PAULWELL
PRIME MINISTER Portia Simpson Miller will next week formally announce Venezuela's agreement to provide 2,500 barrels of oil a day for Air Jamaica under the PetroCaribe facility, a deal which will ease the crunching cash flow problems of the state-owned carrier.
Air Jamaica has already begun to benefit from the arrangement although it is not yet formally in place, according to Financial Gleaner sources.
In an addition to the petrol facility, Simpson Miller, will also announce Caracas' agreement to lend Jamaica US$260 million, most of which will be used to write down expensive debt owed for the Highway 2000 project, thus enhancing the feasibility of a proposed leg of the highway to Ocho Rios.
"All the commitments are in place and were agreed during (Commerce and Technology Minister) Phillip Paulwell's recent visit to Caracas," a senior government official told the Financial Gleaner.
Simpson Miller and Venezuela President Hugo Chavez will in a telephone conversation today finalise a date for Chavez to come to Jamaica for the signing of the agreement.
Chavez was originally to come on Monday but had to change the date at the last minute.
Under PetroCaribe Venezuela sells oil to Caribbean and Latin American beneficiaries at world market prices, but converts 40 per cent of the payments to long-term debt at one per cent interest. But the 'saving' must be used for development projects.
Under an agreement signed nearly a year ago, Jamaica was entitled to 21,000 barrels of oil per day. However, Kingston asked Caracas to vary the agreement to allow for the additional 2,500 bpd specifically for the benefit of Air Jamaica. Fuel accounts for approximately 17 per cent of the cost of the airline, which, prior to the deal, was projecting to lose about US$75 million this year, against US$136 million in 2005.
After a decade of provide control, during which the airline lost over US$700 million, Air Jamaica returned to majority government ownership at the end of 2004 and has been undergoing an overhaul, including a trimming of its fleet. While it has been able maintain good passenger loads and improve revenues and made some headway in trimming costs, the airline remains dogged by high fuel costs in an environment where oil prices have soared.
"The PetroCaribe facility will help to moderate Air Jamaica's cash outlay for fuel," explained an official. "Not only does that ease cash flow pressures, but will enable the airline to steer cash to crucial areas." The US$260 million loan from Venezuela will also allow the government to push for the accelerate another of its pet projects, the tolled highway developed and managed by the French company, Bouygues, under a 30-year concession.
SIX-LANE BRIDGE
So far Bouygues has developed approximately 33 kilometres of highway between Sandy Bay, Clarendon and Kingston, including a new six-lane bridge over Kingston Harbour, linking the capital and Portmore, a dormitory city just to its west. Bougues has spent nearly US$300 million on the project.
Under the original plan, the next phase of the project, is another 39 kilometres of motorway between Sandy Bay and Williamsfield, Manchester. This predicated on the assumption that the highway would open the south and south-central portions of the island to development. The 72 kilometres of highway between Kingston and Williamsfield was originally budgeted at US$390 million.
However, the government would now prefer a spur from Vineyards, St Catherine to Ocho Rios, the north shore resort town. The link between Kingston, on the south coast, and Ocho Rios is now 52 miles of mostly winding roads over mountains and, at one point, a single-line stone bridge over a sometimes treacherous river. A new road would significantly cutdown travel time between Kingston and the north coast, where a a revamped highway, from Negril in the west to the parish of Portland in the east, is already underway.
However, analysts say that Bougyes, carrying relatively expensive debt and still uncertain about the profitability of the latest segment of the Portmore/Kingston highway Ñ Portmore citizens have balked at the J$60 toll free and threatened a boycott Ñ is wary of committing to the Ocho Rios leg.
"If the government could use a portion of the Venezuela loan to provide cheaper debt to Bouygues, then the proposed Ocho Rios leg would be more attractive," explained an official.
