Reaction to fuel readjustments sparks alert among Petrobras shareholders

The strong reactions to increases in gasoline and diesel prices sparked a warning signal among minority shareholders of Petrobras. They fear an advance by the government and centrão parties on the state-owned company’s strategy and boards.

Representative of minority shareholders on the board of directors, lawyer Francisco Petros even sent a letter to the Ministries of Mines and Energy and the Civil House to try to open a space for negotiations.

In the text, he suggests freezing readjustments for 45 days in exchange for maintaining the company’s governance system, which was reinforced during the Michel Temer (MDB) government to improve the state-owned company’s shield against political interference.

Shortly after the readjustments, Petrobras’ management received harsh criticism from President Jair Bolsonaro (PL), who defended a CPI to investigate the company, and from the president of the Chamber of Deputies, Arthur Lira (PP-AL), who promised in an interview with Sheet that “goes to the dick” to “review everything in prices”.

Bolsonaro has been trying to change the command of the state-owned company since the end of May, when he appointed Caio Paes de Andrade to replace José Mauro Coelho as president of the company, but the process collides with governance rules.

Andrade can only take over after his name is evaluated at a shareholders’ meeting, which will only be convened after analyzing the CVs of ten names nominated by the government to renew the board.

After convening the meeting, it is necessary to respect a minimum period of 30 days for the meeting to be held. The government tries to force Coelho’s resignation to expedite the change in command, but has not yet succeeded.

Minorities fear the advance of Centrão parties over the direction of the company, which should be renewed with the arrival of Paes de Andrade. A representative of private investors says the battle is now not over prices, but over the board.

Lira’s PP and the Civil House Minister, Ciro Nogueira, had a strong influence over political indications in the state-owned company during the Lula government. The party is assigned the nomination of Paulo Roberto Costa, the first whistleblower of Operação Lava Jato, to the board that took care of the refining area at the time.

Nogueira was another one of Bolsonaro’s allies to speak out about the readjustment. Upon learning of the rejection of the board of directors to the appeal to hold readjustments, he said that Petrobras abandoned the Brazilians.

Bolsonaro defends that he wants to end Petrobras’ “black box”, but a change in pricing policy would depend on a revision of the state-owned company’s statute, which, in respect of the State-owned Companies Law, prevents loss-making operations to make public policy.

The text determines that, in these cases, the operations must be the subject of an agreement or contract and the losses must be reimbursed by the controlling shareholder. Reviewing the bylaws also depends on convening a shareholders’ meeting.

The fear of interference in the company’s governance gained strength with the recent changes in command and with the appointment of a list of new directors made up mostly of public office holders, including Nogueira’s number two in the Civil House, Jonathas Assunção.

The assessment is that Bolsonaro wants to have a more aligned council to force changes in the company’s management. There are, however, questions about the compatibility of some of the nominees with the rules established by the State-Owned Companies Law.

Paes de Andrade, for example, has no experience in the oil sector or in companies the size of Petrobras, as required by law. Asunción, in turn, holds a special position in the government, which is prohibited by law.