Amid soaring fuel prices and with Petrobras at the center of criticism, including from the political class, the president of the country’s largest state-owned company, retired Army General Joaquim Silva e Luna, defended his management and denied that the company is the responsible for the rise in prices. This year alone, Petrobras increased gasoline by 60% in refineries, and diesel by more than 50%.
In an exclusive interview with the column, the general said that the company will not accept intervention, that the “price setting has always had the worst consequences”, that the search for profit should not be condemned and that the decision on whether or not to privatize the company is up to to the government.
For him, there is currently a kind of “scapegoat hunt” and that “the best antidote is information”.
What prevents shortages in the markets and makes balanced economic growth viable is precisely the acceptance that prices are determined by the market, not by ‘sticking’.
Silva and Luna
Petrobras’ current pricing policy has been in effect since the government of President Michel Temer, who established the so-called international parity policy (PPI), passing on the increases in oil prices in the international market and also in the dollar. The currency alone rose almost 30% in 2020 and accumulates an increase of 5% this year.
The strengthening of the dollar globally and, in particular, in Brazil, has boosted commodity prices and increased inflation. But these uncomfortable truths don’t seem very appealing.
Silva and Luna
President Bolsonaro has repeated that inflation is a global problem. However, data show that the Brazilian problem is much worse than in other countries. Experts heard by UOL emphasize that one of the reasons for this is the troubled political environment, including the conduct of the president himself.
This week, when complaining that he could not control prices, Bolsonaro said he wanted to privatize the company and that he would check with the economic team about this possibility. On the last 8th, Petrobras announced another increase, this time of 7.2% in the prices of gasoline and cooking gas at its refineries.
Asked what he thinks about privatization, Silva e Luna said only that this decision is up to the government. “I consider that this is a choice of the majority shareholder [o governo]”.
‘Petrobras cannot control prices’
The general has been in charge of Petrobras for five months — he is the first military man to preside over the state-owned company since 1989. But he has been in the Bolsonaro government since February 2019, when he was appointed to command Itaipu. It was this last post that accredited him to Petrobras. He was raised to the position after the continuous advance of fuel prices and Bolsonaro’s criticisms of Roberto Castello Branco’s administration.
But in the Silva e Luna administration, the pricing policy was maintained, and prices continued to rise.
The general stated that the state-owned company has been working to ensure balanced economic growth in order to recover from the pandemic. Regarding the cost of fuel, the general said that the scenario is more complex and that citizens need to understand the variables that impact the price at the pumps.
“It is important to understand that Petrobras has neither the capacity nor the legitimacy to control fuel prices in Brazil,” he said, adding that the company has achieved good results despite the economic crisis.
In Brazil, gasoline is not cheap. Inflation accelerated. And there are those who blame Petrobras. And they don’t see that, in this chaotic environment, thanks to its efficient management, the company has managed to generate profit capable of paying its debts, investing heavily and paying taxes and dividends.
Silva and Luna
Pandemic, resumption and water crisis
To justify the rise in fuel prices, Silva e Luna also says that society is currently experiencing the consequences of the pandemic and the economic recovery.
“The reduction in the global supply of fossil energy, scheduled at the start of covid in 2020, and stimulated by the excessive voluntarism of the energy transition, made energy very scarce at this time of high demand, with the resumption of post-vaccination activity,” he said .
With the country experiencing one of its worst water crises in 90 years, Silva e Luna says that climatic factors, such as “little rain and little wind”, also interfere in this scenario.
‘Seeking for profit is not to be condemned’
Silva e Luna affirms that the first step to understand Petrobras’ current situation is to “revisit the past” and reinforce that the search for profit should not be “condemned”.
“In 2015, 80% of Petrobras belonged to creditors, to banks. In a single year, it paid more than four Bahia refineries (RLAM) in interest, directly to the financial system,” he said.
Because of political pressures, Petrobras was a machine for generating losses, says the general, noting that the state’s debt reached US$ 160 billion.
Profit was not important, it was spent and invested in a wasteful way. The company was pressured to act as a political arm of the time. The account brought Petrobras to the brink of bankruptcy.
Silva and Luna
Taxes of five times the Bolsa Família
Silva e Luna says his management has managed to restore profit and liquidate more than $100 billion of “stratospheric accumulated debt”.
In 2021, it is estimated that the state-owned company will pay around R$ 177 billion in taxes for the Union, states and municipalities, which represents approximately five times the amount spent on the Bolsa Família program in the period.
Petrobras does not pursue profit for profit, but because it needs to make investments with an eye on the energy transition and, therefore, it is in a hurry for the pre-salt.
Silva and Luna
The general says that, at the end of 2019, Petrobras invested more than R$60 billion to pay the ticket and have the right to explore more of the pre-salt. “This action cost 150% of the profit obtained that year. The company reinvested the result of its good performance, because it believes in its capacity to explore reserves and generate more wealth for Brazil,” he said.
‘Price listing has the worst consequences’
Silva e Luna defends the opening of the market and says that, since 2002, during the government of former president Luiz Inácio Lula da Silva, Brazil has followed a path that encouraged the arrival of importers and new producers to Brazil.
Even with the opening, the general says that Petrobras is not capable of supplying the country alone with gasoline, diesel, LPG and natural gas.
“If the decision to try to impound prices via Petrobras prevailed, the other companies in the sector would sue the company for predatory pricing [artificialmente baixo] and they would sell their products abroad or leave Brazil,” he says.
According to the general, more than welcome, new investors are vital for Brazil. “And they will only come and stay here if market prices are respected.”
Without mentioning ex-president Dilma Rousseff by name, Silva e Luna says that decisions of past governments, which opted for a price freeze, proved to be completely wrong.
It is estimated that, between 2011 and 2014, during the PT’s administration, the inflation control policy, through the damming of the price of gasoline, generated losses of around R$ 40 billion for ethanol producers alone.
Brazil has tried heterodox measures at other times, always without success. Setting prices has always had the worst economic consequences for any country that does. And nobody imagines making old mistakes.
Silva and Luna