Petrobras political struggle knocks customer and investor confidence

Matthew Farmer 25 February 2021 (Last Updated February 25th, 2021 10:11)

A political change of leadership for South America’s largest oil company has scared customers and investors. Why would a new CEO be bad for Petrobras?

Petrobras political struggle knocks customer and investor confidence
Brazilian president Jair Bolsonaro has pressured the company to appoint a new CEO. Credit: Alan Santos/PR under CC BY 2.0 license.

Political interference in the leadership of Brazilian state-owned oil and gas company Petrobras has caused concern for the CEO, the company, and its clients.

On Friday 16 September, the company announced it had received a letter from the Brazilian Ministry of Mines and Energy to encourage it to replace its CEO before the upcoming annual general meeting. The company initially resisted, asserting that the company’s directors have a mandate to remain in place until 20 March.

Brazilian president Jair Bolsonaro has personally involved himself with replacing the board members. Last Friday, Bolsonaro named military leader and personal friend General Joaquim Silva e Luna as the new CEO. The 71-year-old general has no experience in oil and gas but currently runs hydroelectricity generator Itaipu Binacional.

However, Petrobras announced late on Tuesday that board members would hold an extraordinary general meeting, though did not announce a date. This announcement also stated that the meeting would replace a further seven board members appointed in 2020, before electing eight replacements.

The political interference has knocked investor confidence in the company. After the company announced it had received the letter, its share price rapidly fell.


In Brazil, Petrobras share prices finished the day 21% lower than where they started, according to the Wall Street Journal. This is the equivalent to a $13bn loss in market value.

Current Petrobras CEO Roberto Castello Branco came to office in 2019. That year, the company reported a profit of $10bn, notably different to the company’s $8.5bn loss in 2015. As such, investors have generally seen the change as bad, with brokerage XP advising investors sell shares.

Staff from the company told the Financial Times they saw the announcement as “a negative signal” because of its implications for the company’s governance and its pricing strategy.

Last Thursday, the day before Bolsonaro’s intervention, Petrobras announced it would raise the prices charged by its refineries. Gasoline would increase by 10%, with petrol prices increasing by approximately 15%. The company said this change was “essential to ensure the Brazilian market continues without a risk of shortages”.

As global fuel prices have recovered, Brazil’s have stayed relatively low, making importing fuel costly. Brazilian oil industry regulator ANP told Reuters that Petrobras had turned down fuel distributors’ orders.

This has led them to seek alternative suppliers in order to maintain diesel supplies in coming months. ANP said it sees “no risk of a shortage”, but commentators have said that the company needs to raise prices to maintain supply.