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Petrobras is experiencing its most turbulent week due to Bolsonaro's interference

2021-02-26T23:40:41.462Z

The Brazilian oil company suffers a harsh punishment on the stock market after the president imposed a military man in charge of the state company



President Bolsonaro gives a military salute after sanctioning the Central Bank autonomy law this Wednesday in Brasilia.Joédson Alves / EFE

Petrobras has had a very turbulent week.

The storm began on Thursday 18 during the review of the news that the Brazilian president, Jair Bolsonaro, does via Facebook every week.

And it ended this Thursday with the president of the state oil company detailing to investors the benefits of 2020 dressed in a sweatshirt with the slogan

Mind the Gap

(Be careful with the step), interpreted as a message to the president not to touch fuel prices.

Colorful details aside, the pulse is serious.

And expensive.

Bolsonaro's coup to oust the current president and place a retired general in charge of one of the largest Latin American companies plummeted Petrobras shares.

Between Friday and Monday, the company lost 100 billion reais (15 billion euros, 18 billion dollars) on the stock market.

Investors punished other state investors and the dollar soared.

After the stock market debacle, the shares have been recovering their breath but Petrobras, in which the Government of Brazil has control with 50.26%, has been hurt.

With more than 46,000 employees, it extracts 2.7 million barrels of oil per day.

Founded in the 1950s by Getúlio Vargas, it was opened to private capital in the 1990s.

Its half a million shareholders have lived a very busy week since Bolsonaro revealed his desire to intervene.

The trend was already bad.

Shares of the Brazilian oil company have lost 25% so far this year.

The trigger for the conflict is the sharp rise in the price of gasoline and diesel, 30% so far this year, driven by international increases.

The issue is politically hypersensitive in an immense territory with a president seeking reelection and truckers threatening to paralyze the country as in 2018. From the outset, Bolsonaro announced that he will temporarily eliminate taxes on gasoline and diesel.

The matter also tests the discourse of economic liberalization with which the far-rightist won the elections in 2018. The outgoing president of the company, Roberto Castello Branco, 76, trained at the Chicago School, embodies the privatizing soul;

the candidate to succeed him, the career soldier Joaquim Silva e Luna, 71 years old, the statist.

The analyst Malu Gaspar described

the eternal dilemma

in the

O'Globo

newspaper

: “Who knows if Brazil comes out of self-combustion and decides once and for all if it wants a Petrobras with shares on the Stock Market, which assumes commitments with investors, to finance its activities, or if you want a Petrobras with a social function, executor of public policies and that depends on the Brazilian taxpayer ”.

Bolsonaro responded clearly this Thursday.

"A state, whatever it is, has to have a social function."

To calm the markets in the midst of a collapse, Petrobras reactivated the liberalization plans.

It approved a decree to privatize electricity company Eletrobras, sanctioned the law that enshrines the autonomy of the Central Bank, and handed over to Congress the project to sell Correos.

With Silva e Luna, a third of the Brazilian state companies will be under the direction of men from the Armed Forces, active or retired.

The oil company closed the pandemic 2020 with a profit of 1,060 million euros.

Castello Branco took advantage of the presentation of the annual results last Thursday, the 24th, to vindicate its legacy, which includes the benefits of 2019, the largest in history thanks to the sale of assets.

He stressed that he has reduced the debt "by almost 36,000 million dollars in two years" and defended his position: "Prices below the international market generate negative consequences."

He also mentioned the huge losses from the latest government intervention to control fuel prices.

It was 40,000 million dollars in the time of Dilma Rousseff.

He was surprised that instead of a suit, he wore a sweatshirt with the phrase

Mind the Gap

.

The phrase, the motto of the London Underground, starred in a campaign by the oil company in 2019 about its intentions to close the efficiency gap that separates it from the main international firms.

Castello Branco intervened by videoconference from his home, converted into an office for a year.

That he is still in detention is another reason why Bolsonaro, who still gathers crowds and despite the 250,000 deaths accumulated in the country by the virus, despises the mask, considers that it is inappropriate for the position.

The outgoing manager is a close ally of the Minister of Economy, the ultra-liberal Paulo Guedes, who remains with Bolsonaro despite the fact that the pandemic and the electoral interests of the president have slowed down his ambitious plans for economic reforms.

The minister who arrived with the mission to lose weight in the State has maintained a remarkable silence during the Petrobras storm.

When he finally spoke, it was to insist on the need to "unblock the economic agenda" without mentioning the state one.

Tax and administration reforms are pending in Congress.

Before, the eleven members of the board of directors joined the presidential order and everything seems to be on track for the general in the reserve to assume the reins in mid-March, when the two-year term of the current president expires.

Thiago de Aragão, from the risk consultancy Arko, explained in a tweet that "what caused concern [to investors] was not the nomination [of the military], but the manner and context in which Castello Branco was dismissed."

This crisis is a new setback after only one year since Petrobras returned to profits after the huge crisis caused by the systematic bribes that accompanied its contracts for years, surfaced by the Lava Jato investigation, which Brazil has buried.

On Thursday 17, Bolsonaro had unleashed his irritation on Facebook with the constant increases in fuel.

In addition to criticizing the chief executive of the state company for not stopping the increases, he affirmed: "In the next few days something will happen at Petrobras."

The warning materialized within 24 hours, with the markets already punishing the company, in the form of a ministerial statement tweeted by the President of the Republic.

The general in the reserve who presided over the Itaipu hydroelectric plant, on the border with Paraguay and Argentina, was leaving office to replace the defenestrated Castello Branco.

Source: elparis

All business articles on 2021-02-26

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