SKEPTICAL GUATEMALAN DELEGATION TO CARACAS TO

C O N F I D E N T I A L GUATEMALA 001411

SIPDIS

E.O. 12958: DECL: 06/03/2010
TAGS: ENRG EPET PREL PGOV VE GT
SUBJECT: SKEPTICAL GUATEMALAN DELEGATION TO CARACAS TO
EXPLORE "OFFER" OF CHEAP PETROLEUM

REF: 2004 GUATEMALA 2126

Classified By: EconCouns Steven S. Olson for reason 1.5 (b) and (d)


1. (U) A Guatemalan delegation consisting of Minister of
Energy and Mines Luis Ortiz, congressional Energy Commission
chair Mynor Lopez, and Finance Committee chair Victor Ramirez
departed Guatemala the afternoon of June 2 to pursue a public
offer of significantly lower petroleum prices made by
Venezuela's charge d'affaires in Guatemala. There had been
talk of such a delegation in the latter part of May, but
government sources told the press that the visit was not
going to happen. Critics from the left berated the
government for not taking up the Venezuelan offer of
"Bolivarian" solidarity, while business-savvy commentators
played around themes of "no free lunch." The decision to
make the trip was a surprise.

Going Through the Motions to Silence the Critics
-------------- ---

2. (C) EconCouns spoke with Lopez by phone as the
congressman prepared to board the flight to Caracas. Lopez
said he had no expectations of getting anything out of the
Venezuelans, but the government and congressional leaders
were being pilloried by far-left columnists and activists for
not taking Venezuela up on its offer. He said that there was
no mainstream interest in government-to-government deals
under the San Jose or Caracas accords and no prospect of
getting discounts for the private sector. Rumors of a $15
per barrel discount were absurd. He said that the easiest
way to turn off the criticism was to go, listen, and come
back and report that -- as anticipated -- there was nothing
worthwhile on offer. The group plans to return on Sunday,
June 5.

May Be Able to Help Duke with Orimulsion
--------------

3. (C) Lopez said that he was aware of worries that
Venezuela would not renew its contract to supply emulsified
super-heavy crude (orimulsion) to Duke Energy's Guatemalan
electrical power plant. Duke had switched its plant to using
orimulsion instead of coal in 2004 (reftel) and is now one of
the lowest cost producers of energy in the country. Duke
hears that Venezuela has committed to sell all of its
orimulsion production to the PRC as the result of recent
visits by Chinese leaders. Accordingly, Venezuela's PDVSA
will not renew contracts to supply Duke in 2006, leaving Duke
without a source of fuel for its cutting edge furnaces.
Canadian and Italian firms have also developed technology to
burn orimulsion directly and also face losing their fuel
supply, according to a Duke contact. Lopez says his group
will lobby for continuing the orimulsion sales to Guatemala
on grounds that it facilitates relatively cheap electricity
for the poorest Guatemalans via the country's special "social
tariff" for those with low monthly electricity consumption.
He thought that the appeal to "solidarity" with the poor
might work in this case. If successful, it would also help
show that the authorities were doing what they could to
mitigate rising energy costs.


4. (C) Comment: Minister Ortiz has close links to the
conservative Campollo family's sugar mills and electrical
co-generation plants; Lopez is economically literate and a
stalwart of the center-right PAN; and Ramirez, while more of
a political animal than the other two, is from the
pro-business ruling GANA coalition. They are unlikely to be
swayed by "Bolivarian" nonsense, though we doubt they would
turn down a sweet business deal if one, unexpectedly, were
offered. We will follow up with them upon their return to
see what actually happens. End Comment.

HAMILTON