A Barrel of Oil for a Banana Please

Venezuelan President Hugo Chavez has announced that Central American and Caribbean states could fork out for oil with products such as bananas and sugar or services.

Speaking at the Petrocaribe summit of oil consumers and exporters, Mr. Chavez said that he wanted to extend the arrangement Venezuela currently has with Cuba to all 17 states they supply oil to.

Venezuela and Cuba currently run a scheme where Cuba gets 100,000 barrels of subsidised oil, and in return, Venezuela receives the services of thousands of Cuban doctors and teachers for free. Thus Venezuela gets a highly skilled workforce without having to pay for it whilst also receiving (a reduced) payment for the oil it exports.

Mr. Chavez seems to be cashing in on the rising oil prices, which many fragile Central American economies are struggling with. Surprisingly, perhaps, Venezuela has the largest oil reserves outside the Middle East and is moving itself into a position of great political power. This is especially pointed for the U.S., as Venezuela is its main oil supplier. What is more worrying, though, is the apparent “friendship” between Mr. Chavez and the ageing Cuban President, Fidel Castro.

Mr. Chavez led a colourful past before his appointment as President. And after two failed coup attempts in 1992, he moved from paratrooper to politician – before gaining the presidency in 1998. He has been followed by a wave of controversy ever since, moreover, after making high-profile visits to Cuba and Iraq and repeatedly showing his alliance with Fidel Castro. There have also been reports of the U.S. government instigating a coup of its own in an attempt to overthrow him in view of the Latin American country’s vast oil reserves. Currently Mr. Chavez will remain in power until 2012, when Venezuelan law dictates that he must stand down. Let’s see what mischief he gets up to before then.