Costa Rica asks to join Chávez oil group

July 11, 2008

President Oscar Arias´ administration yesterday authorized the Foreign Ministry to formally request Costa Rica´s incorporation into the Venezuela-led Petrocaribe initiative as soon as possible.

“We have to see if it will be necessary to wait until the next [Petrocaribe] presidents´ meeting in December, or if instead we can benefit from this help as soon as possible, even if we are not full members of Petrocaribe,” Arias said in a press release.

Once accepted, Costa Rica will become the group´s 18th member. Despite sour relations between the United States and Venezuela, three members of the Central American Free-Trade Agreement with the United States (CAFTA) – the Dominican Republic, Honduras and Nicaragua – are members of the grouping.

Costa Rica imports 95 percent of its crude oil from Venezuela, but must pay it in full within seven days of receiving it. As a Petrocaribe member, if the price of oil is more than $100 per barrel, Costa Rican will be able to finance 60 percent of the cost of their oil over 25 years, paying 1 percent interest a year and will have 90 days to pay the remainder. If the price reaches $150 per barrel, it will be able to finance 70 percent of the cost of their oil over 25 years, paying 1 percent interest a year with a two-year grace period.

“What we have to do is talk with authorities within the government of Venezuela and, if necessary, I would call [Venezuelan] President Hugo Chávez,” whose actions Arias has criticized in the past on repeated occasions.

Arias also met with the leaders of the main legislative factions to discuss eliminating the tax on diesel. Given that most cargo and public transportation vehicles use diesel, an elimination of the tax would be expected to slow the rate of increase in the cost of living, according to the wire service EFE.

Arias said legislators were receptive to the idea. “It has been a very important first step,” Arias said. “We can now say there is nearly unanimous agreement that it is necessary to eliminate the tax on diesel.”

The tax on fuels is used to fund social programs and road maintenance. Arias said that the agreement to eliminate the diesel tax would lead to a “second phase” of conversations with legislators aimed at determining how the government would compensate for the loss of funds caused by the elimination of the tax.

The government currently collects some $200 million each year from the tax.

The Costa Rican Petroleum Refinery (RECOPE) estimates that the country´s oil import tab is expected to reach $2.8 billion this year, twice its size in 2007 and an amount equal to roughly a quarter of the country´s exports.

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