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Petrobras evaluates CEO change President of Brazil puts pressure

São Paulo — On Tuesday, the financial future of Brazilian oil giant Petrobras was out of balance as the board proceeded with plans to approve the controversy of President Jair Bolsonaro. Appointment of Army General To steer the company with an obvious bid to force the company to subsidize fuel prices.

Mr. Bolsonaro served with him under Brazil’s 1964-85 dictatorship, and the nomination of General Joaquin Silva Erna, who had no experience in the oil industry, devastated the market. Eliminate billions of dollars from Petrobras market value There is growing concern that the government will interfere with the economy.

Petrobras said late Tuesday that 11 boards had agreed to hold an extraordinary shareholders’ meeting to evaluate the president’s nomination without setting a date. The intention of the meeting is to replace the current CEO, but according to people familiar with the situation, Petrobras will first see if Bolsonaro’s candidate meets the best job standards set in the company’s articles of incorporation. You need to judge.

Analysts said Petrobras’ announcement also increased the likelihood of multiple director changes, but suggested that the president could win with efforts to shake the company’s operations.

The market closed before the announcement of Petrobras, and investors prepared for further fluctuations in the company’s share price on Wednesday. According to a Sao Paulo-based analysis, Petrobras preferred stocks rose 11% on Tuesday, recovering some of the ground lost the day before, with about 20% of the second largest loss of market value since the early 1990s. I made it plummet. Our company. Brazil’s benchmark Bovespa Index rose 2.3%.

Right-wing presidential intervention in Petrobras was widely seen among investors as a crucial moment in his two-year-old administration. This shows that he prioritizes politics over the economy prior to the 2022 re-election bid. Subsidizing fuel prices can cost state-owned enterprises billions of dollars annually, ruin their finances and reduce their ability to find and produce more oil.

“The government is moving away from plans to implement structural reforms aimed at forcibly reducing government spending and liberalizing the economy,” said an analyst at Capital Economics, a London-based consulting firm. Political concerns were due to the slump in Brazil’s currency, they said, adding that it is likely to be one of the few emerging market currencies to fall against the US dollar over the next two years.

Bolsonaro’s political opponent wins the 2018 elections for him to undertake a series of free market policies and reviews after nearly 14 years of governance under the Left Workers Party led Brazil’s economy to: The crisis that jumped to the decision as a shift from his pledge.

President Jair Bolsonaro has implemented a free market policy away from the 2018 election promise.


Photo:

evaristo sa / Agence France-Presse / Getty Images

João Doria, a powerful governor and former businessman in São Paulo, said: “Bolsonaro opposed the very contribution to his election. Marcelo Mezquita, one of Petrobras’ non-governmental board members, accused the president of” communist flirting “in a local television interview.

Under the rival Left Workers Party, Petrobras was used as a means of government intervention in the economy. Between 2011 and 2016, the company spent about $ 30 billion on gasoline and diesel subsidies to keep fuel prices low and combat inflation.I lost it too Billions of dollars in corruption with scandals It trapped company executives and politicians, investigators say.

Former right-wing army lieutenant Jair Bolsonaro, who professed to know nothing about economics, chose Paulo Guedes, an economist educated at the University of Chicago, as minister of economics. He also appointed Chicago graduate Roberto Castello Branco to head Petrobras, promising the freedom to set fuel prices based on the international oil market. According to analysts, Castello Branco’s term ends on March 20, but the board was highly expected to renew it.

Some investors believe that the turmoil in Petrobras is just the beginning of the Bolsonaro administration’s interventionist era. Shares of Brazil’s largest utility fell on Monday after Mr. Bolsonaro told supporters over the weekend that he plans to “stab his finger” in the field as well.

Others have come to defend Mr. Bolsonaro. Arthur Lira, the new chairman of the Brazilian House of Representatives and an ally of the president, said the sharp loss of the company’s stock was just a “hysterical bubble.” He said Congress “has all the tools to get Brazil on the right track.”

Many ordinary Brazilians also celebrated the president’s apparent efforts to gain more control over the company, betting that it might stop the rise in pump prices. “It’s ridiculous. Gasoline costs continue to rise. I don’t know why,” said São Paulo carpenter David Silva. “If the president can reduce prices by just 10 cents, it will really help us.”

Mr. Bolsonaro’s movement Focus on Mr. Guedes’ future.. One senior Brazilian banker said it was unlikely that a former banker would quit soon. “Nevertheless, he seems to have a bad marriage,” he said. “He likes to be a minister.”

But, Pandemic devastated BrazilThe president, who killed 250,000 people and called for impeachment of Mr. Bolsonaro, returned to corporatism, which marked 27 years as a member of parliament, and protected the interests of his political foundation, analysts said.

The Petrobras crisis began last Thursday when the company announced that it would raise gasoline prices by almost 10% and diesel fuel prices by almost 15%. Bolsonaro responded to his anger and warned that “something would have to change.” Truck drivers also went on strike this month, threatening to paralyze Brazil, a country larger than the mainland US, with few rail networks and a heavy reliance on road transport.

In 2018, a truck driver who complained about the high price of diesel fuel went on strike for 10 days, stopping the flow of goods nationwide, blaming the economy and resigning Pedro Parente, then CEO of Petrobras.

Adriano Pires, an oil industry consultant in Rio de Janeiro, said: However, Petrobras recently introduced internal rules on how much the company’s prices could deviate from the international market, limiting the extent to which Bolsonaro could interfere with the company, he said.

Since taking office, President Bolsonaro has become increasingly dependent on former military personnel such as General Joaquin Silvaerna, a candidate to lead Petrobras.


Photo:

evaristo sa / Agence France-Presse / Getty Images

The appointment of figures such as Castello Branco and Geddes has calmed investors worried about Mr. Bolsonaro’s volatile years in parliament.

Last year’s president increased government spending, filled his administration with fellow military personnel, and appointed them to important posts such as the Minister of Health. And his free way of spendingHe spent $ 10 billion a month helping the poor cope during a pandemic, resulting in a surge in government debt.

It effectively evaded Mr. Guedes’ promised small government free market crusade. Neither Mr. Geddes nor Mr. Bolsonaro’s office answered the call for comment.

Bolsonaro spoke to many supporters last weekend, calling Petrobras management a “coward” about the recent rise in fuel prices, spoiling investors and saying “zero commitment to Brazil.” Blame. The president denied interfering with the company and said he was demanding greater predictability and transparency from the company instead.

Friday’s nomination shocked both investors and many in the company. Castello Branco won the trust of the market after supervising. Ambitious plans to reduce the company’s debt burden By selling non-core assets and increasing production from the company’s offshore oil deposits.

The company’s net liabilities fell from $ 95.5 billion at the end of the first quarter of 2019, the first quarter of Castello Branco’s work, to $ 66.2 billion at the end of the third quarter of last year.

“The work he’s been doing since he started there is very good and I think this interruption is very bad, especially that,” said Ian Arbetman, an analyst at Ativa Investments in Brazil. Is the way it was done. “

Despite pressure from the president to resign, Castello Branco intends to continue working until the official end of his March term, a person familiar with his idea said.

Silva e Luna was a temporary Defense Minister in 2018 and is currently the Director of Brazil for Itaipu Vinacional, the agency in Paraguay, Brazil, which operates the Itaipu Hydropower Dam, which spans both countries.

Since taking office in 2019, Bolsonaro has become increasingly dependent on former military members, especially those trained at his alma mater, the Black Needles Army Academy in Rio de Janeiro, such as Silva Erna.

Bolsonaro, after dismissing his first health minister, Luis Enrique Mandetta, and resigning his successor a few weeks later, is another Blackneedle military general to handle the country’s response to the pandemic. Eduardo Pazuero was appointed. Many public health experts have accused the president of fighting off the virus and failing to secure enough vaccines for more than 210 million countries.

Write to Samantha Pearson samantha.pearson@wsj.com And Luciana Magalhaes Luciana.Magalhaes@wsj.com

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Petrobras evaluates CEO change President of Brazil puts pressure

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