Borzonaro’S Appointment Of A Soldier As Chairman Of Petrobras Has Raised Concerns About Intervention

2021-02-20   |   by CusiGO

After several days of criticism of Petrobras’ fuel price policy, Brazilian president jair bolsonaro announced that he would appoint general Joaquin Silva Luna, former defense minister and current director general of ETAP hydropower station, As a replacement for Roberto Castro Branco, he will be president of state oil. The decision to change the president of Petrobras, announced on Friday night, reinforces the military presence in key positions in the Brazilian government and raises concerns among financial market participants that the president may want to intervene in state-owned enterprises to curb rising fuel prices and to appease investors The truckers Union, a strategic ally of the president, threatened to strike for weeks.

During his presidential campaign, borzonaro promised to abide by the liberal principle of non-interference in state-owned enterprises. He has been making contradictory statements about Petrobras. On Friday afternoon, the president reiterated in Pernambuco, northeastern Brazil, that Petrobras would change, but that the government would not “intervene” in oil. “We will never interfere with this big company and its pricing policy, but people will not be surprised by some adjustments,” he said. On Thursday, the president went on to say that Castro Blanco’s statement a few days ago that the threat of a trucker strike “is not a problem for Petrobras” will clearly have consequences.

Now all eyes are on the new boss of Petrobras. Silva e Luna, 71, a former defense secretary, is a doctor of Military Science in the army command and staff and is now the chief executive of Itaipu binacional. Petrobras’ board has yet to approve his appointment, which it technically has the power to veto. However, the government has a majority on an 11 member board.

Castello Branco, elected by economy minister Paulo guedes, was appointed chairman of Petrobras at the end of 2018 for a two-year term until March 20 this year. The re-election of the current chairman of the state-owned enterprise is scheduled for next Tuesday.

The response of financial market analysts and brokers was immediate. “Petrobras is in a complex situation. “It’s not worth investing in general Silva Luna until it’s managed and to what extent the government will continue to intervene in the company,” wrote Thiago de arag? O of ArKO advice, a political risk consultancy. “It’s no exaggeration to say that the president has deviated from the agenda of putting him in power, which opens up space for people to speculate on his liberal beliefs,” said Andre é Perfeito, chief economist at necton brokerage.

Basonaro’s decision comes a day before the president criticized Petrobras in a live social media broadcast a day before he was angry about the further rise in fuel prices, which is linked to changes in international prices. Borzonaro announced that from March 1, the federal gasoline tax will be reduced to zero in two months. Concerns about political interference in the state-owned company reverberated in financial markets, with Petrobras shares plummeting nearly 8% on Friday.

For joelson Sampaio, economics course coordinator at the Getulio Vargas foundation, “the market thinks the president’s speech is very negative.” “In recent times, the main criticism of SOEs has been this kind of political intervention, but it has improved with the change of some rules,” he said. For Sampaio, borzonaro’s statement brought a sense of interference and interference, just as the government of former president dilma Rousseff did when Petrobras’ price policy was inconsistent with international prices. “It’s obviously a political nod to the truck driver category, but it’s a heavy burden on the market,” the economist added.

The announcement of reducing diesel tax within 60 days also attracted investors’ attention, and market participants were not optimistic about it. The measure will have billions of dollars in impact on government accounts. The president did not elaborate on the estimated amount of the damage or how it would be compensated in public accounts, which have been in red numbers for more than six years.

At the same time, the international arena continues to exert pressure on state-owned enterprises. On Thursday, Petrobras announced two new adjustments to gasoline and diesel prices, rising 10.2% and 15.1% respectively from Friday, February 19. This is the fourth gasoline and third diesel adjustment in 2021. This year alone, the price of gasoline sold by Petrobras has risen by 34.7%. Over the same period, diesel prices rose by 27.7%.

Bolsonaro said Petrobras’s recent price adjustment was “off track” and sought a solution to meet the interests of truck drivers. “This is the fourth adjustment this year. It’s always my fault, even though Petrobras has autonomy,” he said on Thursday.

This is not the first time that Mr. bajinsnaro has talked about changing fuel prices and reducing diesel taxes. With no room to maneuver to meet the demands of truck drivers, they held a strike earlier this month, and the president unexpectedly announced a bill calling for the regulation of refineries and trucks Not at the gas station (where the value is the most expensive) or have a fixed value.