Connect with us

Emerging Markets

Brazilian markets rattled by Bolsonaro’s removal of Petrobras chief

Published

on


Shares in Petrobras tumbled and Brazil’s currency slid against the dollar after President Jair Bolsonaro moved to replace the oil producer’s chief executive following a dispute over fuel prices.

Petrobras’s São Paulo-listed stock fell 19 per cent on Monday, as investors reacted to the government’s nomination on Friday of an army general with no experience in the oil and gas industry as the new boss of the state-controlled group.

The news hit the broader market, with the benchmark Bovespa index falling 3.7 per cent. The Brazilian real at one point lost 2.4 per cent of its value and breached the threshold of R$5.5 to the US dollar, before recovering slightly to R$5.44 later in the day.

The abrupt decision over Petrobras came after Bolsonaro publicly criticised incumbent chief executive Roberto Castello Branco following recent increases in the price of petrol and diesel, which have sparked unrest among truckers and threats of strikes.

The rightwing populist leader has insisted that his actions did not amount to “interference” in the company, but they have raised concerns among international investors that the Brazilian government intended to take a more interventionist approach to the economy ahead of presidential elections next year.

Many in Brazil’s powerful business lobby backed Bolsonaro when he ran for the presidency as an outsider because they believed he would implement an ambitious privatisation and deregulation programme and reform the constitution to improve public finances.

But apart from a big pension reform passed in 2019, most of the main changes have failed to happen. As the election approaches, markets are growing increasingly nervous that Bolsonaro will turn on the spending taps to win another term.

Brazil-watchers are now keeping a close eye on the future of Paulo Guedes, the country’s hawkish finance minister, who has repeatedly pledged to roll back the state’s role in the economy but is known to be frustrated at the slow pace of reforms.

The market ructions were “a reflection of the growing concerns, or diminishing optimism, that was generated with the current government’s initial reform proposal”, said Pablo Riveroll, head of Latin American equities at London-based asset manager Schroders. “A positive message from the finance ministry would help.”

At the centre of the disagreement between Bolsonaro and the Petrobras chief executive is the company’s policy of setting fuel prices in line with international levels.

“If that’s reiterated [and] new management says we stick to the pricing policy — that would also help,” Riveroll said.

Fears of more government intrusion into business were stoked over the weekend as the Brazilian president, a former army captain, hinted that similar moves might be on the way. 

“If the press is worried about yesterday’s switch [in CEO], next week there will be more,” said Bolsonaro. “We will put a finger on electricity, which is also a problem”.

Shares in Eletrobras, Latin America’s biggest power utility, fell almost 7 per cent before paring losses to 3.5 per cent. The government recently said the electricity provider was on a list of state-controlled companies it intended to privatise. 

Pedro Lang, an analyst at Valor Investimentos, said the market was “opening in despair”.

“This insecurity, fear of what may come, of what the next interferences will be, we are afraid of,” he added. “Today is going to be a long day.”

The board of Petrobras is due to meet on Tuesday to discuss the proposed appointment of Joaquim Silva e Luna, a general in the reserve army who was defence minister under former president Michel Temer, as the oil producer’s new chief. At present, he heads hydroelectricity generator Itaipu Binacional. Castello Branco’s term as chief executive is set to expire on March 20.

The Brazilian state holds about 36.8 per cent of Petrobras, but 50.5 per cent of the voting rights.

Additional reporting by Carolina Pulice



Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Emerging Markets

NYSE to suspend trading of China’s Cnooc next month

Published

on

By


The New York Stock Exchange is to start delisting proceedings against China National Offshore Oil Corporation to comply with an executive order from Donald Trump that bans Americans from investing in companies with ties to the Chinese military.

The NYSE on Friday said it would suspend trading in Cnooc’s American depository shares on March 9, after determining that the company was “no longer suitable for listing” following the order that the former US president signed in November.

The order banned investing in several dozen Chinese groups that were last year put on a Pentagon blacklist of companies that are accused of working with the People’s Liberation Army and threatening US security. Trump set a January 28 deadline for the ban to take effect, but President Joe Biden pushed the deadline back to May 27.

The NYSE move comes as Biden evaluates a number of assertive actions that Trump took against China during his last year in office. The commerce department last year put Cnooc on a separate blacklist — called the “entity list” — that makes it hard for US companies to sell products and technology to the Chinese oil group.

The Biden administration has not made clear whether it intends to keep Trump’s executive order in place. But the new president and his officials have so far adopted a tough stance towards China over everything from its economic “coercion” to concerns about its clampdown on the pro-democracy movement in Hong Kong to the repression of more than 1m Uighur Muslims in the northwestern Chinese province of Xinjiang.

Earlier this month, Biden used his first conversation with Chinese president Xi Jinping since assuming office to raise concerns about Hong Kong and Xinjiang, and aggressive Chinese actions towards Taiwan. Antony Blinken, secretary of state, also described the detention of Uighurs in labour camps as “genocide”.

Jen Psaki, White House press secretary, has said the administration was conducting a number of “complex reviews” of the China actions that Trump took. The former president put dozens of other Chinese companies on the Pentagon and commerce department blacklists, including Huawei, the Chinese telecoms equipment group.



Source link

Continue Reading

Emerging Markets

Bond sell-off roils markets, ex-Petrobras chief hits back, Ghana’s first Covax vaccines

Published

on

By


The yield on the benchmark 10-year Treasury exceeded 1.5 per cent for the first time in a year and the outgoing head of Petrobras warns Brazil’s President Jair Bolsonaro against state controlled fuel prices. Plus, the FT’s Africa editor, David Pilling, discusses the Covax vaccine rollout in low-income countries. 

Wall Street stocks sell off as government bond rout accelerates

https://www.ft.com/content/ea46ee81-89a2-4f23-aeff-2a099c02432c

Ousted Petrobras chief hits back at Bolsonaro 

https://www.ft.com/content/1cd6c9fb-3201-4815-9f4f-61a4f0881856?

Africa will pay more for Russian Covid vaccine than ‘western’ jabs

https://www.ft.com/content/ffe40c7d-c418-4a93-a202-5ee996434de7


See acast.com/privacy for privacy and opt-out information.

A transcript for this podcast is currently unavailable, view our accessibility guide.



Source link

Continue Reading

Emerging Markets

Petrobras/Bolsonaro: bossa boots | Financial Times

Published

on

By


“Brazil is not for beginners.” Composer Tom Jobim’s remark about his homeland stands as a warning to gung-ho foreign investors. Shares in Petrobras have fallen almost a fifth since President Jair Bolsonaro said he would replace the widely respected chief executive of the oil giant.

Firebrand Bolsonaro campaigned on a free-market platform. Now he is reverting to the interventionism of leftist predecessors. It is the latest reminder that a country with huge potential has big political and social problems.

Bolsonaro reacted to fuel protests by pushing for a retired army general to supplant chief executive Roberto Castello Branco, who had refused to lower prices. This is politically advantageous but economically short-sighted.

Fourth-quarter ebitda beat expectations at R$60bn (US$11bn), announced late on Wednesday, a 47 per cent increase on the previous quarter. This partly reflected the reversal of a R$13bn charge for healthcare costs. Investors now have to factor the cost of possible fuel subsidies into forecasts. The last time Petrobras was leaned on, it set the company back about R$60bn (US$24bn at the time). That equates to 40 per cent of forecast ebitda for 2021.

At just over 8 times forward earnings, shares trade at a sharp discount to global peers. Forcing Petrobras to cut fuel prices will make sales of underperforming assets harder to pull off and debt reduction less certain. Bidders may fear the obligation to cap prices will apply to them too.

A booming local stock market, rock bottom interest rates and low levels of foreign debt are giving Bolsonaro scope to spend his way out of the Covid-19 crisis. But the economy remains precarious. Public debt stands at 90 per cent of gross domestic product. The real — at R$5.40 per US dollar — remains near record lows. Brazil’s credit is rated junk by big agencies.

Rising developed market yields will make financings costlier for developing nations such as Brazil. So will high-handed treatment of minority investors. It sends a dire signal when a government with an economic stake of just over a third uses its voting majority to deliver a boardroom coup.

If you are a subscriber and would like to receive alerts when Lex articles are published, just click the button “Add to myFT”, which appears at the top of this page above the headline.



Source link

Continue Reading

Trending