See what the government needs to change Petrobras’ pricing policy

Pressure for changes in Petrobras’ pricing policy has intensified in recent weeks, amid changes in the commands of the MME (Ministry of Mines and Energy) and the state-owned company itself, and there are already proposals under debate in the government.

Minority shareholders and financial market analysts believe, however, that the chances of change are small, due to restrictions imposed by the State-owned Companies Law and by the company’s statute, which prohibit loss-making investments and operations.

To be able to put into practice the desire to change this policy, therefore, the government will have to go through some stages, in which it must face resistance from minority shareholders and control bodies.

The first step is to complete the change in command of the company, since the current president, José Mauro Coelho, is against changes in pricing policy. Coelho was fired earlier this week, but his replacement, Caio Paes de Andrade, has not yet been endorsed by shareholders.

Approval of the name has to be done at a meeting, whose date has not yet been set. As a minimum period of 30 days is required between the convening and the holding of the meeting, Paes de Andrade will not take over the company until at least the end of June.

Owner of control of the state-owned company, the government has enough votes to endorse the appointment of the new president, but the process must be questioned by minority shareholders, for whom Paes de Andrade does not meet the experience requirements required by law for management positions in state-owned companies.

At meetings, the government approves the appointment of executives to the company’s board of directors. One of them will be the president, but his appointment depends on a majority on the board of directors.

At the meeting that will bear the name of Paes de Andrade, eight representatives of the council will be elected, who will be removed along with Coelho. Another three —two representatives of the minority and one of the workers— were elected by a separate vote and remain in office.

The three, representatives of minority shareholders Francisco Petros and Marcelo Mesquita de Siqueira Filho, and Rosângela Buzanelli, who represents workers, are critical of the government’s continued interference in the government’s command.

To gain greater support from the collegiate, the government must renew its list of nominees, ensuring representatives more aligned with Bolsonarism than the current framework, which still has oil and capital market specialists.

The State-Owned Companies Law itself, however, prohibits members of the government and political parties from the council. And it requires experience in companies in the same area of ​​activity or similar size, as a teacher in the company’s area of ​​activity or in a position of trust in the public administration.

After the formation of the board and the election of the new president of the company, a significant change in the price policy can still be stopped by the statute of the state-owned company, which prevents the sale of fuels at a loss.

If the controller requests that the company have losses, the text says, the strategy must be carried out in a transparent way, with public accounting and provision for reimbursement by the Union. The amendment to the bylaws also needs to be approved by the shareholders at a meeting.

The rules were created by the State-Owned Companies Law, approved under the Michel Temer government and adopted by government-controlled companies. The idea was precisely to shield these companies from political interference in their management.

Minorities and the oil sector are betting that the noise caused by any proposed change will be another obstacle to the process.

Before the change in the bylaws, price damming was done more directly by the controlling shareholder. President of Petrobras in the Dilma government, Graça Foster admitted in a statement to the Federal Public Ministry that the readjustments were defined by the then Minister of Finance, Guido Mantega.

“The increases, all of them, from my first day to my last day, were by the chairman of the board,” she said, referring to the minister, who presided over the collegiate. “He would call me and say ‘3 on diesel and 5 on gas’ and hang up.”

On the eve of the 2014 election, also amid the escalation of international prices, Petrobras’ management had several requests for readjustments denied by Mantega, even in the face of warnings about the impacts of the damming on the company’s indebtedness.

During Dilma’s first four terms, Petrobras had an accumulated profit of R$ 56.5 billion in values ​​at the time, but it operated with negative cash flow throughout the period, which means that it had to take on debt to honor its commitments.

The company’s debt increased four times between the end of 2010 and the end of 2014, already considering the inflation of the period.