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Petrobras Forgives Billion-Dollar Debt with Petróleos de Venezuela

By: PanAm Post Staff - Mar 25, 2014, 8:51 am

EspañolBrazilian newspaper O Estado de Sao Paulo revealed yesterday that Petrobras — the Brazilian state energy conglomerate — has halted collection of a billion-dollar debt from Petróleos de Venezuela (PDVSA), the Venezuelan state oil company.

The debt originated in PDVSA’s failure to fulfill its commitment to finance 40 percent of the construction costs of the Abreu e Lima refinery in the northeastern state of Pernambuco, Brazil. That was according to an agreement signed in 2005 by Luis Inacio Lula da Silva and Hugo Chávez, then presidents of Brazil and Venezuela, respectively.

The project cost was initially estimated at US$2.5 billion, of which, according to the agreement, 60 percent would be funded by Brazil, and the remaining by Venezuela.

The Brazilian newspaper said that since 2005 until last year, Petrobras tried to collect the money owed by PDVSA, without success. In October last year, when investments in the refinery had reached $18 billion, the Brazilian company decided to cease its collection attempts — although that went unreported until this week.

The original agreement established the recourse of sanctions if PDVSA did not fulfill its commitment to cover its share of the investments costs, but Petrobras executives have decided against such a measure. There is also dispute over whether the agreement was legally binding, since it lacked final approval from the Venezuelan legislature.

Source: El Universal.