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INFO RUEHHH/OPEC COLLECTIVE
RUEHBO/AMEMBASSY BOGOTA 5928
RUEHLP/AMEMBASSY LA PAZ 1605
RUEHPE/AMEMBASSY LIMA 9808
RUEHQT/AMEMBASSY QUITO 1677
RUEATRS/DEPT OF TREASURY
RHEBAAA/DEPT OF ENERGY
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RHEHNSC/NSC WASHDC

UNCLAS SECTION 01 OF 02 CARACAS 000264 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EPET ECIN EINV VE
SUBJECT: DETAILS OF VENEZUELAN ENERGY COOPERATION AGREEMENTS 
WITH BOLIVIA AND OTHER INITIATIVES. 
 
REF: A) CARACAS 03560,  B) LA PAZ 00168 
 
¶1.  SUMMARY: On January 23 President Chavez signed two 
bilateral agreements with Bolivian President Evo Morales: 
the Broad Scope Energy Agreement and the Caracas Energy 
Accord.  Both are aimed at expanding regional integration 
through the BRV's Petroamerica initiative and the 
consolidation of its sub-regional component Petrosur.  While 
the Broad Scope Agreement provides the framework for 
increased ties and cooperation in the energy sectors for the 
development of the oil, gas, power, and petrochemical 
industries of both countries, the Caracas Energy Accord 
establishes the quantities of oil and fuels (primarily 
diesel) to be exchanged for Bolivian products (primarily soy 
and chicken) and spells out the terms and conditions for the 
exchange.   Several other initiatives including, inter alia, 
a USD 30 million donation for social projects, 5001 
scholarships for low income students, and technical 
cooperation exchanges were also announced/formalized on the 
same date.  END SUMMARY. 
 
--------------------------------------- 
SUPPLY AND SALES TERMS 
--------------------------------------- 
 
¶2.  According to the MFA's website,  under the Caracas 
Energy Accord, Venezuela agreed to supply up to 200,000 
barrels per month (b/m) of oil, refined products, and LPG 
(Liquefied Petroleum Gases) to Bolivia.  This volume is 
adjustable based on Bolivia's internal demand.   The press 
reported that Rafael Ramirez, Venezuela's Energy Minister 
and President of Venezuela's national oil company PDVSA, 
estimated Bolivia's demand for diesel to be around 5,000 
barrels per day (b/d) or approximately 150,000 b/m. 
 
¶3.  This bilateral supply agreement is subject to the 
availability of production by Venezuela and decisions 
adopted by OPEC on assigned quotas. The agreement is 
reserved to national energy companies of both countries with 
the pre-approved exception by Venezuela of Bolivian private 
companies in the logistics and transportation of product. 
The agreement is to be managed by PDVSA and subject to 
company policies. 
 
¶4.  Sales by PDVSA to YPFB (Yacimientos Petroliferos 
Fiscales Bolivianos), Bolivia's national energy corporation, 
will be paid under a commercial compensation mechanism with 
Bolivian products through Venezuela's economic and social 
development bank BANDES.  Among the products to be exchanged 
for fuels by Bolivia will be approximately 200,000 tons per 
year of soy as well as up to 20,000 tons per year of chicken 
and other agricultural products. 
 
------------------------- 
PAYMENT TERMS 
------------------------- 
 
¶5.  Similar to most Petrocaribe bilateral agreements, 
Venezuela is providing a five tier financing mechanism (only 
in this case the terms are based on barter values), which 
increases the financed portion of invoices based on the 
international price of oil.  The minimum financing available 
is 5 percent of the invoice when prices are equal or below 
USD 5 per barrel and the maximum is 25 percent of the 
invoice when prices are equal or above USD 30 per barrel. 
The principal must be paid within 90 days of the shipment 
with an interest rate of 2 percent.  The financed portion 
can be paid in fifteen years with a two-year grace period 
and a two percent interest rate. 
 
----------------------------------------- 
DURATION OF AGREEMENT 
----------------------------------------- 
 
¶6.  The Caracas Energy Accord was signed on January 23, but 
we understand will not go into effect until several legal 
and legislative formalities are met by Bolivia.  The 
duration of the agreement is 1 year, renewable automatically 
for similar consecutive periods.  (Note: We understand 
Venezuela and Bolivia signed a narrower agreement, which 
this agreement supersedes, on December 9, 2004 but the 
agreement was never fully implemented.  End Note.)   The 
Broad Scope Energy Agreement will have a duration of 4 
 
CARACAS 00000264  002 OF 002 
 
 
years. 
 
----------------------------- 
OTHER INITIATIVES 
----------------------------- 
¶7.  President Chavez also announced a donation of USD 30 
million to support social projects in Bolivia as well as the 
opening of offices by PDVSA, BANDES, and BIV (Banco 
Industrial de Venezuela) in Bolivia.  While PDVSA and BANDES 
would manage the exchange of products under the Caracas 
Energy Accord, the BIV office would provide loans and 
guarantees to Bolivian importers of Venezuelan goods and 
services. 
 
¶8.  Two other agreements signed were the Higher Education 
Cooperation Agreement and the Technical Cooperation 
Agreement on Health.  Under these agreements Venezuela 
donates 5,000 scholarships for low-income Bolivian students 
to conduct undergraduate and graduate studies in Venezuela 
in areas ranging from health to energy, business 
administration, engineering, and tourism.  (Note: While the 
agreement provides for 5,000 scholarships Chavez quipped 
that he would provide 5,001 as Fidel had committed to 5000. 
End Note.) 
 
¶9.  Another important agreement signed was the Agricultural 
and Rural Development Agreement, under which the two 
countries will exchange scientists and experts in agro- 
industry, forestry, land ownership, and water management. 
This agreement is aimed at searching for new areas of 
"economic complementation" between the two countries, 
especially those related to agricultural products such as 
soy, coffee, cocoa, and other processed goods. 
 
¶10.  Venezuela and Bolivia also signed a cooperation 
agreement on education and sports.  Under this agreement 
Venezuela provides support to Bolivia in these areas with 
experience gained from BRV funded missions such as Robinson 
I and II (to improve adult literacy), Ribas (fosters 
completing of high school degrees)  as well as with 
Venezuela's Bolivarian schools. 
 
BROWNFIELD