ASSESSMENTS

Mexico Sees an Opportunity in Venezuela's Struggles

Aug 29, 2017 | 11:37 GMT

With the decline of Venezuelan oil production, Mexico considers its options in the Caribbean

With Venezuelan oil output in decline, Mexico is considering supplying Cuba and nations participating in Caracas' Petrocaribe program with fuel and crude.

(iStock)

Highlights

The Mexican finance and foreign ministries are considering a plan to step in and replace subsidized Venezuelan oil and fuel deliveries to Cuba, as well as to some Caribbean and Central American nations.
The plan is tentative, but if Mexican energy deliveries displaced Venezuelan ones to Cuba, it eventually could sever the 18-year alliance between Havana and Caracas.
Such an outcome would help the United States isolate Venezuela and open the door to heavier sanctions against the Venezuelan government. For Mexico, helping the United States pressure Venezuela would give it important leverage in its political relationship with Washington.

A steady drop-off in Venezuelan oil production may give Mexico an opportunity to increase its stature in the Caribbean. The Mexican government is considering a plan to replace subsidized Venezuelan oil and fuel shipments to Central American and Caribbean nations should the economically struggling country be unable to continue meeting regional demand, according to an Aug. 23 report. It is not yet clear under what payment mechanism that such shipments, which currently are provided at a discount through Venezuela's Petrocaribe program, would be sold if Mexico decides to go ahead with the idea. Since 2005, Venezuela has exported crude oil, gasoline and diesel to Cuba and 11 Petrocaribe beneficiaries under a pricing mechanism in which the up-front cost to buyers decreased as global crude oil prices rose. Under that program, recipients would repay the rest of the value of oil shipments, with interest, to Venezuela over a period of years....

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