Petrobras pushes back on management overhaul

Brazil's state-controlled Petrobras is pushing back on President Jair Bolsonaro's move to replace the company's chief executive with a political appointee.

The company's board of directors met today to consider Bolsonaro's controversial nomination of former army general Joaquim Silva e Luna to replace technocrat Roberto Castello Branco. After the meeting late this evening, Petrobras said it would convene an extraordinary shareholders' meeting ahead of a regular shareholders' meeting on 14 April to consider Bolsonaro's pick. If Castello Branco is removed, the entire eight-member board would need to be redefined in a subsequent vote, the board said. The initial two-year terms for Castello Branco and most other company executives -- including the chief financial officer -- expire on 20 March.

On the eve of the release of fourth quarter 2020 earnings tomorrow, the company's management appears to be trying to raise the costs of Bolsonaro's perceived interference in an effort to maintain its hard-fought autonomy.

In reference to Bolsonaro's signalling of intervention in the company's market-based fuel-pricing policies, the board said "it will continue to strictly monitor Petrobras' governance standards, including with regard to the company's product pricing policies."

In a separate sign of resistance today, a public prosecutor requested that the federal audit court (TCU) grant a temporary injunction halting all management changes pending an investigation into the facts surrounding the unexpected 19 February nomination of Silva e Luna.

The TCU, which governs matters of public administration, did not reply to the injunction petition. Brazil's maverick prosecutors are known for their far-reaching "Car Wash" corruption investigation into Petrobras and a pool of contractors that began around 2014.

Petrobras' stock nosedived yesterday on fears that Castello Branco's ouster would signal wider government meddling in the oil company, but the share price partially recovered today as politicians and analysts said the negative response was overblown.

In a speech today with pro-market economy minister Paulo Guedes in the audience, Bolsonaro dismissed accusations of meddling, asserting that the appointment of Silva e Luna would swap "a good manager for an excellent one."

The nomination was preceded by weeks of pressure from trucking unions demanding diesel price controls.

The crisis over the company's management risks delaying its plans to sell around 1.1mn b/d of domestic refining capacity, a key component of its $25bn-$35bn divestment portfolio.

By Nathan Walters