Energy Security in the Americas

Latin American countries have a long history of swift regime change, either by coup or by legitimate institutional processes. The impetus is typically economic decline. That’s what is happening now in Brazil with President Dilma Rousseff’s impeachment proceedings. And in Venezuela, President Nicolás Maduro is getting dangerously close to a recall referendum. Venezuela’s problems – like Brazil’s – run much deeper than inefficient leadership, corruption, and poorly structured policies. The economic framework used to guide the entire country – largely centered on Petrocaribe – is failing. The U.S. needs to pay close attention.

Former Venezuelan President Hugo Chávez launched Petrocaribe in 2005 as an oil assistance program for the Caribbean and Central America. Credit financing allows countries to make an upfront payment to Venezuela for crude oil and petroleum products, while rolling over the remainder of the payment into loans that accrue interest. The more expensive oil gets, the less the down payment and the more credit Venezuela gives to small island nations. Thus, Petrocaribe does not provide cheap oil, but rather cheap credit.