Petrocaribe

The other day I was listening to Dr Richard Pike explaining why the world's actual oil reserves are likely to be about twice the scary figure of 1.2 trillion barrels recently published. Each field works out its worst case scenario and these dismal estimates are then aggregated, a process akin to rolling a die hundreds of times and getting "1" each time, Pike asserted.

Meanwhile the notion that the oil will run out in around 40 years continues to push up the price of crude which is creating serious economic discomfort here in Guatemala.

Yesterday President Colom was in Venezuela signing up to Hugo Chávez's Petrocaribe club, whereby Guatemala will get 20,000 barrels of diesel a day on long-term credit.

Colom says the money saved will permit his government to make the significant social investments he promised at election time. Whatever the politicians say, Guatemala is unlikely to see any significant reduction in poverty for some time to come, because there are really only two effective ways to do this: grow the economy at a steady 6% per annum or start using the state to transfer wealth from the rich to the poor. It has calculated that the incomes in Britain would be essentially as inequitable as those across Latin America if the role of the state is discounted. Borrowing from dodgy blokes in red berets in not the long-term solution to this problem!

The deal is that Guatemala pays 40% of the bill after 90 days and the rest is financed for 25 years (at 1% pa).

Colom noted yesterday that it is Guatemala's "worst shame" to be so dependent on petrol when it is blessed with an abundance of natural sources of alternative energy. Fortunately though, through the terms agreed with Petrocraibe, Guatemala is able to pay its debt using its agricultural wealth!

Critics of the system point out that delivery of the fuel shipments is often patchy, with only Jamaica and Cuba (surprise surprise) experiencing an uninterrupted service.