El Salvador has become the latest nation to join the Venezuela-led Petrocaribe alliance as it looks to increase cheap oil imports and plough cash into social programmes.
The Central American country is to receive some 210,000 barrels of crude per month from Venezuela under the cute-rate trade mechanism installed by former Venezuelan president Hugo Chavez.
El Salvador will pay for half of the oil up front and the other half over 25 years at an annual interest rate of 2%.
The country’s President Salvador Sanchez said he will used the economic savings from the initiative to carry out social reform.
El Salvador has become the seventeenth member state of Petrocaribe, plus Venezuela. In Central American it is joined by Honduras, Belize and Nicaragua, while in the Caribbean the other members are Antigua & Barbuda, Bahamas, Cuba, Dominica, Dominican Republic, Grenada, Jamaica, St Lucia, St Kitts & Nevis, St Vincent & Grenadines and Haita. On the South America continent Suriname and Guyana are members.
Guatemala used to be a member but withdrew late last year.
Venezuela is thought to provide about 40% of the oil that the Petrocaribe member states require. Although some countries go for the low interest rate option over a long pay-back period, others choose to pay half of their arrears in goods and services, typically food.
Rafael Ramirez, Venezuela’s oil minister and president of state-run company PDVSA, said recently that the oil importing nations have sent about $800 million worth of foodstuffs in payment to Venezuela.