Saturday, February 27, 2021

Brazilian stock market in free fall after Bolsonaro puts general to lead Petrobras – Bolsa


A decision by the Brazilian president is causing an intense flight of investors from Brazilian assets, putting the shares of Petróbras and other public companies in free fall.

Bolsonaro’s interventionism put the real down 2.2%, despite the central bank’s intervention. The iBovespa, the main index of the São Paulo Stock Exchange, sinks 5.14% to 111,339.3 points, thus returning to December 2020 levels.

Petrobrás, on the other hand, sinks 10.59% to 20.44 reais, and the securities of the Brazilian state oil company quoted on Wall Street (ADR) are falling even more, suffering a drop above 20%. The company had already closed on Friday with falls close to 10% on the Brazilian stock exchange, due to the expectation of changes in management.

The fall of the shares eliminated about 96 billion reais (17.5 billion dollars) from the market value of Petrobrás, a company that is a partner of Galp Energia in oil exploration in Brazil.

The decline in shares was exacerbated by the fact that several analysts – Bradesco BBI, BTG Pactual, Credit Suisse, JPMorgan, Nau Securities, Santander, Scotiabank and XP Investimentos – reduced the stock recommendation due to Bolsonaro’s decision.

A general leading an oil company

Brazilian President Jair Bolsonaro announced on Sunday an exchange in the presidency of state oil company Petrobras, putting General Joaquim Silva e Luna in office, at a time of controversy about the increase in fuel prices in the country.

“The Government decided to appoint Mr. Joaquim Silva e Luna to fulfill a new mission, as a board member and president of Petrobras, after the end of the cycle, over two years, of the current president, Mr. Roberto Castello Branco,” said Bolsonaro at social network Twitter, by sharing a statement from the Ministry of Mines and Energy.

On Thursday, the head of state had already said that “something was going to happen” at the largest company in the country, but without giving details.

In his usual video broadcast on the social network Facebook, on Thursday, the head of state criticized Petrobras’ management and successive increases in fuel prices.

“From March 1, there will be no more federal tax on diesel for two months. In the next two months, we will study a definitive way to eliminate this tax to help balance this excessive increase in Petrobras,” said Jair Bolsonaro , when announcing the exemption of taxes on diesel and gas for two months.

“There was an increase, in my opinion, here I am going to criticize, an increase outside the Petrobras curve. 10% in gasoline and 15% in diesel. It is the fourth adjustment of the year. The scolding always comes at me, only Petrobras has autonomy “, added the representative.

Two weeks ago, the truckers’ union, which supported the far-right leader in the presidential elections that Bolsonaro won in 2018, threatened to carry out a general strike against rising fuel prices.

Despite defending the company’s autonomy, Jair Bolspnaro’s latest statements were interpreted by investors as an attempt to interfere with the state-owned company, as well as its pricing policy.

However, for the replacement in the presidency of what is the largest company in Brazil to be carried out, the indication still needs the approval of the Petrobras Board of Directors, which will meet next Tuesday, but whose content of the meeting has not been revealed.

According to the Brazilian press, Joaquim Silva e Luna, general of the Army reserve, was the first military man to exercise the position of defense minister, in the government of ex-president Michel Temer.

In 2019, he assumed the presidency of the Brazilian part of the Itaipu hydroelectric power station, an experience taken into account when he was appointed to preside over one of the largest oil companies in the world.

The general has a postgraduate degree in Army Policy, Strategy and Senior Management from the Army Command and Staff School. He also holds a postgraduate degree, from the University of Brasília, in Projects and Systems Analysis.

Roberto Castello Branco’s appointment to lead Petrobras was made in 2018, during the transition from the Temer government to the Bolsonaro government.

Roberto Castello Branco, with a postdoctoral degree from the University of Chicago, is a former director of the Central Bank and Vale, one of the largest companies in the mining sector in the world. Between 2015 and 2016, during the government of ex-President Dilma Rousseff, he was also a member of Petrobras’ board of directors.

He was also a professor at the Center for Studies in Economic Growth and Development at Fundação Getúlio Vargas.





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