Petrobras will have a new boss next year

Just last week, information from Jair Bolsonaro’s transition team suggested Ivan Monteiro, the current Petrobras CEO, would keep his job in the future administration. That scenario is no more, as the office of Paulo Guedes, the future economic tsar, confirmed a new name to head Brazil’s state-run oil and gas company: Roberto Castello Branco, an economist with previous stints at mining company Vale and as director of the Central Bank.

The nomination is a win for Mr. Guedes, as military advisors wanted one of their own for the position. Also, it could indicate that he’ll have the future president’s ear heading into the inauguration. The “super minister” and the future Petrobras CEO go way back, being close since the 1980s, when Mr. Castello Branco was a professor in a business school founded by Mr. Guedes.

Mr. Castello Branco will be the third “Chicago Boy” in the upper echelon of the Bolsonaro administration, joining Mr. Guedes himself and Joaquim Levy, who will take over the National Development Bank (BNDES). The future Petrobras CEO has a post-doctorate degree from the University of Chicago – a cradle of neoliberal economists such as the late Milton Friedman. As far as we can tell, Mr. Castello Branco brings to the table a pro-market, privatization-friendly approach in line with what Mr. Guedes envisions.

roberto castello branco petrobras ceo

Roberto Castello Branco, the future Petrobras CEO

In an op-ed published on Folha de S.Paulo on June 2, amid the truckers’ strike that nearly paralyzed the entire country, the future Petrobras CEO defended the privatization of the company he will now take over. “One of the lessons we take from the [supply] crisis [caused by the truckers’ strike] is the urgent need to privatize not only Petrobras, but also other state-owned companies,” he wrote. “It is unacceptable to keep hundreds of billions of dollars allocated to state-owned companies for activities that could very well be performed by the private sector, while the state has no money to keep basic obligations such as healthcare, education, public safety.”

But the intentions regarding Petrobras were a sensitive spot during the presidential campaign. Mr. Guedes defends privatizing most of the government’s assets, including Petrobras. But that vision goes against the beliefs of the military advisors, who consider the oil and gas sector as “strategic” for Brazil. Mr. Bolsonaro himself said, prior to the election, that he would not privatize Petrobras.

Internal struggles

Mr. Castello Branco’s nomination for Petrobras CEO is not the only “defeat” for the Army top brass advising the president-elect. Last week, Mr. Bolsonaro confirmed the name of career diplomat Ernesto Araújo for the Ministry of Foreign Affairs. Mr. Araújo is a strong supporter of U.S. President Donald Trump and defends a policy of total alignment with the northern power. He was a name endorsed by one of Mr. Bolsonaro’s sons, congressman-elect Eduardo Bolsonaro, who himself has plans of becoming a sort of leader in the Latin American right-wing populist movement. The military, on the other hand, wanted a more diplomatic name for the job.

After all, Mr. Araújo has written very harsh words against China, Brazil’s number one trading partner, which monopolizes 25 percent of the country’s exports, and over 50 percent of commodity exports.

Petrobras, Brazil’s largest company

Created in 1953 by then-President Getulio Vargas, Petrobras has grown into one of the largest oil companies in the world and a source of pride for Brazilians. Most oppose its privatization, with 78 percent of voters being particularly against a foreign group taking over the country’s largest company.

Right now, the state-run oil and gas firm represents over BRL 48 billion in investments, produces roughly 2.8 million barrels of oil equivalent every day, and owns 9.7 billion barrels in proven reserves. Right now, it has more than 600,000 shareholders and 62,700 employees.

In recent years, however, Petrobras was at the center of Brazil’s biggest corruption scandal in history, unveiled by Operation Car Wash. The investigation uncovered a long-running scheme of kickbacks received by politicians supporting concessions or contracts favorable to construction firms, especially Odebrecht, and Petrobras. By August 2018, prosecutors had inked deals with companies and individuals targeted by the investigations to recover BRL 13.7 billion of money that had been siphoned away.

But the estimated corruption deficit is of at least BRL 20 billion for Petrobras alone. Not to mention other companies which were dilapidated by corruption.

MoneyNov 19, 2018

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BY The Brazilian Report

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