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Petrobras, Lula's statist turn for the oil giant: more power to the government and unions

The new course of the Brazilian oil giant desired by the socialist leader continues: fewer dividends, less market and primacy of politics with priority to the green transition. But a quarter of the capital is in the hands of foreign investors who are now speculating on the stock and the dollar-real exchange rate

Petrobras, Lula's statist turn for the oil giant: more power to the government and unions

That the new course of Petrobras, a Brazilian oil giant with a turnover of the equivalent of 100 billion euros with around 25 billion in profits, would worry the private investors was nothing new, but now the makeover wanted by President Lula takes shape more and more with the strengthening of the presence of government and trade unions in the company controlled by the State with 28,67% of the capital and 50,26% of the ordinary shares, but still listed on the stock exchange, both in Sao Paulo and in New York, with the foreign investors who own 25,7% of the share capital.

The start of the "re-nationalization" process

The giant with 40.000 employees had begun its journey “re-nationalization” and of less propensity to the market already last year, when the president elected for the third term had led a decisive battle to review the dividend policy, historically very generous to the point that Petrobras was for years the company that bestowed it the most in the world. Earlier this year the clash continued over theextra coupon, which led to the dismissal of CEO Jean-Paul Prates, appointed by Lula himself and replaced in May by engineer Magda Chambriard, a technical and pro-government profile.

The new appointments wanted by Lula

Eventually the extraordinary dividend passed, also because it brought the equivalent of 3 billion euros to the state coffers, the main shareholder, but with the new CEO came also three new general managers and a total of 17 executive positions were changed, inserting a member of the Partido dos Trabalhadores, Lula's own party.

For this reason there is no shortage of controversy, also because as the local press points out, for example, the new financial director, Fernando Melgarejo, comes from Banco do Brasil and does not know English. The company justified itself in a note by claiming that “the new appointments they are part of a normal process of turnover of people." Three of the new appointments were instead reserved for the FUP (Federação Única dos Petroleiros), i.e. the oil workers' union, with the clear intention of bringing Petrobras more and more "to contribute to the economic and social development of the country". Moreover, Lula himself had made clear, even with harsh words, the paradigm shift: "The market is a voracious dinosaur that wants everything for itself", the Brazilian president wrote in X last March, causing the collapse of the Petrobras stock on the stock exchange. A stock which at the beginning of the year had well exceeded 40 reais per share and which today, after the minimum reached in June, is trading at 38 reais.

Lula's recipe: fewer dividends, more investments

In short, the Lula recipe wants fewer dividends, more investments in energy transition and in general a company closer to political projects than to market needs. For example, the recent announcement of the Maxi investment by Petrobras from 60 billion reais (a dozen billion euros) in new projects to diversify production and make it more sustainable and create jobs: part of that money will go on bio-fertilizers, generating up to 27.000 new jobs, while several billion will be placed in the Getulio Vargas refinery, fundamental for the production of petroleum derivatives and especially biofuels.

The financial community does not approve

Petrobras' new course is therefore based on primacy of politics, however the financial community does not stand idly by: first there was a run away, run away, partially returned, by Title of the oil on the stock exchange, then more recently the market - according to an interpretation of the Brazilian press - wanted in some way to rebuke Lula by starting a game of speculation to weaken the brazilian currency, the real, with the dollar reaching its highest levels since 2021 in recent weeks.

There is also no shortage of contradictions within the government itself, which first pushes for a green transition and then endorses, for example, the very dangerous extraction of crude oil from the mouth of the Amazon, which could potentially trigger an environmental disaster. Meanwhile, another trouble is coming for Lula: the Court of Auditors Brazilian government could investigate the president for alleged illegal favoritism of municipalities administered by government allies ahead of the October administrative elections. For the electoral campaign, the government would have allocated more funds to the Municipalities governed by its allies, not respecting the technical criteria.

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