass to ALBA for the superior economic security it provides and its seemingly better alignment with their interests.  Unless our Heads of Government act seriously on their commitment made at the last inter-sessional meeting to formulate a plan of action designed to reform CARICOM to make it more effective, there could be a day when all of our countries eventually turn their backs completely on CARICOM in favour of other blocs which they believe have both the ability and will to better cater to their peoples’ interests and needs. That would be a sad day.

Alicia Nicholls is a trade policy specialist and law student at the University of the West Indies – Cave Hill. You can contact her here or follow her on Twitter at @LicyLaw.