Caribbean Cement Company Limited is banking on a new cement supply agreement with Venezuelan to reboot sales and reinvigorate its cash flows, but intervening elections could crush its plans.
The cement supply deal is being negotiated under the crude for commodities component of the PetroCaribe agreement between Jamaicaand Venezuela, which allows for part-payment of oil with goods.
In June, Caribbean Cement's chairman Brian Young disclosed to shareholders that the Kingston plant hoped to begin supplying cement to Venezuela in early 2013.
However, finalising the contract was first delayed by Hugo Chávez's illness - the Venezuelan president was widely reported to have cancer and was treated several times in Cuba - and now it faces the uncertainty of elections and a potential change of government when residents of the South American country vote in national elections on Sunday, October 7.
Chávez is considered to be leading narrowly in opinion polls with his challenger, Henrique Capriles, nipping at his heels. It is widely expected that a new Venezuelan administration would, at the very least, seek to reshape the PetroCaribe agreement struck with individual oil-import dependent Caricom nations, which, in turn, would delay or jeopardise its side deals.
A portion of Jamaica's oil bill owed to Venezuela is converted to long-term loans under the seven-year-old PetroCaribe accord to be used for development projects.
The loan proceeds are administered by the PetroCaribe Development Fund, which was established to manage and invest the portion of the oil payments that are treated as long-term loans.
Repayment is priced at one per cent but the agreement also allows for the trading of commodities to offset the oil debt.
Trade compensation
The cement deal aims to leverage that area of the agreement, known as the Trade Compensation Mechanism.
The cement producer disclosed the arrangement in its 2011 annual report. General Manager Anthony Haynes has not responded to requests for comment on the structure of the arrangement and how big a contract Rockfort is negotiating.
However, the company's second-quarter financials released in August vaguely refers to continuing negotiations for a three-year supply contract with an unnamed party - as have previous quarterly reports - which, it said, is expected to "make a significant contribution to the group's forecasted turnover and net cash flow over the contract period."
If agreed, it will be the first such crude-for-commodities arrange-ment for Jamaica, but Guyana has supplied rice to Venezuela under the pact.
Caribbean Cement is struggling with accumulated losses of more than J$5 billion and is reliant on parent company Trinidad Cement Limited for its continuing operations.
The Jamaican operation has been expanding aggressively into export markets - including Haiti, Eastern Caribbean and Dominican Republic - to offset shrinking domestic cement sales.
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