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Petrobras CEO resigns as strikes take down market favourite

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Pedro Parente resigned as chief executive officer of Brazil's state-controlled oil company under pressure from President Michael Temer in the wake of a nationwide strike against high fuel prices.

[RIO DE JANEIRO] Pedro Parente resigned as chief executive officer of Brazil's state-controlled oil company under pressure from President Michael Temer in the wake of a nationwide strike against high fuel prices.

The resignation sent shares in Petroleos Brasileiros SA down as much as 22 per cent and caused the Brazilian currency to drop as much as one per cent against the US dollar as investors pondered the effect on Latin America's largest economy. Mr Temer is seeking a new Petrobras CEO who will be more focused on the nation's development and less on the market, said Beto Mansur, a lawmaker close to the president, in an interview.

In the meantime, Chief Financial Officer Ivan Monteiro was named by the board as interim CEO. Mr Parente's resignation highlights the erosion of support for market-friendly policies after two years of austerity under Mr Temer. It's also a setback for any pro-business candidate ahead of October's general elections.

"Any candidate linked to Temer and his policies will have to change their rhetoric to at least be competitive," said Andre Cesar, a political analyst at Hold legislative consulting.

"Pedro Parente was thrown to the dogs - it's a sign that any pressure group can get anything they want from this weak government."

Mr Parente is the highest-profile victim of an 11-day trucker strike that grounded flights, shuttered sugar mills and caused shortages of products from food to gasoline. His departure marks the downfall of an executive credited with turning around a state-controlled energy company shackled with debt, corruption and mismanagement.

"It is clear that my permanence at Petrobras ceased to be positive," Mr Parente said in his resignation letter to Mr Temer, who he met with Friday in Brasilia.

"In my time in public service, above everything, I have been committed to the public good. I'm not attached to any jobs or titles and I will not be an obstacle to the discussion of alternatives."

Mr Monteiro was the CFO of Banco do Brasil SA until 2015, when he joined Petrobras along with Banco do Brasil's then CEO, Almir Bendine. They were given the task of repairing the company's finances amid the corruption scandal known as Operation Carwash. Bendine was later charged with receiving bribes from a construction company, and is currently in jail.

As CFO, Mr Monteiro was able to resume regular financial statements after reaching an agreement with auditors, and he successfully extended the company's debt payment schedule. In December, he led the initial public offering of Petrobras Distribuidora SA, the country's biggest IPO since 2013.

Mr Parente, 65, took the Petrobras helm in May 2016, vowing to shift company strategy away from government interests and toward a business-oriented strategy. The trained engineer was also tasked with cleaning up the image of the company that was at the centre of the Brazil's biggest corruption probe in modern history, Operation Carwash.

"Independence from the government was one of the main tenets of Parente's programme. His resignation revives concerns that the government will force Petrobras to artificially lower domestic prices, raising risks for its balance sheet and turnaround," said Fernando Valle, a senior oil analyst at Bloomberg Intelligence.

ASSET SALES

Mr Parente had gained praise in financial markets for plans to sell assets to cut debt, reducing costs, recovering cash flow and implementing a new and profitable fuel price policy. Under Mr Parente's watch, Petrobras posted its best quarterly financial results in five years, and the company's stock price doubled.

It was that fuel policy, which matched local fuel prices to international rates, that came under fire during a massive truckers strike that wreaked havoc on Latin America's largest economy. As global oil prices rose, the cost of fuel in Brazil also increased, spurring discontent among consumers, led by truck drivers who depend on fuel to make their living.

Mr Parente has long been at the centre of finance in Brazil.

He began his career at state-controlled Banco do Brasil in 1971, had previously been a Petrobras board member, and also became its Chairman under former President Fernando Henrique Cardoso. He later held numerous private sector positions, including head of agribusiness giant Bunge's Brazil unit.

He was chairman of BM&FBovespa SA, the operator of Latin America's biggest securities exchange, and in April, became chairman of food giant BRF. BRF shares advanced as much as 13 per cent in Sao Paulo on speculation Mr Parente may have more time to devote to the company.

TRUCKER STRIKE TIMELINE:

May 21 Truckers call nationwide strike

May 23 Petrobras cuts diesel prices by 10% for 15 days to help resolve strike, triggering historic share plunge

May 24 Government extends diesel price cut to 30 days, and commits to adjust prices monthly instead of daily; also announces tax cuts on diesel and lower freight costs

May 24 Petrobras says government to compensate for any diesel losses, preserving its market-based price policy

May 25 While trucker representatives agree to end strike, protesters continue to block roads and cripple the economy

May 27 Government announces that diesel price cut of 0.46 reais a litre to last 60 days

May 28 Petrobras says it will be compensated for any losses

June 1 Petrobras announces additional cut in diesel to 2.0316 reais a litre under subsidy programme with government

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