Page 5 - LatAmOil Week 19 2022
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LatAmOil                                     COMMENTARY                                            LatAmOil


                         At the same time, though, Bolsonaro has con-  narrowed by four percentage points to 14%.
                         tinued to appoint candidates to the CEO posi-  However, there is likely to be plenty of frus-
                         tion who are at least nominally committed to   tration with Petrobras among Brazilian voters in
                         the principle of Petrobras’ independence from   the run-up to the presidential election in Octo-
                         state control.                       ber. Just a few days after Bolsonaro criticised its
                           And in practice, once these candidates have   record-high profits, the NOC announced an
                         taken office, they have proved to be actually   8.87% increase in refinery-gate prices for diesel.
                         committed to letting Petrobras continue to set   As a result of this move, diesel prices have now
                         its own rates rather than giving the government   gone up by 47% since the beginning of the year.
                         any control over pricing. (There has been occa-  This is not wholly unreasonable, in light of
                         sional talk of using the company’s dividends to   what global crude oil markets have been doing,
                         relieve the burden of rising fuel prices, but so far   but it has led Brazilian truck drivers to threaten
                         the talk has borne no fruit.)        strikes and road blockades on May 21. The threat
                                                              is likely to worry both Brazilian voters and Bol-
                         Contradictory approach               sonaro, given that memories of a similar strike
                         This pattern of appointing CEO candidates who   that ended up paralysing the country’s economy
                         uphold Petrobras’ independence from the state   for weeks in 2018 are still vivid.
                         while pushing the company to uphold the gov-
                         ernment’s policy priorities may sound contra-  The privatisation option
                         dictory, but it does have some benefits for the   But will that worry be enough to lead the pres-
                         president.                           ident to abandon his policy of having his cake
                           One possible upside is the benefit of con-  and eating it too – that is, of pushing Petrobras
                         sistency with Bolsonaro’s earlier statements in   to implement the government’s policy priorities
                         favour of free-market economics. This is likely   while filling its leadership ranks with people
                         to prove ultimately hollow, though, in light of the   who intend to uphold its independence from
                         fact that the president seems now to be leaning   the state?
                         more in the direction of right-wing populism   Probably not. Instead, it may be bringing the
                         than right-wing capitalism.          government back to the idea of privatising the
                           Far more important is the fact that Petrobras   company.
                         is Brazil’s largest corporate taxpayer. In other   At his first press briefing, Adolfo Sachsida,   Brazilian voters
                         words, it is in the government’s best interest to   Albuquerque’s replacement as the Mines and
                         give the company room to stay profitable so that   Energy Ministry, said he wanted the govern-  will probably
                         it can make large contributions to the budget.  ment to consider the option of selling Petrobras,
                           Meawhile, Petrobras also makes a useful   as well as Pre-Sal Petroleo SA (PPSA), which   be hearing a
                         whipping boy when its profits are high and   manages Brazil’s lucrative offshore pre-salt oil
                         officials in Brasilia need an excuse to complain   and gas fields. “I request the beginning of the  great deal about
                         that the NOC is paying dividends to sharehold-  studies pending the proposal of the legislative   Petrobras from
                         ers or investing in exploration and production   changes necessary for the Petrobras’ privatisa-
                         rather than channeling profits into social pro-  tion,” he was quoted as saying by Reuters. He   Bolsonaro in the
                         grammes. Indeed, Bolsonaro indulged in a bit   also said he hoped to submit a request to that
                         of this on May 5, when he lambasted his Mines   effect to the president in the near future.  near term
                         and Energy Minister Bento Albuquerque and   Sachsida characterised privatisation as a
                         Petrobras’ newly appointed CEO Jose Mauro   means of getting consumers out from under
                         Coelho during a speech broadcast on his social   the company’s control, saying: “We are going to
                         media channels.                      liberate the Brazilian people from monopolies.”
                           “Minister Albuquerque and Jose Mauro,   This is not the first time the Bolsonaro
                         from Petrobras, you cannot increase diesel   administration has considered a sell-off; the
                         prices. I am not appealing, I am making a state-  president was reported to be looking into this
                         ment taking into account the abusive profit   option in 2019.
                         you guys have,” he said, referencing Petrobras’   However, he appears to view a sale as more of
                         announcement in the first week of May that it   a means of ridding the government of a problem
                         had earned a record-high net profit of $8.9bn   – or washing his own hands of the company’s
                         in the first quarter of 2022. “You cannot break   unpopular pricing decisions. (“Every bad thing
                         Brazil. It is an appeal now: Petrobras, do not   that comes from Petrobras is my fault,” he com-
                         break Brazil. Do not rise prices. I cannot inter-  plained in November 2021.)
                         vene. You made a profit, you have ‘fat’ and you   It seems unlikely that there will be much
                         have the social role of Petrobras as defined in the   real movement on this front in the run-up to
                         constitution.”                       the election. Five months is not enough time
                                                              for Brazil’s government to do much more than
                         Major election issue                 decide to study privatisation. Nevertheless, Bra-
                         It remains to be seen whether such thunder-  zilian voters – and investors in Brazil’s energy
                         ing denunciations will help Bolsonaro gain the   sector – will probably be hearing a great deal
                         support he needs to win re-election later this   from Bolsonaro about Petrobras in the near
                         year. Earlier this week, the MDA polling agency   term. Indeed, the president may end up sparring
                         said a survey commissioned by the transpor-  with Lula over the question of whether privatisa-
                         tation group CNT showed that Lula’s lead over   tion or tighter state control is the best way to help
                         the incumbent president in opinion polls had   consumers beset by rising fuel prices. ™



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