Shares in Brazilian state oil company Petrobras plummeted Monday after President Jair Bolsonaro changed the company’s chief executive, fueling fears he will try to block further energy price hikes as he eyes re-election.
The company’s ordinary and preferential shares both dived by more than 19 percent shortly after opening on the Sao Paulo stock exchange, which was pulled down around five percent overall in midday trading.
Bolsonaro on Friday appointed army reserve general Joaquim Silva e Luna as president of Petrobras, shortly after saying that “people can’t be surprised” by the firm’s price increases.
Under sacked CEO Roberto Castello Branco, Petrobras had increased fuel prices four times so far in 2021, a cumulative rise of nearly 35 percent.
The increases came as international oil prices recovered to pre-coronavirus pandemic levels, boosted by output cuts in oil-producing countries and optimism that vaccines against Covid-19 will spur a global economic recovery.
But they have triggered backlash in Brazil, notably among truck drivers, who vowed a crippling strike.
Free-market vs. big-spending Bolsonaro
Bolsonaro won election in 2018 with strong backing from the business sector, wooed by his choice of ultra-liberal Economy Minister Paulo Guedes and the promise of free-market reforms.
But the far-right leader looks increasingly inclined to ditch tight-belt, small-state policies for populist economics as he gears up his bid to win re-election in 2022.
“Is Brazil’s oil ours, or does it belong to a small group of people?” Bolsonaro rhetorically asked supporters outside the presidential palace in Brasilia Monday.
“There are some things that need to be explained (at Petrobras). I demand — not request, demand — transparency from all my subordinates. Petrobras is no different.”
He also criticized Castello Branco for working from home because of the pandemic.
“He’s been at home for 11 months without working. He’s working remotely. This is a time when the boss needs to be at the front,” said the president, an outspoken critic of social distancing policies against Covid-19.
Bolsonaro added that “no one is going to interfere in Petrobras’s pricing policy.”
But analysts and markets did not seem convinced.
“The government has clearly showed interference in Petrobras, because Bolsonaro is openly against the system of floating fuel prices,” said economist Alex Agostini of credit rating firm Austin Rating.
“It’s a clear signal he’s going to intervene on prices. And we know when that’s been done in the past under (former president) Dilma Rousseff (2011-2016), it led to very big losses for Petrobras,” he told AFP.
The Brazilian real fell more than 2.5 percent, crashing through the barrier of 5.5 to the dollar.
Shares in state electricity company Eletrobras were down eight percent amid fears Bolsonaro would also target rising electricity prices.
The president said Saturday he was also looking at “putting a finger” on electricity, amid ongoing discussions on privatizing Eletrobras.
The Petrobras board is due to meet Tuesday to confirm Silva e Luna’s appointment to replace Castello Branco, who had been picked by Guedes for the chief executive job.