You are here
Incoming Petrobras CEO rules out privatisation
Rio de Janeiro
A UNIVERSITY of Chicago-trained economist who was named on Monday to head Brazil's Petrobras will not privatise the state-run company, but wants to push ahead with selling non-core assets and to focus on oil exploration and production.
Brazil's incoming far-right government announced Roberto Castello Branco as the next chief executive of Petroleo Brasileiro SA, amid a debate over how far to pursue asset sales at the indebted company, Latin America's largest by market capitalisation.
Mr Castello Branco's appointment is the latest in a string of market-friendly selections by President-elect Jair Bolsonaro, many of them influenced by his adviser and future economy minister, Paulo Guedes.
The appointments have raised hopes among investors that the former army captain, who takes office on Jan 1, 2019, will deliver significant reforms needed to improve Brazil's creaking public finances, including a pension overhaul.
Mr Castello Branco, who in the past has spoken in favour of privatising Petrobras, on Monday said that he had not been tasked with selling off the company but signalled his intention to cut costs, do away with some of the company's downstream operations and focus on its core business.
"The privatisation of the company is not in question. I do not have a mandate to think about it," he told the Folha de S Paulo newspaper, adding that he expected Brazil's Supreme Court to approve a path enabling the company to continue selling assets such as majority stakes in two blocks of refineries and in a gas pipeline company.
In an earlier interview with the O Estado de S Paulo newspaper, he said that BR Distribuidora, Petrobras' fuel distribution unit, was not a natural fit for the company and does not generate returns, sending its shares up almost 6 per cent as investors bet that the government may sell its 70 per cent stake in the unit.
Mr Castello Branco also said that he would consider all current asset sales, including that of liquid petroleum gas distribution company Liquigas. "Petrobras' competence is in oil exploration and production," he told the newspaper.
Mr Guedes has advocated a full privatisation of the company while military generals around Mr Bolsonaro oppose such an idea.
Underlining that tension, Mr Bolsonaro told reporters on Monday that certain units of Petrobras could be privatised, even though the company is deemed strategic for the nation.
Mr Castello Branco, a one-time post-doctoral fellow at the University of Chicago, will join other school alumni in the ranks of the incoming administration, including Mr Guedes and former finance minister Joaquim Levy, who has been tapped to lead Brazil's powerful state development bank, BNDES.
Chicago's economics department has long been known for orthodox economics, particularly in Latin America, and much of Brazil's business elite is enthused by the prospect of Chicago-linked appointees in top posts in public administration.
"We basically have the University of Chicago economics department taking over the Brazilian economy," said James Gulbrandsen, chief investment officer for Latin American investments at NCH Capital, welcoming Mr Castello Branco's appointment.
"He's been public in the past about advocating for less government intervention . . . all the way to privatising parts of Petrobras."
Mr Castello Branco, a member of Petrobras's board until 2016, has also held executive positions at Brazil's central bank and at iron ore miner Vale SA.
"We expect Petrobras' deleveraging process and divestment programme to continue under Castello Branco's tenure," Vincente Falanga and Oscar Camilo, analysts at Banco Bradesco BBI, wrote in a note to clients.
Petrobras, which is burdened by some US$88 billion of gross debt, has played a leading role in developing a bonanza of deep-water oil finds in recent decades.
Mr Castello Branco told Folha that the company would now double-down on that strategy, seeking to maximise potential of the so-called pre-salt deep-water area. REUTERS