US embassy cable - 05GUATEMALA1411

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