Shares of the Brazilian oil giant melted on the Sao Paulo Stock Exchange as markets reacted negatively to the appointment of a general to head the company, seen as a sign of the Bolsonaro government’s interference in the economy.
The ordinary shares of the oil giant Petróleo Brasileiro SA, better known as Petrobras, lost 20.48% at the close on February 21 and the preferentials 21.51%, while the Ibovespa index (the Brazilian CAC 40) lost 4 , 87% and that the real lost 1.26% against the dollar.
At the last listing of the previous weekend, shares of Petrobras had already fallen by more than 7% following statements by Brazilian President Jair Bolsonaro who had mentioned “changes” to come at Petrobras. The loss of market capitalization reached more than 100 billion reais (15 billion euros) during these two sessions, including 72 billion in the single day of the 21st.
The reason for this plunge: the announcement at the end of the week of the non-renewal of the president of Petrobras, Roberto Castello Branco, to whom Jair Bolsonaro accuses four successive increases in fuel prices in less than two months (+ 35% since the beginning of the year). In his place, he appointed a reserve general, Joaquim Silva e Luna, ex-defense minister, whose name has yet to be approved by the group’s board of directors on Tuesday.
“Authoritarian impulse”, “military intervention”: criticism has burst forth in the editorials of the main Brazilian newspapers, while many analysts fear that this untimely change at the head of the oil giant will seriously damage Brazil’s credibility with foreign investors .
The president, meanwhile, reacted to the plunge in the share price of the largest public company in the country, by stigmatizing the business community. “This shows that some people linked to the financial markets are very satisfied with a policy of Petrobras which had only one goal: to serve the interests of certain groups in Brazil”, he declared on February 22 in front of partisans leaving his official residence in the Palace of Dawn (Palácio da Alvorada).
“Is the oil ours or a small group of Brazilians?”
“Is the oil ours or a small group of Brazilians?” He asked. These remarks make the circles of Brazilian investors fear a 180 degree turn compared to the campaign promises of President Bolsonaro, who had appointed the ultra-liberal Paulo Guedes to the Ministry of the Economy.
“With the change at the head of Petrobras, the government has clearly shown interference because Bolsonaro is against the systematic increase in fuel prices,” Alex Agostini, of the rating agency, told AFP. Brazilian origin Austin Rating. The consultant also believes that Jair Bolsonaro, whose popularity has fallen, has in mind the next presidential election to be held in 2022.
The head of state however defended himself from any interference in the setting of fuel prices. “Have you seen the prices drop? Where is the interference? All I demand from Petrobras is transparency and predictability ”. He had also publicly criticized the president of Petrobras for having run the company by telecommuting for the past 11 months in the name of measures to combat the spread of the coronavirus.
Jair Bolsonaro’s appointment of the new chairman of Petrobras was qualified in an editorial, published in Folha de S. Paulo, of “demagogic reaction to these price increases which embarrass its trucker allies”, in reference to the threat of a strike by truck drivers, who had paralyzed the country in 2018.
Petrobras was founded in 1953 as a state monopoly before widely opening up its capital to private investors. It is now a publicly listed company in São Paulo and New York, in which the Brazilian government owns 36.8% of the shares and 50.5% of the voting rights. The Brazilian oil giant remains very heavily in debt, even if it has increased its commitments from 126 billion dollars in 2015 to 57 currently, at the cost of a policy of asset disposals, in particular refinery facilities.