You are here: Home » International » News » Markets
Business Standard

Petrobras shares slump as Brazil's Bolsonaro doubles down on intervention

Shares in state electricity company Eletrobras also plunged on Monday after Bolsonaro said it would be the next sector in which the government would "stick its finger"

Topics
Petrobras | Jair Bolsonaro | Brazil

Reuters  |  RIO DE JANEIRO 

PETROBRAS
FILE PHOTO: The facade of the headquarters of Petroleo Brasileiro S.A. (PETROBRAS) is pictured in Rio de Janeiro

By Sabrina Valle and Gram Slattery

RIO DE JANEIRO (Reuters) - shares plunged 22% on Monday, wiping out 71 billion reais ($13 billion) in market value, as Brazilian President again slammed its pricing policies after he replaced the state-controlled oil company's market-friendly CEO with a retired army general.

The selloff, following a series of analyst downgrades, deepened after Bolsonaro said the company's fuel policy was only pleasing to financial and select groups in and should be changed as part of an effort to lower gasoline and diesel prices.

Overall, the last few days have marked a dramatic about-face for Bolsonaro, a right-wing populist whose interventionist instincts until now had been largely contained by economically conservative allies.

Shares in state electricity company Eletrobras also plunged on Monday after Bolsonaro said it would be the next sector in which the government would "stick its finger."

In comments to Brazil's Radio Bandeirantes on Monday, Joaquim Silva e Luna, the man tapped by Bolsonaro on Friday to take the reins from Roberto Castello Branco, floated the idea of a government fund, or "cushion", to lessen the effects of fluctuating fuel prices on consumers.

Bolsonaro doubled down on his criticism of Castello Branco, mocking his decision to social distance since the beginning of the coronavirus pandemic, the severity of which the president has repeatedly minimized.

"Now, the current chief executive, let's be very clear, has been at home for 11 months without working, working remotely. Now, the boss has to be on the front line," Bolsonaro said, adding: "This is for me unacceptable."

BONDS ALSO HIT

Credit Suisse, Santander, Scotiabank, Bank of America, Bradesco and XP analysts were among those who downgraded their recommendations on shares of Petroleo Brasileiro SA, as the Rio de Janeiro-based producer is known.

"A good reputation is hard to earn and easy to lose," BTG bank analyst Thiago Duarte said in a note to clients.

Dollar-denominated debt issued by also suffered hefty losses with the 2043 bond dropping 7.6 cents to trade at a seven-month low of 98 cents on the dollar, Refinitiv data showed.

Morgan Stanley removed its 'like' recommendation on sovereign bonds on Monday, citing fiscal concerns and potential spillover from the removal of Castello Branco.

Petrobras' "all-important" pricing policy and its implications for cash generation and planned asset sales, particularly of its refineries, has clouded its debt reduction and dividend outlook, Santander analysts led by Christian Audi said in a note to clients. They downgraded their recommendation on the stock to "hold" from "buy."

Director-General Rodolfo Saboia of Brazil's oil regulator ANP said that the CEO change would not affect the country's policy of opening up the refinery sector to private investment or pursuit of free He declined to comment directly on Petrobras' refinery sales.

"The best way to attempt to reach a fair price is by opening the market ... and not depending on one actor to set the price a certain product should have," he told Reuters in an interview.

In a Facebook post after the close of trading on Friday, Bolsonaro announced the nomination of Silva e Luna, a former defense minister who has been managing giant hydroelectric dam Itaipu, to replace Branco.

The retired general, who lacks any oil and gas industry experience, said in the Radio Bandeirantes interview that he had not discussed and does not have an opinion on an eventual privatization of the company.

On Saturday, Silva e Luna told Reuters that the company needed to find "balance" in fuel pricing, considering the impact on shareholders, investors, sellers and consumers.

Brazil's securities industry watchdog CVM on Monday announced the opening of an investigation on the change of leadership, confirming an earlier Reuters report on the matter.

 

(Reporting by Sabrina Valle, Gram Slattery, additional reporting by Marta Nogueira in Rio de Janeiro; Aluisio Alves, Paula Laier and Tatiana Bautzer in Sao Paulo; Karin Strohecker and Marc Jones in London, Editing by Emelia Sithole-Matarise, Dan Grebler and Richard Pullin)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Tue, February 23 2021. 07:14 IST
RECOMMENDED FOR YOU
.