Petrobras agitation anticipates Brazil election battle

(Bloomberg) — A chaotic battle for leadership at Petrobras, Latin America’s largest oil producer, is setting the stage for Brazil’s contentious presidential campaign and highlighting the complex tensions between the company’s profit-seeking and its role in as a tool of populist politics.

Since the weekend, President Jair Bolsonaro’s choices for CEO and president have been abruptly withdrawn in a public relations fiasco. The fact that Bolsonaro changes direction so late in his term underlines the political importance of Petrobras at a time when voters blame it for high prices at gas stations, made worse by the Russian invasion of Ukraine.

The election has called into question Petrobras’ business model of market-based prices and cost controls that has delivered record profits. Bolsonaro, a social conservative who was elected with the support of the business community, has gone back and forth between calls for price intervention and outright privatization, signaling an uncertain future. Former President Luiz Inacio Lula da Silva, the main contender ahead of the October elections, says he will eliminate market-based prices and turn Petrobras back into a job creator and engine of national development.

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“The volatility in Petrobras’ leadership foreshadows the volatility Brazil will see during the presidential campaign and beyond,” said Schreiner Parker, Latin America director at consultancy Rystad Energy. “The idea of ​​a long-term experienced executive at the helm of Petrobras, rather than a political ally, seems distant in a Lula or Bolsonaro presidency.”

Petrobras has risen 15% this year, trailing other oil majors due to concerns about political interference in fuel prices.

Looking for CEO

Bolsonaro is having trouble finding an executive director after economist Adriano Pires stepped down. Pires initially agreed, but later said he couldn’t get out of his consulting business fast enough. There was also speculation about conflicts of interest related to years of consulting for private oil and gas companies.

One of the candidates is a secretary of the Economy Ministry, Caio Paes de Andrade, said two people with knowledge of the matter who requested anonymity because the discussion is not public.

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They indicated that Andrade was recommended by the Minister of Economy, Paulo Guedes. Brazil’s economic czar has been trying to stay away from the Petrobras turmoil, but his candidate is seen as a good solution because he would not face any conflict of interest and Bolsonaro likes him, the people said. Andrade came to the Government in 2019 after years in the private sector in areas such as information technology and real estate.

‘National Battle’

Whoever takes over Petrobras will face a litmus test in the election campaign. Lula has been criticizing Bolsonaro over high fuel prices, and oil policy is becoming the most populist part of an otherwise relatively moderate campaign.

“Petrobras needs to become a national battle,” Lula said last week at an oil union event, where he was joined by a former Petrobras chief executive and exploration chief. “The trucker who can no longer fill his tank needs to know this fight is for him.”

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