Q&A with Brookshire’s Gianna Bern

Instant Max AI

(Energy Analytics Institute, Pietro D. Pitts, 19.Jul.2013) – Brookshire Advisory and Research President Gianna Bern spoke with Energy Analytics Institute in a brief interview from Chicago, IL.

What follows are excerpts from the brief interview.

EAI: Do you think PDVSA will move to increase rates on Petrocaribe member countries that are not exporting products that are needed in Venezuela?

Bern: I think PDVSA will manage its export-import agreements very carefully. As such, I am not surprised by the rate increases associated with various export-import partners, and I think there will be rate increases where there is a path of least resistance.

Venezuela’s electricity sector has been in need of infrastructure improvements for the past decade and so now we see increased diesel fuel supplies being dedicated to generate electricity instead of transport. Consequently, Venezuela has been increasing its imports of reformulated gasoline from the USA and at a time when the USA’s production of oil has been increasing.

However, not all countries had the same faith. Officials from Honduras and Guatemala emerged from the July 2013 Petrocaribe conference in Managua as the first countries to openly express concern over potential rate increases, although it is unclear whether they will abandon the initiative.

EAI: Why would PDVSA increase interest rates on Petrocaribe loans?

Bern: My suspicion is that it is cash flow driven. PDVSA is still taking steps to increase its cash flow, so this is probably just one initiative we are seeing by the company to improve its very challenging financial situation.

EAI: Could these interest rate increases be a game breaker for the members?

Bern: At first glance an interest rate increase may be substantial but each country will have to make a decision based on their economic interest and whether they want to continue moving down the path with PDVSA. However, I do not think the solution is one of longevity.

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