On Thursday (27/04), Petrobras’ shareholders elected members of the board of directors, including those appointed by the Federal Government but considered unfit for the position. This move could allow the government to enlarge its influence inside the company, thus creating conditions for it to better deal with pressures caused by inflation driven by fuel prices.
Shareholders’ Meeting
During the shareholders’ meeting, 8 of the 11 directors of the company were elected. The government managed to keep six positions, three of them filled by names rejected by the internal committee responsible for analyzing CVs and by the board of directors itself.
The Candidates
The candidates considered ineligible were the secretaries of the MME Pietro Mendes and Efrain Cruz, in addition to the former Minister of Science and Technology Sergio Machado Rezende. The council considered that the first two have potential conflict of interests, due to their functions in the government and their participation in the body that defines the state-owned company’s strategy. The third came up against the prohibition of the appointment of party leaders.
In addition to the three ineligible candidates, the Union elected the current president of the company, Jean Paul Prates, the director of the National Water and Basic Sanitation Agency (ANA) Vitor Saback and the economist Bruno Moretti.
Inflation Rate
With this new team in Petrobras, the government hopes to have more chances of holding an eventual fuel price increase, since despite the slowdown in inflation measured by the Ample National Consumer Price Index 15 (IPCA-15) in April, the result will not even be enough to allow cuts in Selic.
According to data released on Wednesday (26) by the Brazilian Institute of Geography and Statistics (IBGE), in the past month, inflation grew 0.57%, the lowest total for the month since 2020.
In the view of economists, the numbers reinforce the current disinflation scenario in the country. However, the slowdown is still considered insufficient for the confirmation of immediate cuts in the basic interest rate (Selic), currently at 13.75%. Therefore, on 2 and 3 May, during the next Monetary Policy Committee (Copom) meeting, analysts do not believe that there will be any reductions in the inflation rate.
The Government Versus the Central Bank
On Tuesday (25/04), Central Bank President Roberto Campos Neto went to the Congress to explain the basic interest rate (Selic), which is at the current level since August 2022. The visit was organized due to criticisms made by President Luiz Inácio Lula da Silva (PT) and members of the government regarding the high level of interest rates in the country amidst a scenario of slowing economic activity and rising defaults.
In defense of his position, Central Bank President Campos Neto said that the country’s sustainable growth, with inflation control, does not depend on “magic” nor a “silver bullet”, but discipline of public accounts. He cited as an example the case of the United Kingdom, which culminated in the resignation of Prime Minister Liz Truss. The trigger for the departure of Boris Johnson’s successor was the launch of an economic program to cut taxes and increase public spending.
Industry Slowdown
Despite Neto’s arguments, the economic scenario seems to be pressuring for a Selic reduction. For instance, the construction activity index measured by the National Confederation of Industry (CNI) registered in March the fifth consecutive month of decline, reaching 49.5 on a scale that goes up to 100. The report shows that the interest rate, considered high, tax burden and the difficulty in acquiring raw materials are contributing for this context.
Our Analysis:
Particularly after the end of the worst waves of the Covid-19 pandemic and the beginning of the war between Russia and Ukraine, the global economy started to suffer with difficulties to return to pre-pandemic production levels, which affected the global supply chain. This led to an inflationary pressure that was exacerbated by fears of global shortages, including of fossil fuels. During this period, former President Jair Bolsonaro had to deal with extreme fluctuations in oil prices, which intensified the effect of the local inflation on basic goods. The scenario created great fears of strikes, protests and popularity loss. He battled Petrobras directors and other political agents to exert maximum control over the company and try to reduce fuel prices, which are regulated by a rule that set oil prices according to international values, the PPI. In this period, Petrobras President was changed five times. Lula must deal with a scenario that is not that different, and it is trying to obtain means to influence the company’s decisions. After the latest election, the government finally managed to conclude the renovation of the state-owned company’s administration. Petrobras board and council now has representatives appointed by the PT administration, which will facilitate the strategic changes promised by Lula in his campaign, and others that may ease his mandate, like the possible removal of the PPI.
