Change of command at Petrobras would hardly lead to new pricing policy, say analysts

Jair Bolsonaro and Paulo Guedes
President Jair Bolsonaro (PL) called the new adjustment a ‘betrayal to the Brazilian people’ (photo: Reuters)

Petrobras announced this Friday (17/06) a new adjustment in the prices of gasoline and diesel sold to distributors — the increase in effect on Saturday (18/06).

With the change, the average sale price of gasoline from Petrobras to distributors will rise from R$3.86 to R$4.06 per liter (an increase of 5.18%). For diesel, the average price will increase from R$4.91 to R$5.61 per liter (a 14.26% increase).

The announcement further intensified the government’s pressure for changes in Petrobras’ pricing policy.

President Jair Bolsonaro (PL) called the new adjustment a “betrayal to the Brazilian people” and stated that he is articulating with the Chamber of Deputies the creation of a CPI (Parliamentary Commission of Inquiry) to investigate the direction of Petrobras.

In an interview with Natal radio 96 FM, Bolsonaro also said that the Petrobras command is “boycotting” the Ministry of Mines and Energy by preventing the replacement of the state-owned company’s president and other members of the board of directors.

The representative also insinuated that his government intends to guarantee a change in the company’s pricing policy with the change in command.

“In exchange, we can put competent people inside [da Petrobras] in order to understand the social purpose of the company and not grant this adjustment, which destroys the Brazilian economy and leads to inflation for the entire population. It leads to a loss of purchasing power for the entire population, which is already experiencing a very critical situation in terms of their purchasing power,” Bolsonaro said.

In May, the Ministry of Mines and Energy announced the resignation of Jos Mauro Ferreira Coelho from the presidency of the company and the appointment of Caio Mário Paes de Andrade, current Secretary of Debureaucratization of the Ministry of Economy, to the post.

But the exchange collided with the legal procedures defined for the replacement and, even if the name of Paes de Andrade is approved internally, he should not take over the command of the state-owned company before the end of July, according to the scheduled schedule.

However, as happened with the resignations of Roberto Castello Branco, in February 2021, and Joaquim Silva e Luna, in March of this year, economists consulted by BBC News Brasil assess that Ferreira Coelho’s departure should not result in a significant change in the company directions.

This is because, according to specialists, a change in Petrobras’ pricing policy to prevent the increase in the value of fuels in Brazil would be risky and extremely costly for the company’s president in legal terms.

“In the event of the replacement of Petrobras’ president, the new nominee may even adopt a pricing policy different from the current one, but will be subject to legal challenges for failing to meet the interests of shareholders to the detriment of meeting political issues”, says Rafael Schiozer, professor at FGV-EAESP.

“We have seen that President Bolsonaro has tried to use a similar strategy on two occasions in the past, by putting Roberto Castello Branco and [posteriormente] General Joaquim Silva was in charge, but it didn’t work out.”

“The president of the Republic runs a great risk of making a new change and, when the CEO is in fact in power, refusing to make any major changes for fear of hurting the interests of shareholders”, adds Schiozer.

Gasoline pump
Petrobras announced new hikes in gasoline and diesel prices (photo: AFP)

Petrobras has adopted the so-called import parity price (PPI) since 2016, which links the value of oil derivatives to the behavior of product prices in dollars on the international market.

President Bolsonaro recently raised the tone of criticism of this policy and this Friday said that “Petrobras could plunge Brazil into chaos” with the readjustments in fuels.

But Petrobras’ board members may be legally questioned by minority shareholders about changes in pricing policy that harm the state-owned company’s accounts. They are protected by two laws that govern this topic: the Lei das SAs (Corporations Law), of 1976, and the Law of Responsibility of State-Owned Companies, of 2016.

The laws determine that state-owned companies are operated in accordance with governance criteria and establish a series of obligations to shareholders, distribution of dividends and minority shareholders.

The State-Owned Companies Law also prohibits the participation of members of the government or political parties in the council. And it requires experience in companies in the same area of ​​activity or similar size, such as teaching in the company’s area of ​​activity or in a position of trust in public administration.

The Petrobras statute determines compensation by the Federal Government if the state-owned company is urged to fulfill its public interest and there are differences “between the defined market conditions and the operating result or economic return of the obligation assumed”.

“It is known that the extension of internal governance instruments to assign responsibility is very well done. And what follows from the fact that anyone who tries to ‘find a way’ to circumvent the laws will certainly be prosecuted outside the company”, says the chief economist of the bank Fator, Jos Francisco de Lima Gonalves.

After a price control policy at the state-owned company under the management of former president Dilma Rousseff (PT), former members of Petrobras’ Board of Directors were judged by the Securities and Exchange Commission (CVM).

The accusation understood that there had been a failure in the directors’ duty of loyalty, for having misled investors by delaying decisions on changes in the pricing of products.

Among the accused were also former Minister of Finance Guido Mantega, former Minister of Planning and former president of Caixa Miriam Belchior and former president of BNDES Luciano Coutinho. But the trial ended in 2021 with the acquittal of those investigated.

“Today, Petrobras executives could suffer worse consequences if a clear policy of not passing on prices was adopted”, says Rafael Schiozer.

For Sergio Vale, chief economist at MB Associados, actions that challenge the state-owned company’s governance structure can also have negative impacts on the market.

“Trying to interfere with the State-Owned Companies Law or change the legal structure of the State’s relationship with Petrobras would have negative repercussions on the market. After all, after some time the price had to be passed on to the population anyway and the company was harmed”, he says.

electoral climate

President Bolsonaro was not the only one who criticized the readjustment in fuel prices.

The president of the Chamber, Arthur Lira (Progressistas), said on Twitter that Ferreira Coelho should “immediately resign” from the presidency of the company.

Arthur Lira at a press conference
The Chamber’s president stated that Congress will debate the state-owned company’s pricing and profit distribution policy. (photo: Agência Brasil)

In an interview with GloboNews, the congressman also stated that Congress will debate the state-owned company’s pricing and profit distribution policy next week.

Asked about a possible change in Petrobras’ profit tax, Lira said that there is “every possibility” that the topic will be discussed.

Along the same lines, the Minister of the Civil House, Ciro Nogueira (Progressistas), called for “enough is enough” and said that the company “cannot abandon Brazilians in the biggest crisis of the last century”.

For analysts interviewed by BBC News Brasil, the speeches of Bolsonaro, Lira and Nogueira are part of a strategy to villainize Petrobras at a time of high fuel prices, reducing the impact of the current scenario on their electoral campaigns.

“This is an expected move given the current electoral scenario, in which the president appears in second place in the polls”, says Lima Gonalves.

“The president wants to show that he is doing what he can to keep fuel prices down,” says Rafael Schiozer.

“Right now, it seems to me to be an attempt to blame Petrobras for the rise, when in fact it is a question of a worldwide rise in the value of a barrel of oil and a depreciated exchange rate that reflects fiscal incompetence.”

‘Bad tug of war for the company’

For specialists, however, the statements of government officials and the uncertainty regarding Petrobras’ pricing policy are bad for the state’s health and for the Brazilian economy as a whole.

After the oil company announced the new fuel price increase, the company’s common shares (those with voting rights) dropped 7.25%, quoted at R$ 29.93, and preferred shares (without voting rights) dropped 6, 09%, at R$ 27.31.

Petrobras and Brazil flags
Petrobras links the value of oil derivatives to the behavior of product prices in dollars on the international market (photo: Getty Images)

“At this moment, investors are cautious because of the uncertainty and are selling the papers. This tug of war between the company’s executives and the controlling shareholder, in the person of the President of the Republic, is very bad for the company”, evaluates the FGV professor. -EAESP.

For economist Sergio Vale, the government’s attempt to contain prices via Petrobras puts more pressure on the exchange rate and could worsen not only the value of fuels, but other prices in the economy that are somehow related to imports.

“If the government continues to put pressure on Petrobras, trying to interfere in the company’s governance, the exchange rate will suffer even more and it will be necessary to revise the inflation projection upwards”, he evaluates.

– This text was originally published in

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About Yadunandan Singh

Born in 1992, Yadunandan approaches the world of video games thanks to two sacred monsters like Diablo and above all Sonic, strictly in the Sega Saturn version. Ranging between consoles and PCs, he is particularly fond of platform titles and RPGs, not disdaining all other genres and moving in the constant search for the perfect balance between narration and interactivity.

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