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SÃO PAULO – The financial future of Brazilian oil giant Petrobras was at stake on Tuesday as its board of directors met to decide whether to approve President Jair Bolsonaro’s controversial appointment of an army general to head the company in an apparent attempt to force the company to subsidize fuel prices. .

Mr. Bolsonaro’s appointment of General Joaquim Silva e Luna, who served alongside him under the Brazilian dictatorship of 1964-1985 and has no experience in the oil industry, shook the markets, wiping out billions of dollars in the market value of Petrobras and raising fears of government interference in the economy.

As the council meeting was due to end on Tuesday evening, people familiar with the deliberations said the 11 members could delay the decision to back the president’s decision or challenge him. A delay will only create more uncertainty, analysts said, leading to possible further losses for the company.

Petrobras shares climbed 8% on Tuesday, recovering some of the ground lost the day before, when they plunged about 20%, the second largest daily loss in market value since the early 1990s, according to Economatica, an analysis company based in São Paulo. . Brazil’s benchmark stock index, Bovespa, rose 2% on Tuesday afternoon and the real edged up against the dollar.

The right-wing president’s intervention in Petrobras was widely seen by investors as a pivotal moment in his two-year administration, a sign that he would put politics ahead of economics ahead of his 2022 reelection bid. Fuel prices would likely cost the state-owned company billions of dollars per year, crippling its finances and diminishing its ability to find and produce more oil.

“The government is moving away from plans to implement structural reforms aimed at cutting mandatory public spending and liberalizing the economy,” analysts at Capital Economics, the London-based consultancy, said. Political concerns are largely to blame for the underperformance of the Brazilian currency, the real, they said, adding that it was likely one of the few emerging market currencies to depreciate against the US dollar. over the next two years.

Mr Bolsonaro’s political enemies have jumped on the decision as a reversal of his promise to win the 2018 election as he would undertake a series of free market policies and revisions after nearly 14 years of governance under the Workers’ Party of the left has driven the Brazilian economy into crisis.

President Jair Bolsonaro has moved away from his 2018 election pledge to implement free trade policies.


evaristo sa / Agence France-Presse / Getty Images

“Once again, Bolsonaro went against the very things that helped him elect him,” said powerful São Paulo governor, former businessman João Doria. One of the non-governmental members of the Petrobras board, Marcelo Mesquita, accused the president in a local television interview of “flirting with communism”.

Under the rival left-wing Labor Party, Petrobras was used as a vehicle for government intervention in the economy. Between 2011 and 2016, the company spent around $ 30 billion to fund gasoline and diesel subsidies to help keep fuel prices low and fight inflation. He also lost billions of dollars to corruption in a scandal that trapped business executives and politicians, investigators said.

Mr Bolsonaro, a former right-wing army captain who said he knew nothing about economics, has chosen Paulo Guedes, an economist trained at the University of Chicago, as minister of the economy. He also appointed former Chicago student Roberto Castello Branco as head of Petrobras, promising him the freedom to set fuel prices according to the international oil market. Mr Castello Branco’s term ends on March 20, but the board was largely due to renew it, analysts said.

Some investors believe the Petrobras upheaval may just be the start of an interventionist era for Mr. Bolsonaro’s administration. Shares of Brazil’s largest electricity companies fell on Monday after Mr Bolsonaro told supporters over the weekend that he planned to “put his finger” in that sector as well.

Others came to Mr. Bolsonaro’s defense. Arthur Lira, the new head of Brazil’s lower congress and an ally of the president, said the steep losses on the company’s shares were nothing more than a “hysterical bubble”. He said Congress “has all the tools to keep Brazil on track”.

Mr Bolsonaro’s decision also placed emphasis on Mr Guedes’ future. The former banker is unlikely to resign soon, a top Brazilian banker has said. “It’s like someone in a bad marriage who stays anyway,” the person said. “He likes to be a minister.

But as the pandemic ravaged Brazil, killing a quarter of a million people and sparking calls for Mr Bolsonaro’s impeachment, the president returned to the corporatism that marked his 27 years as members of Congress, protecting the interests of its political base, analysts said.

The crisis in Petrobras began when the company announced last Thursday that it would increase the price of gasoline by almost 10% and the price of diesel by almost 15%. Mr Bolsonaro reacted angrily, warning that “something should change”. Truckers also threatened to strike this month and cripple Brazil, a country larger than the contiguous United States with few rail networks and heavily dependent on road transport.

In 2018, truckers complaining about the high price of diesel fuel went on strike for 10 days, halting the flow of goods across the country, criticizing the economy and leading to the resignation of Petrobras general manager Pedro Parente.

“Bolsonaro plays with the crowd,” said Adriano Pires, oil industry consultant in Rio de Janeiro. However, he said, Petrobras recently introduced internal rules on the extent to which the company’s prices could diverge from the international market, limiting the extent to which Mr Bolsonaro could interfere in the company.

Petrobras assesses CEO change as Brazilian president ramps up the pressure

Since taking office, President Bolsonaro has relied more and more on former members of the armed forces, such as General Joaquim Silva e Luna, his candidate for the head of Petrobras.


evaristo sa / Agence France-Presse / Getty Images

The appointment of figures such as Mr Castello Branco and Mr Guedes had appeased investors worried about Mr Bolsonaro’s erratic years in Congress.

Over the past year, the President has increased government spending and filled his administration with comrades in the military, appointing them to key positions such as Minister of Health. And his means to spend for free – he has spent up to $ 10 billion a month to help the poor cope with the pandemic – has led to increased public debt.

This effectively sidelined the small government, free market crusade that Mr. Guedes had promised. Neither Mr. Guedes nor Mr. Bolsonaro’s office responded to calls for comment.

Speaking to crowds of supporters last weekend, Mr Bolsonaro called Petrobras management “cowardly” over recent fuel price hikes and accused the company of targeting investors and failing to have “no commitment to Brazil”. The president denied interfering with the business, saying he instead demanded greater predictability and transparency.

The appointment on Friday came as a shock to investors and to many within the company. Mr Castello Branco had gained market confidence after overseeing an ambitious plan to reduce the company’s debt by selling non-core assets and increasing production from the company’s offshore oil fields.

The company’s net debt fell to $ 66.2 billion at the end of the third quarter of last year, from $ 95.5 billion at the end of the first quarter of 2019, Mr. Castello’s first quarter. Branco in office.

“The work he’s been doing since his inception has been very good, and we consider this interruption to be very bad, especially the way it was done,” said Lan Arbetman, analyst at Brazilian firm Ativa Investimentos.

Despite pressure from the president to step down, Castello Branco intends to stay in office until the official end of his term in March, according to a person familiar with his thinking.

Mr. Silva e Luna briefly served as Minister of Defense in 2018 and is currently Brazilian Managing Director of Itaipu Binacional, the Brazilian-Paraguayan agency that operates the Itaipu hydroelectric dam straddling the two countries.

Since taking office in 2019, Mr Bolsonaro has increasingly relied on former members of the armed forces, especially those who – like Mr Silva e Luna – trained at his alma mater, the academy Black Needles military in Rio de Janeiro.

After sacking his Prime Minister of Health, Luiz Henrique Mandetta, last year to have his replacement step down after several weeks, Mr Bolsonaro appointed Eduardo Pazuello, another Black Needles army general, to the post for manage the country’s response to the pandemic. Many public health experts have accused the president of downplaying the virus and not getting enough vaccines for the country of more than 210 million people.

Write to Samantha Pearson at and Luciana Magalhaes at

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