Published On: Fri, Nov 17th, 2017

Venezuelan crisis threatens Curaçao and Aruba

Venezuelan socialismWILLEMSTAD - Venezuela is about to collapse and that threatens to hit Aruba and especially Curaçao hard. Both islands are firmly committed to the oil industry, which in turn is heavily dependent on the country that is in danger of bankruptcy. If things go wrong, the Netherlands may have to pay the price. This is according to the Financieel Dagblad (Financial Journal).

In recent days, Venezuela and state-owned oil company PDVSA have been labeled as defaulter by credit rating agencies. PDVSA is the faltering engine of an economy that is barely functioning due to maladministration and a persistently low oil price. The population suffers from hunger, while Dictator Nicolás Maduro tries to secure his position with all his might.

PDVSA leases the oil refinery in Curaçao and through the American subsidiary, Citgo also has an agreement with Aruba. This ensures investments, rent payments and employment. But the supply of Venezuelan oil to Curaçao is stalling, and the modernization of the Aruban refinery is progressing slowly.

The Venezuelan state-owned oil company is an important player on the islands. According to Chairman Willem Jonckheer of the local Chamber of Commerce, PDVSA, directly and indirectly, keeps around 3,500 people working in Curaçao. That is more than 2% of the population. Jonckheer states that PDVSA provides an inflow of some $ 400 million per year, on a GDP of about $ 3 billion.

The Aruban refinery is currently being remodelled by Citgo. The Aruban Minister of Economic Affairs Richard Arends states that the refinery will eventually account for 15% of GDP. Directly and indirectly, this means about 3,000 jobs, about 3% of the population.

Both islands have a major economic interest in keeping the refineries open or going as a stable source of income. Curaçao is in, any case until 2019, and Aruba much longer, depending on the Venezuelan state oil company.

Curaçao thought last year to have found a replacement for the shaky tenant PDVSA. But lately, doubts have arisen about the financial and technical strength of the Chinese saving angel Guangdong Zhenrong Energy, including a disturbing report from EY researchers. In order to draw up a sound business plan, documents are needed that only PDVSA can provide, and they don’t want to cooperate.

If PDVSA is unable to meet its debt obligations, the question is whether it can transfer rent payments, let alone invest in the much-needed modernization of the refineries. Work in Aruba was already delayed.

The Aruban Minister Arends states that the work is progressing 'within the margins of the agreements'. Moreover, he emphasizes that during the negotiations with Citgo it has been thoroughly established that the company is at a considerable legal distance from the parent company. Arends: “They are very professional, and they comply with their payments.”

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