Lula da Silva’s policy towards Petrobras and Vale caused shares of Brazil’s two largest companies to fall.

Luiz Inacio Lula da Silva, President of Brazil (Reuters/Euseley Marcelino)

On the same day, March 8, the National Oil Company petrobras The stock exchange lost 55.3 billion reais, about $11.126 billion, more than 10% of its market value, while Brazil’s main mining company, OkAccording to the report, 48.3 billion riyals, 9.718 million dollars have been burned and about 21% of its value has been lost since the beginning of 2024. bloomberg,

This is how the market reacted to the recent decisions of the Lula government, which reached its tipping point this week, sparking controversy. The Board of Directors decided against the recommendation of Petrobras management Do not pay additional dividends To its shareholders. However, fifteen days earlier, the Chairman of Petrobras, Jean-Paul PratsHe announced this in an interview bloomberg The company’s dividend policy will be more prudent to encourage investment in renewable energy, but 50% of the extraordinary amount calculated last year will be distributed as dividend. The remaining half will be paid later. According to Brazilian press reports, the vote of the Minister of Mines and Energy was decisive for the change of course. alexandre silveira,

Instead of letting the matter rest, President Lula has added fuel to the fire In recent days by publicly attacking a market which he called “The gluttonous dinosaur who wants everything for himself and nothing for people, Then he also added that Petrobras “must not think about shareholders, but about 200 million Brazilians” “They own this company.” However, Those small shareholders would also have enjoyed these additional dividends. Who deposited their savings in one of Brazil’s leading companies. Moreover, it is actually minority shareholders who demanded that the Central Bank Securities Commission verify the unusual operations that caused Petrobras’s price fluctuations on February 28, the day after Prats’s interview. bloomberg, “A few hours before the publication of the interview, which caused the first decline in the state company’s shares on the stock market, millions of options were bought, as if someone was guessing what was going to happen,” the complaint document says.

,Companies, whether state-owned or not, do not answer to the government or the President. This is typical of dictatorshiphe commented Ricardo Rangel in weekly VejaAdding that “In democracies, where there are clear and concrete corporate laws, companies are accountable to their boards of directors, who in turn are accountable to shareholders., In a democracy, the market does not need the ‘help’ of the government. “This requires the government to set clear and fair rules, exercise proper supervision and not interfere.” However, it must be remembered that even during the tenure of former President jair bolsonaro, Petrobras faced government interventionism. In 2021, Bolsonaro fired the then president of the company, Roberto Castello BrancoFollowing the announcement of diesel price increase and threats of truck drivers’ strike.

A man walks past the Petrobas headquarters in Rio de Janeiro (Reuters/Sergio Moraes/File)

The decisions taken by Lula this week, following his firm strategy “more states“In the economy, he was Give the Economy Ministry one of the government’s six seats on the board of directors of Petrobras as the main shareholder, Nor did the visit to Venezuela of some oil executives, invited by the dictator, go unnoticed in a week full of controversy. Nicolas Maduro, The destination of the trip was Lake Maracaibo, the country’s oil hub. Petrobras tries to expand in Venezuela, but so far he has not made any agreement with Maduro. However, the newspaper Sao Paulo state In an editorial, he compared the current policy of the Lula government with respect to Petrobras to that of Hugo Chávez for the Venezuelan oil company PDVSA. Let’s be clear, this is what it’s about: An attempt to turn Petrobras into a tool in the service of massive Lulopatista demagoguery, as was done in Chavista Venezuela. This is what the dictatorship did to PDVSA in Venezuela, which was one of the largest oil companies in the world and which has been impoverished by the populism of Comrades Chávez and Maduro into a vast ruin, while today about 80% of Venezuelans live below the poverty line. ,” reads the editorial.

Lula’s government was interested in Modern Monetary Theory (MMT), which, so far without success, preaches greater state intervention in the economy, even if inflation increases, from the beginning of his mandate. . At that time his eyes were on economists like gabriel gallipoloThe current director of monetary policy of the Central Bank and the potential new chairperson of that entity. roberto campos neto His tenure ends next January. Although Gallipolo has since denied his closeness to this critical view of the economy, he was among the experts in a 2022 work by the Center for Political Economy of the Brazilian Center for International Relations, SEBRI, which precisely defended MMT-inspired policies. . coordinated by the center andre lara resendeAnother devotee of this view of the economy and member of the economic center of Lula’s transitional government in late 2022.

But From theory to practice the scenario is now becoming complexAs many economists say these days, who compare Lula’s third term with Lula’s second term Dilma RousseffOne in which the country experienced its worst economic recession since the return of democracy in 1985. for economist samuel pessoa, The government’s use of Petrobras today is very similar to that of the previous governments of the Workers’ Party, Lula’s PT. “Petrobras was used as an instrument of economic development policy. The main problem was the project error. To think that it is possible to support the development of a country through the actions of a large oil company and, with it, take advantage of a naval industry, a platform industry and a refining industry. We have seen the results. “The oil company became the most indebted in the world and went through a serious crisis,” Pessoa said in an interview. Sao Paulo state,

During Lula’s second term (2006–2010), Petrobras charged much higher prices than those applicable abroad at the expense of consumers in order to accumulate resources to support the controversial projects of the Growth Acceleration Program (PAC). Under the two governments of Dilma Rousseff (2010–2016), Petrobras avoided raising fuel prices to control inflation and incurred billions in losses by allowing the Central Bank to artificially lower the base interest rate. After being weakened by the PTI corruption scandal exposed by Lava Jato, Petrobras regained profits and prestige, achieving a net profit of 124.6 billion reais ($25.067 million) in 2023, up from only 188.3 billion reais ( 37.882 million). Dollar) registered in 2022.

Logo of Brazilian mining company Vale SA in Sao Gonçalo do Rio Abaixo, Brazil (Reuters/Washington Alves)

Brazil’s leading mining company Vale was also in Lula’s sights.Who made every possible effort to impose a new President of his choice, the former Economy Minister Guido Montega, During the government of Dilma Rousseff, Montague adopted several measures known as the “new economic metrics”, which included tax cuts, energy tariff cuts, and controls on fuel prices. It was intended to increase the productivity of industry, but these measures ultimately led to the economic disaster of 2014. In Vale, whose capital is 91.3% private, the Lula government is represented on the board of directors by the employees’ treasury privy. of Banco do Brazil, which holds 8.7% of the capital. Although Lula declared that Montega’s appointment was merely a matter of “gratitude” to the minister who had supported him in difficult times, people close to the company said. Sao Paulo state that this appointment was a way “Vale was more sensitive to government programs, On the other hand, Lula himself announced this in an interview. redetv He “Vale can’t even think of owning Brazil” And that “it should be in line with the development vision of the government.”

However, now dissenting voices are on the rise. on Tuesday, Jose Luciano Duarte PenidoAn independent member of Vale’s board of directors submitted his resignation in a public letter denouncing the “obvious and damaging political influence” in the company regarding the succession of the current chairman. Eduardo Bartolomeo, whose mandate, which should have expired in May, was extended at an extraordinary Council meeting in December. “My performance as an independent member of the Council has been completely ineffective, distasteful, and disappointing,” Penido said in the letter. Vale responded to the director’s allegations by saying that the board’s actions “strictly comply with the laws” in the process of defining the company’s chairman, as well as “the internal rules and policies of the company”.

However, this scenario This appears to be just the beginning of ever-increasing state intervention In the country’s economy. Civil House Minister Mohd. two days ago Rui Costa announced it Government will make further changes in the board of directors of other companies to provide oxygen to them, Many people, and not just economists, wonder who all this benefits. Foreign investors are scared. In the session of March 11, he withdrew 1,076 million reals, or about $216.5 million, from the stock market. The balance in March was negative at 5,658 million reais ($1,138 million) and as of January, at 23,008 million reais ($4,629 million).

In the opposite direction to this strategy of more state control in the economy, the Lula government has continued the wave of concessions to individuals of natural parks in the country that began under Bolsonaro. Grant of 28th January Jericoacoara National ParkOne of the postcards, from Ceará state in Brazil’s north-east, went up for auction and was awarded to a private consortium. Dunas Consortium, for the amount of 61 million reais, approximately $12 million. One of the group’s companies already manages other natural paradises in Brazil, such as Iguazu Falls Park and Fernando de Noronha Island Park. For the former Tourism Secretary of Ceará State, Arialdo Pinho, “Now that Jericoacoara Park is privatized, there will be hotels and all kinds of tourist attractions at any location within the park. This is a betrayal of the interests of tourism and the local population,” he said bluntly.

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