Update Country Report Curaçao 03 May 2019

Event

On April 24th seven members of the US Congress visited Curaçao to meet with the prime minister, Eugene Rhuggenaath, various government ministers and legislative representatives. The discussions focused on the impact on the Venezuela crisis on Curaçao, and particularly the US sanctions on that country.

Analysis

The visit by the congressional representatives was the first formal visit of its kind since 1997 and reflects the current US foreign policy focus on Venezuela. Venezuela's economic decline and political turmoil have been having an impact on Curaçao for several years already. Tourist arrivals from the distressed country have slumped and production at the Isla oil refinery, operated by Venezuela's state-owned oil firm, PDVSA, has sharply declined.

However, the situation has deteriorated since early 2019, especially linked to tighter US sanctions on Venezuela and PDVSA. According to local reports, the US delegation discussed the impact of the sanctions on Curaçao, given that PDVSA remains the technical operator of the Isla refinery, one of the most important sources of economic activity on the island. Although no agreements on the issue were reported, it is likely that Curaçao and the US are seeking to create mechanisms by which Curaçao can avoid being penalised for its contractual relationship with PDVSA.

Such an agreement is even more important given the role that Curaçao is playing as a logistical hub for the provision of key humanitarian supplies to Venezuela, including supplies from USAID. Venezuela has argued that the humanitarian hub is a cover for efforts by the US to infiltrate Venezuela, pointing to the presence of a US Air Force Forward Operating Location in Curaçao. While the US has denied such allegations, keeping the Curaçao government as the visible co-ordinator and delivery mechanism for humanitarian aid will help to deflect such criticism.

Closer co-ordination with the US will be welcome to Curaçao in support of mitigating some of the potential economic impact from US sanctions on Venezuela. This may take the form of more US investment, as the two governments discussed how to attract more American firms to the island. Tourism from the US has also increased in recent months, helping to assuage the reduction in Venezuelan tourists and develop ties between the two countries.

Impact on the forecast

Our forecast remains broadly unchanged. Ties with Venezuela will continue to deteriorate amid a warming of relations with the US.