HONDURAS: VENEZUELAN FUEL SCHEME IN EL SALVADOR

1. (C) Summary: A recent meeting in San Salvador has detailed
a potential deal involving Venezuelan fuel that may be used
to influence upcoming elections. The deal involves oil
trading company Trafigura Beheer SV, which has links to
Venezuelan fuel company PDVSA and has been in serious
negotiations to buy Honduran fuel retailer DIPPSA. Trafigura
and PDVSA may be utilizing a PetroCaribe type arrangement to
provide discounted fuel to a Salvadoran political party,
which could be a blueprint for similar deals in Honduras and
Nicaragua. End Summary.



2. (C) Per ref (a), the Chavez government in Venezuela is
attempting to influence future elections in El Salvador by
selling discounted fuel through an agreement with Trafigura
Beheer SV, a global trading company that has a strong
presence in Latin American through subsidiaries Puma Energy
and COPENSA. The scheme apparently is to sell the fuel to
Salvadoran political party FMLN at a discounted price, then
allow them to sell the fuel at regular price through PUMA
facilities, pocketing the difference for upcoming elections.
(Comment: Several FMLN mayors have signed up for a Venezuelan
fuel deal called PetroCaribe, which allows them to finance 40
percent of the purchase at 1-2 percent over 23 years. The
deal requires a government to government agreement, normally
between Venezuelan fuel company PDVSA and the host
government. Working a PetroCaribe type deal through an
intermediary like Trafigura would be a new arrangement, but
not unexpected. End Comment).



3. (C) Trafigura continues to play a prominent role in the
Honduran national fuel bid and the potential purchase of
Honduran fuel retailer DIPPSA (ref b). The national bid,
which would seek one supplier for each type of fuel, is due
to be sent to potential bidders within 15 days. DIPPSA owns
key strategic storage and distribution facilities on both
coasts, with easy access to both El Salvador and Nicaragua,
where similar PetroCaribe agreements have been signed. Owner
Henry Arevalo has been in advanced talks with Trafigura about
a potential sale of 50 percent of DIPPSA, and has publically
stated that he plans on winning the national bid.



4. (C) Headquartered in Holland, with principle trading
offices in Switzerland, Trafigura has over 55 trading offices
in 36 countries, and specializes in the transport, storage
and retail of petroleum products. In Central America,
Trafigura owns considerable storage facilities in Guatemala
(through COPENSA), and a growing network of PUMA brand retail
gasoline stations throughout Guatemala, El Salvador, and
Honduras. Combined with DIPPSA, the company would have in
Honduras over 130 gas stations, strategically placed storage
facilities, and a truck fleet.



5. (C) Trafigura,s owner, Wilmer Ruperti Perdomo, is rumored
to have close connections with Venezuelan President Hugo
Chavez, and played a key role helping Chavez survive the
potentially devastating oil strikes in 2002 and 2003. In
2005, press reports indicated that PDVSA was double billed by
Trafigura for a fuel shipment valued at USD 14 million, but
an ensuing investigation by PDVSA was inconclusive (Comment:
The implication was that Chavez was rewarding his confidant.
End Comment). Trafigura, founded in 1993 by former employees
of Marc Rich,s oil trading company Glencore, was also
implicated in the 2001 UN oil- for-food scandal.



6. (C) In what Post originally assumed to be a separate
negotiation, Argentine/French businessman Adrien Reca
Salaburu continues to boast of an impending deal with Arevalo
for all of DIPPSA, with an offer valued at USD 71 million
(ref c). Reca has openly declared that he will source his
fuel from PDVSA, and was recently in the Dominican Republic

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where he is rumored to have bid on fuel giant Shell,s
assets. While Arevalo continues to scoff at any offers from
Reca, the flow of detailed information from the Reca camp may
indicate that a deal is actually in the works, and may be
related to the Trafigura negotiations. (Comment: The recent
Salvadoran agreement with Trafigura confirms rumors that they
will also source their fuel from PDVSA. Contacts in the Reca
camp have indicated that they are, or have made, deals in El
Salvador for distribution, and Reca himself described to
EconOffs his vision for a sweeping Central American strategy.
The 50 percent deal with Trafigura, however, does seems to
differ from Reca's stated desire to buy DIPPSA outright, and
Arevalo,s reluctance to deal with Reca seems genuine. That
said, with the common thread being PDVSA, Reca may in fact be
working behind the scenes with Trafigura. End Comment).



7. (C) Comment. Official and unofficial channels with the
GOH have repeatedly indicated that they want to do a deal
involving PDVSA and PetroCaribe, but on &commercial terms.8
An intermediary with considerable Central American reach
like Trafigura seems likely to fill that role. At a minimum,
the Salvadoran deal, if true, seems like a natural to extend
to the Nicaraguan market, where PDVSA has signed similar
agreements. A larger deal within Honduras would nicely tie
together the three markets with strategically located storage
and retail facilities. If a PetroCaribe financing scheme is
involved, the network could have repercussions on national
elections for years to come. End Comment.
FORD