Gasoline price discussion is bullshit, says ex-Petrobras chief

Former Petrobras president Roberto Castello Branco said this Friday (25) that Brazil is wasting time debating fuel prices instead of focusing on approving reforms that allow economic growth.

The first head of the state-owned company during the Jair Bolsonaro (PL) government, Castello Branco was fired in February 2021 amid a political crisis generated by the escalation of domestic prices in transfer to the recovery of oil after the beginning of the pandemic.

In a virtual debate promoted by the Millennium Institute, he defended that fuel prices follow international quotations and said that the risk of intervention alienates investors in refineries in Brazil.

“Wasting time with discussions about fuel prices is nonsense,” said the economist, who was appointed to the state-owned company by the Minister of Economy, Paulo Guedes, and today occupies a vacancy on Vale’s board of directors.

“The solution, instead of just talking about fuel prices, is economic growth, fighting poverty, investing in reforms to generate productivity, because productivity gains generate employment, promote inclusion.”

Castello Branco criticized proposals for “Brazilianization” of prices, made by the opposition to the government, saying that oil and fuels are international commodities and, therefore, their prices are quoted in dollars.

The granting of subsidies as part of the government, he says, would represent incorrect allocation of the National Treasury’s money and gives signals to the consumer that he can continue consuming scarce resources instead of saving or looking for alternatives.

“The National Treasury is not swimming in cash. Brazil needs to pursue fiscal balance and, in terms of resource allocation, [subsídio] It’s not a better destination”, he said. “How about investing massively in children, from maternity, when they are developing their cognitive capacity, having good public schools, having good public hospitals?”

Castello Branco defended that the debate on price interventions has been harming the process of selling state-owned refineries, which has just won a longer term from Cade (Administrative Council for Economic Defense) due to lack of progress.

“What drives buyers and investors away from refineries in Brazil is this talk of inventing things for fuel prices, of intervening in the market. This scares the investor away, the private investor does not want to invest billions of dollars to lose money.”

So far, Petrobras has managed to transfer the operation of only one refinery to the private sector, the Mataripe Refinery, in Bahia, the second largest in the country, operated by the Arab Mubadala fund.

The company has been following more closely international oil prices and before Petrobras passed on the spike after the start of the war in Ukraine. Therefore, it is the target of criticism from the opposition and consumers.

For the former president of Petrobras, the strategy of holding transfers of highs in the international market gives Petrobras an almost monopolistic role, as fuel importers that would compete for the Brazilian market cease to act.

Currently, he says, only 42% of the volume of fuel used by light vehicles in Brazil is produced in Petrobras refineries. Another 5% comes from natural gas, a market in which the state-owned company is also dominant, and the rest is ethanol.

An advocate of privatization of Petrobras, Castello Branco once again criticized the high costs of refineries designed during the PT governments — the PT’s pre-candidate for the presidency, Luiz Inácio Lula da Silva, has been advocating that the state-owned company return to invest in the segment.

“Brazil invested money in refineries, but it was money thrown away,” he said, citing the Abreu e Lima Refinery in Pernambuco as an example. “It is the most expensive refinery in the world. It cost US$ 190,000 for each barrel processed. The most efficient refineries cost between US$ 20,000 and US$ 25,000”.

Castello Branco says that the main problem to be tackled in Brazil is poverty and not fuel prices. “We saw during the pandemic, with the so-called invisible ones, how poor Brazilian society is,” he said.

“Only half of the workers have a formal contract, the rest are informal; 25% of our young people aged between 14 and 29 do not study or work. It is a very serious problem not only in the short term but also in the medium term. We have to take care of it.”