Petrobras, flagship of the Brazilian industry in crisis

published on Friday, April 08, 2022 at 17:24

Flagship of the Brazilian industry, Petrobras is going through a period of turbulence, between political pressures and an almost impossible mission to lower fuel prices in the midst of an international crisis.

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

Petrobras posted a record 2021 net profit of nearly $20 billion, but its recovery has taken a backseat as tensions around its executives gain attention.

The far-right head of state, Jair Bolsonaro, dismissed General Joaquim Silva e Luna, the company’s second president during his term, 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 fuel prices set by Petrobras.

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

In this electoral year, which will see a very polarized presidential election, the main opponent of Jair Bolsonaro, former leftist president Luiz Inácio Lula da Silva, also came with his pikes against the oil company.

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

But the internal rules of Petrobras, which is listed on the Sao Paulo and New York stock exchanges, and the fact that Brazil is not self-sufficient in oil, prevent any drastic change in pricing policy, according to analysts consulted by AFP.

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

– Complicated succession –

Some 75% of Brazilians blame President Bolsonaro for double-digit inflation fueled by rising fuel prices.

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

“Manipulating the price policy is like manipulating the law of gravity,” General Silva e Luna said in an interview with the weekly Veja after being fired.

But since his removal, the government has had great difficulty finding him a successor.

The first to be appointed, the economist Adriano Pires, resigned to assume this position due to a possible conflict of interest with his consultant.

The Brazilian press reported several refusals from other personalities approached, until the government finally opted on Wednesday for José Mauro Coelho, who was in charge of oil issues in the Ministry of Mines and Energy.

His taking office will only be possible after the approval of his appointment by the general meeting of shareholders on April 13.

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

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

– “Heritage” –

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

On the sidelines of the negotiations on Brazil’s entry into the OECD in Paris, Economy Minister Paulo Guedes, an ultraliberal “Chicago Boy,” said at the end of March that he “dreamed” of privatizing the company, but assured that this would not would occur during the current “first term” of Jair Bolsonaro.

The fate of Petrobras is, therefore, closely linked to the presidential elections in October, with its share of uncertainties, with Lula being the favorite in the polls.

For privatization to materialize, it must be approved by parliament, the majority of whose elected officials still resist the idea, as do Brazilians in general (54%), according to a poll by Poderdata.

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

Leave a Comment