Petrobras, Brazil’s flagship industry in turmoil

published on Friday, April 08, 2022 at 5:24 PM

Petrobras, a flagship of Brazil’s industry, is going through a period of turbulence, between political pressure and a near-impossible mission to lower fuel prices amid an international crisis.

The country’s largest state-owned company, the state-owned oil company, has barely had time to navigate the calm waters again after the storm of the “Lavage Express” mega-corruption scandal.

Petrobras posted a record net profit of nearly $20 billion in 2021, but the turnaround has faded into the background as tensions surrounding its executives draw attention.

Far-right head of state Jair Bolsonaro fired General Joaquim Silva e Luna, the company’s second president during his term in office, last week, criticizing the “lack of sensitivity” of his pricing policy.

His predecessor, Roberto Castello Branco, was fired a year ago over a disagreement with Jair Bolsonaro over Petrobras’ fuel prices.

The price of fuel, aligned with the international market, has risen by 33% in one year, a price considered “impossible to pay” by the head of state.

In this election year, when presidential elections will be highly polarized, Jair Bolsonaro’s main opponent, left-wing ex-president Luiz Inacio Lula da Silva, also went there with his pikes at the oil company.

“Get ready, we are going to + Brazilianize + the fuel price”, the former trade unionist recently launched during a speech in Rio de Janeiro.

But the internal regulations of Petrobras, listed on the Sao Paulo and New York stock exchanges, and the fact that Brazil is not self-sufficient in oil, prevent a drastic change in its pricing policy, analysts consulted by AFP said.

“We could create a stabilization fund to mitigate price volatility, but it is not possible to fundamentally change pricing policy,” explains Gesner Oliveira, an economist at the Getulio Vargas Foundation.

– Complicated follow-up –

About 75% of Brazilians hold President Bolsonaro responsible for the double-digit inflation fueled by rising fuel prices.

For Gesner Oliveira, Joaquim Silva e Luna was sacrificed by Bolsonaro “to satisfy his voters”.

“Manipulation of pricing policies is like manipulating the law of gravity,” General Silva e Luna said in an interview with Veja weekly after he was fired.

But since his resignation, the government has struggled to find a successor for him.

The first to be appointed, the economist Adriano Pires, resigned from the position due to a potential conflict of interest with his consulting firm.

The Brazilian press reported several denials from other personalities approached, until on Wednesday the government finally chose José Mauro Coelho, who was responsible for oil issues at the Ministry of Mines and Energy.

His appointment is only possible after approval of his appointment by the general meeting of shareholders on 13 April.

In 68 years of existence, Petrobras has known a waltz of presidents: 39 exactly, with an average lifespan of less than two years.

“It is a position that is subject to very strong political pressure, and any resignation is like an easy political response to a complex economic problem,” said Adriano Laureno of the consulting firm Prospectiva.

– “Legacy” –

Another hot topic: a possible privatization of Petrobras, already mentioned several times by President Bolsonaro.

On the fringes of Brazil’s OECD accession negotiations in Paris, Economy Minister Paulo Guedes, an ultra-liberal “Chicago Boy”, said in late March that he “dreamed” of privatizing the company. , but assured that this would not happen during Jair Bolsonaro’s current “first term”.

The fate of Petrobras is therefore closely tied to the October presidential election, with its share of uncertainties, with Lula currently the favorite in the polls.

To make privatization a reality, it must be approved by parliament, whose majority of elected officials still oppose the idea, as are Brazilians in general (54%), according to a Poderdata poll.

“In parliament and among the population, Petrobras is considered the jewel of the Brazilian state,” said Adriano Laureno.

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