VZCZCXYZ0000
PP RUEHWEB

DE RUEHKG #0622/01 2331236
ZNY CCCCC ZZH
P 211236Z AUG 09
FM AMEMBASSY KINGSTON
TO RUEHC/SECSTATE WASHDC PRIORITY 7955
INFO RUCNCOM/EC CARICOM COLLECTIVE PRIORITY
RUEHCV/AMEMBASSY CARACAS PRIORITY 0572
RUEHLO/AMEMBASSY LONDON PRIORITY 0604
RUEHOT/AMEMBASSY OTTAWA PRIORITY 2413
RHMFISS/CDR USSOUTHCOM MIAMI FL PRIORITY

C O N F I D E N T I A L KINGSTON 000622 
 
SIPDIS 
 
STATE FOR WHA/CAR (JMACK-WILSON) (VDEPIRRO) (WSMITH) 
WHA/EPSC (MROONEY) (FCORNEILLE) (AWONG) 
INR/RES (RWARNER) 
INR/I (SMCCORMICK) 
SANTO DOMINGO FOR FCS AND FAS 
 
E.O. 12958: DECL: 08/20/2039 
TAGS: ECON ETRAD EFIN ENRG PINR PREL PGOV JM XL
SUBJECT: JAMAICA/VENEZUELA: ENERGY AND PETROCARIBE, WHERE 
IS THE LOVE? 
 
REF: A. KINGSTON 614 
     ¶B. KINGSTON 581 
     ¶C. KINGSTON 427 
     ¶D. KINGSTON 430 
     ¶E. 08 KINGSTON 97 
     ¶F. 08 KINGSTON 95 
     ¶G. 07 KINGSTON 89 
     ¶H. 08 KINGSTON 651 
     ¶I. 07 KINGSTON 1793 
 
Classified By: Isiah L. Parnell Charge d'Affaires, a.i. for reasons 1.4 
 (b and d) 
 
¶1. (C) SUMMARY AND ANALYSIS: Jamaica continues to suffer 
under the global economic recession, but the island has been 
hit harder than other nations because of its high energy 
costs and reliance on petroleum for electricity.  The lack of 
viable short-term solutions, and increasing dependence on the 
benefits afforded under the PetroCaribe agreement, have put 
the Government of Jamaica (GOJ) in an unenviable position. 
The GOJ depends on the generosity of Venezuela,s President 
Hugo Chavez, if there are any substantive changes in the 
agreement it would devastate budget projections and 
exacerbate already deteriorating medium-term economic plans. 
Despite Jamaica,s apparent disinterest in Chavez,s 
Bolivarian Alternative vision, the benefits derived from 
PetroCaribe softened the blow of both the economic downturn 
and record oil prices in 2008; and helped keep Jamaica from 
falling into an abyss.  However, if Chavez attempts to revise 
the terms of PetroCaribe to influence Jamaica, he is likely 
to win more enemies than friends.  END SUMMARY AND ANALYSIS 
 
High Energy Costs, No Solution in Sight 
-------------------------------------- 
 
¶2. (C) The 2008 rise in world oil prices set off a spike in 
energy prices in Jamaica and near-panic in the GOJ.  The high 
energy costs and reduced world aluminum demand devastated the 
bauxite sector, which had accounted for 20 percent of GDP and 
had been a major source of good paying jobs, as well as tax 
revenue (Reftel C).  Three of the island's four bauxite 
plants that closed may never reopen, given that at about 31 
cents per kilowatt hour, Jamaica has some of the highest 
energy rates in the region and new competition in the sector 
is coming on line in Asia.  On the manufacturing side, 
Jamaica will continue to lose plants and jobs to its regional 
competitor Trinidad and Tobago, which has a rate of about 3 
to 4 cents per kilowatt hour. 
 
¶3. (C) The GOJ needs to diversify its power generation system 
and embark on aggressive conservation measures, but has been 
slow to formulate a viable plan even after the shock of the 
2008 energy crisis and the likelihood that world oil prices 
will trend higher.  Ministry of Energy James Robertson has 
told Emboffs that he is close to a deal for sourcing 
Liquified Natural Gas (LNG), but any LNG project, if 
implemented, would take years to complete and would likely 
have a price tag to exceed USD 600 million. 
 
In the Short-Term: Reliance on PetroCaribe 
------------------------------------------ 
 
¶4. (C) In the short-term Jamaica will remain reliant on the 
benefits of Venezuelan President Hugo Chavez,s PetroCaribe 
agreement.  The GOJ uses the PetroCaribe oil both for jet 
fuel for Air Jamaica planes and also to run thermal 
generators that feed power to the national electricity grid 
-- thus virtually all of Jamaica,s energy production is 
fueled by petroleum products. ((NOTE: Under PetroCaribe, the 
GOJ pays Venezuela for about 60 percent of the cost of oil up 
front, with the remainder converted to long-term debt (25 
years) at nominal interest rates of 1 percent.  If oil prices 
rise, the amount that is deferred as loans increases as a 
percentage. END NOTE)).  The agreement has saved the GOJ 
about USD 32.7 million per month for the 23,500 barrels-a-day 
of oil imported from Venezuela.  The benefits afforded under 
PetroCaribe softened the blow of the economic downturn and 
record oil prices; and helped keep Jamaica from falling into 
an abyss. 
 
PetroCaribe Still Not Winning JLP Friends... 
----------------------------------------- 
 
 
 
¶5. (C) Despite the benefits derived from the deal, the 
Jamaican Labour Party (JLP)-led administration appears no 
friendlier to the Chavez regime and its politics (Reftels D, 
E, F).  Prime Minister Bruce Golding spoke of "cooperation8 
on the energy side in the lead up to a proposed one-day visit 
by Chavez, part of Jamaica,s Independence Day celebration on 
August 6.  Chavez cancelled his visit at the eleventh hour, 
blaming a dubious softball injury.  During the proposed 
visit, Chavez was to have broken ground on his Simon Bolivar 
Cultural Center in Kingston.  A few days later, Minister of 
Energy James Robertson was scheduled to visit his Venezuelan 
counterpart, but Ministry contacts told Emboffs that the trip 
was delayed by the Venezuelans who claimed "logistical" 
issues.  The local press did not report that Robertson had 
not actually visit Venezuela as planned. 
 
...But Any Modifications Are Cause for Worry 
-------------------------------------------- 
 
¶6. (C) In early August Chavez spoke of having to modify the 
terms of the PetroCaribe agreement to possibly require 
recipient countries to pay a higher percentage (80 percent) 
of costs up front; he appears to have since backed away from 
this position.  The issue was enough to worry PM Golding, who 
lamented publicly that the GOJ,s current budget and 
medium-term economic plan is predicated on the PetroCaribe 
agreement as it currently exists.  Golding said he hoped 
Chavez would be &sympathetic to the difficulties8 facing 
countries like Jamaica. 
 
Chavez,s Warmth Towards Jamaica,s Bolivar Connection 
----------------------------------------- 
 
¶7. (C) Chavez,s Bolivarian Alternative vision seems to have 
gained little traction in Jamaica overall, as Jamaicans do 
not look toward the South American country with any real 
sense of kinship or cultural ties.  Jamaicans, particularly 
those who would support the Opposition Peoples, National 
Party, are socialist in leaning, but that does not mean 
Chavez,s message resonates on the island.  Chavez has 
pointed out that the statue of Simon Bolivar overlooks 
Jamaica,s Heroes Circle, but this fact would not strike most 
Jamaicans as significant.  (NOTE: Simon Bolivar spent time in 
Jamaica, where he survived an assassination attempt and wrote 
his famous &letters from Jamaica8 prior to his 1819 
invasion of Venezuela.  END NOTE).  Chavez was planning to 
lay a wreath at the statue during his aborted August 6 visit. 
 He seems to have more warmth towards Jamaica than the island 
has towards him. 
 
Addressing Energy Pressures 
--------------------------- 
 
¶8. (C) Emboff contacts, both within the JLP and the private 
sector, seem to recognize that the PetroCaribe deal is 
addressing one of the island,s greatest needs, by 
alleviating some of the pressure of energy costs, but the 
gesture does not appear to be winning over the Jamaicans. 
Contacts have been quick to point out that no other country 
is offering oil under such favorable terms.  Anecdotal 
evidence suggests that Jamaicans see the agreement as a 
fortunate short-term benefit, but most are leery of what 
Chavez will seek in return.  There is also concern that 
Jamaica is not moving fast enough to prepare itself for a 
post-PetroCaribe environment, and needs to be taking more 
steps to improve energy diversification. 
 
Father of the Caribbean 
----------------------- 
 
¶9. (C) When speaking about Chavez with a Ministry of Energy 
official, he shook his head and chuckled, &Chavez, he does 
love to see himself as the Father of the Caribbean.8  Most 
GOJ officials with whom Emboffs have spoken appear to view 
Chavez with caution, but recognize that his is currently the 
only country offering crucial support to the energy sector 
and thus do not want to jeopardize the arrangement. 
 
Chavez Posturing May Create More Resentment 
------------------------------------------- 
 
¶10. (C) Jamaicans seem unemotional about PetroCaribe for the 
most part and tend to view the arrangement as merely a very 
favorable business relationship.  The recent move by Chavez 
suggesting he might modify the terms of PetroCaribe would 
likely create more resentment among the Jamaicans instead of 
bringing them closer to his camp.  Regardless of public 
comments made by PM Golding about &cooperation,8 prior to 
September, 2007, as leader of the Opposition, he was deeply 
suspicious of Chavez (Reftel G), and has reiterated these 
concerns in private discussions with Emboffs since becoming 
PM (Reftel H and I). 
PARNELL