Tuesday 25 June, 2019

PNP warns against hostile takeover of Venezuela's shares in Petrojam

The move by the Government to enact legislation that would allow it to take ownership of the 49 per cent stake in Petrojam that is held by Venezuelan state-owned oil company PDVSA, through PDV Caribe, does not have the support of the parliamentary Opposition.

The objection was raised Tuesday afternoon by the Opposition spokesman on Energy, Phillip Paulwell. This followed the earlier announcement by Foreign Affairs and Foreign Trade Minister, Kamina Johnson Smith, that the Government was moving to take back the shares in order to safeguard the country’s energy sector.

According to Johnson Smith, the expected upgrade of Petrojam has not materialised since the shares were sold to PDV Caribe in 2006/07.

Kamina Johnson-Smith

Johnson Smith noted that, based on the agreements, the Petrojam refinery should have been upgraded and expanded to improve its competitiveness while ensuring that it meets local and international market demands.

With these objectives having not been met, the minister said the refinery is now a risk to the economy and the country. She also noted that commitments made by Venezuela President Nicolas Maduro, that the upgrade would have taken place, have not materialised. 

However, despite the reasons outlined by Johnson-Smith, Paulwell, a former energy minister, is not in favour of a hostile takeover of the shares. He described the move as premature and highlighted that the Zacca Committee, which was appointed to look at the future of the oil refinery, is scheduled to report in May 2019 on its findings and recommendations.

Phillip Paulwell

Paulwell also noted that no apparent effort was made by Jamaica to use any international arbitration organisations to settle any dispute which may have arisen between the two governments, especially in light of reports that a settlement price was the only outstanding issue.

“The expropriation will cause ripple effects to be felt in the local and international investor community for some time. This hostile approach is uncharacteristic of Jamaica, and may, in fact, be detrimental to our future negotiating capacity with other foreign investors,” Paulwell warned.

He added that “the expropriation of investor property must always be a last resort, demonstrably justified in a free and democratic society, and only after exhausting all reasonable avenues for an amicable settlement.”

Paulwell said Prime Minister Andrew Holness, as both head of government and energy minister, must tell the nation what role he played in the negotiation. He said the prime minister should also disclose immediately the factors which led to this urgent action of forcibly acquiring the shares of a non-hostile foreign partner.

For her part, the Opposition spokesperson on foreign affairs and foreign trade, Lisa Hanna said this level of heavy-handedness is uncharacteristic of the Jamaican state and should not be countenanced against a government which has helped our people during our crisis.

According to her, Jamaica’s economic survival has been due in no small measure to the support and generosity of the Venezuelan people.

The Opposition stated that the Petro Caribe Fund provided by the Government of Venezuela represented the largest loan with the best financial terms in Jamaica’s independent history.

“At a one per cent interest rate, the Venezuelan government provided Jamaica more the US$3 billion. The Venezuelan Government went even further and accepted a US$1.5 billion settlement of our debt in July 2015, which not only reduced our debt to GDP ratio significantly but also helped to improve our international financial standing in aggregate terms,” it said.

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