Venezuela signs cheap oil pact

Mr Chavez reviews the guard before signing

The world's third-largest oil exporter, Venezuela, has signed an agreement to supply cheap oil to Central American and Caribbean countries.

Venezuelan President Hugo Chavez said the accord, which 10 countries signed on Thursday, would support the region's developing economies.

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President Hugo Chavez

"We are not giving oil away, nor is that what our brothers are asking for - this is a simple co-operation agreement," he said.

A BBC correspondent in the region says the accord is part of attempts by Mr Chavez to gain more influence and fulfill his vision of closer integration.

Critics say the accord provides no benefits for Venezuelan exporters and could be harmful to business.

Loans

The Caracas accord will double the 80,000 barrels of oil a day already provided on favourable terms by Venezuela to 11 of its neighbours under the 1980 San Jose accord, which it administers jointly with Mexico.

Venezuela will finance up to 25% of the cost of the crude when oil prices are over $15 a barrel.

The loans will be for up to 15 years, with a one-year grace period, an interest rate of only 2%, and the opportunity to pay for some of the oil in kind.

Rift with Mexico

Mr Chavez created the new initiative after Mexico rejected his proposal to expand the San Jose accord to include Cuba and other countries.

Belize, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Haiti, Honduras, Jamaica, Nicaragua and Belize signed on Thursday.

Cuba is expected to follow suit when President Fidel Castro visits Venezuela next week.

The two accords are expected to function in parallel.