Friday, December 3

Joaquim Silva e Luna: Bolsonaro appoints a military man to the presidency of Petrobras and unleashes the fear of an intervention | International

The new president of Petrobras, General Joaquim Silva, in a file image.
The new president of Petrobras, General Joaquim Silva, in a file image.Marcelo Camargo / Agência Brasil

After several days of criticism of Petrobras for its fuel price policy, Brazilian President Jair Bolsonaro has announced that he will appoint General Joaquim Silva e Luna, former Defense Minister and current CEO of the Itaipú Binacional hydroelectric plant, as a substitute Roberto Castello Branco in the presidency of the state oil company. The decision to change the president of Petrobras, announced this Friday night, reinforces the military presence in key positions of the Brazilian administration and increases the fear of financial market agents that the president wants to intervene in the state company to contain the rise in the price of fuel and calm the truckers’ unions, strategic allies of the presidency that have threatened to go on strike for weeks.

Bolsonaro, who launched his presidential campaign promising to convert to the liberal precepts of nonintervention in state-owned companies, has been making contradictory statements about Petrobras. On Friday afternoon, the president reaffirmed in Pernambuco, a northeastern Brazilian state, that there will be changes in Petrobras, but that the government “will not interfere” in the oil company. “We will never interfere with this great company and its pricing policy, but you cannot surprise people with certain adjustments,” he said. On Thursday, the president went so far as to say that the statements by Castello Branco, who a few days ago had stated that the threat of a truckers’ strike was “not a problem” for Petrobras, “obviously” would have consequences.

Now all eyes are on the new Petrobras boss. Silva e Luna, 71, a former defense minister, has a doctorate in military science from the Army Command and General Staff School and is currently the general director of Itaipú Binacional. Petrobras’ board of directors has yet to approve his appointment, and technically has the power to veto it. However, the Government has a majority on the board of directors made up of 11 members.

Chosen by the Minister of Economy Paulo Guedes, Castello Branco was appointed to the presidency of Petrobras at the end of 2018 for a two-year term that ended on March 20 of this year. The meeting of the board of directors to deliberate, among other things, the re-election of the current president of the state company was scheduled for next Tuesday.

The reaction of analysts and financial market agents was immediate. “Petrobras enters a difficult position. It is not worth investing in the company until there is more clarity about what General Silva e Luna’s management would be like and to what extent the Government will continue to intervene, ”wrote Thiago de Aragão, from the political risk consultancy Arko Advice. “It is not an exaggeration to say that the president has taken a dangerous step off the agenda that holds him in power, opening room for speculation about his liberal convictions in fact,” said André Perfeito, chief economist at the Necton brokerage.

Tax reduction

Bolsonaro’s decision comes a day after the president, angered by the new increase in fuel prices – linked to the variation in international prices – criticized Petrobras in a live broadcast on his social networks. Bolsonaro announced that the federal gasoline tax will be reduced to zero for two months starting March 1. Fears of political interference at the state-owned company echoed in the financial market and sent Petrobras shares plummeting almost 8% this Friday.

For Joelson Sampaio, coordinator of the economics course at the Getulio Vargas Foundation, “the president’s speech has been understood by the market as something very negative.” “In the recent past, the great criticism that existed about state-owned companies was this political interference, but it improved after the change of some rules,” he says. For Sampaio, Bolsonaro’s statements bring up that feeling of interference and interference, as happened in the government of former President Dilma Rousseff, when Petrobras’ pricing policy did not fluctuate in accordance with international prices. “It is clearly a political nod to the category of truckers [grupo que ha apoyado al presidente], but that weighs heavily on the market ”, adds the economist.

The announcement of the reduction of the tax on diesel for 60 days is also on the radar of investors and was not frowned upon by market players. The measure will have a multimillion dollar impact on government accounts. The president did not give details on the estimated amount of the loss or how it will be offset in the public accounts, which have been in the red for more than six years.

Adjust “out of the curve”

Meanwhile, the international scene continues to put pressure on the state company. Last Thursday, Petrobras announced two new readjustments in the prices of gasoline and diesel, which will increase by 10.2% and 15.1%, respectively, as of Friday, February 19. It is the fourth readjustment for gasoline and the third for diesel in 2021. This year alone, the price of gasoline sold by Petrobras accumulates an increase of 34.7%. Diesel rose 27.7% in the same period.

Bolsonaro considered that Petrobras’ latest price adjustment was “out of the curve”, and is looking for a solution to satisfy the interests of truckers. “It is the fourth readjustment of the year. The fault is always mine, although Petrobras has autonomy, “he said last Thursday.

This was not the first time Bolsonaro has talked about changing fuel prices and reducing taxes on diesel. With no room for maneuver to meet the demands of the truckers, who came to call a strike earlier this month, the president went off on a tangent and announced a bill for the Tax on the Circulation of Goods and Services (ICMS) , a state tax on fuel is paid at refineries and not at gas stations (where the value is more expensive) or has a fixed value.

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