Petrobras Price Move Damages Bolsonaro’s Pro-Business Stance

(Bloomberg, Simone Preissler Iglesias and Sabrina Valle, 12.Apr.2019) — A conversation lasting less than 20 minutes was enough to put the neo-liberal credentials of Brazil President Jair Bolsonaro’s government in question.

Bolsonaro and his Chief of Staff Onyx Lorenzoni suspended oil giant Petrobras’ diesel price increase late Thursday after that discussion and a phone call to Petrobras CEO Roberto Castello Branco, according to a government official with knowledge of the matter. Bolsonaro and Lorenzoni derided the price boost that had been announced hours earlier as untimely and extemporaneous. Diesel costs were behind a nationwide truckers strike in 2018.

Shares of Petroleo Brasileiro SA, as the company is formally known, plunged as much as 8.1 percent on Friday as the decision revived fears of government meddling. More so, the move put in doubt the trust that investors placed in Bolsonaro, who took power vowing to revive a sluggish economy by boosting public accounts and making it easier to do business. Bolsonaro’s decision comes as his top economic policy makers court some of the world’s leading business and government authorities at an event in Washington D.C.

“It was a retreat because the Bolsonaro government always announced it was liberal, that it wants market prices,” said Adriano Pires, director of infrastructure consultancy CBIE. “Intervention in Petrobras was one of the primary causes for the situation Brazil is living today.”

While visiting the northern city of Macapa on Friday, Bolsonaro told reporters that he will seek explanations from Petrobras executives on why they want to raise prices. “If they convince me, then that’s fine. If they don’t convince me, then we’ll give an adequate response.”

Petrobras’s management held a meeting with its board of directors today to explain the decision and present measures the company is taking to limit fuel price volatility while protecting profits. Management told the board the decision came from Bolsonaro, according to two people who asked not to be named because the information is not public. Castello Branco didn’t participate in the meeting even though he was expected to.

Petrobras’ press office declined to comment for this story.

2018 Strike

The trucker strike in 2018 caused monthly activity to plunge the most since at least 2003, effectively torpedoing the nascent recovery of Latin America’s largest economy. Factory operations halted, tens of millions of animals died for lack of food and grocery stores’ supply of some basic foodstuffs dwindled before the government caved into demands by agreeing to subsidize the cost of diesel.

The decision was made while Economy Minister Paulo Guedes, seen as a guarantor of neo-liberal policies, was in Washington. Brazil Vice President Hamilton Mourao said Friday he believes in Bolsonaro’s good sense and has “absolute certainty” the administration won’t pursue the same policy of intervening in fuel and energy prices as seen in prior governments.

“I’m judging this as an isolated incident, precisely because of the moment we’re living in,” Mourao said in an interview with radio station CBN. “I’ve seen some of data that’s come in about pressure from the truckers, so I believe that the president is looking for the best way, best solution to balance this problem.”

Putting an end to last year’s strike proved difficult because the industry is so fractured and multiple unions claimed to represent truckers who didn’t return to work after the government struck a deal. Brazil has 1.89 million trucks on the roads, of which 37 percent are owned and operated independently, according land transport regulator, ANTT.

— With assistance by David Biller

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