After four down years, Petrobras finally profits again

Author

Gustavo Ribeiro
February 28, 2019 • Reading Time: 7 minutes

In today’s issue: After four down years, Petrobras finally profits again. 

After four down years, Petrobras finally profits again

Petrobras, Brazil’s state-run oil and gas company, has posted positive yearly results for the first time since 2013. The BRL 25.7bn profit was made possible mainly due to a reduction of Petrobras’ debt and benefited from a 31% increase in the average Brent crude price. Over 2018’s last quarter, however, profits stayed at BRL 2.1bn—way below the projected BRL 7.8bn.

Over the past few years, Petrobras has been strangled by Operation Car Wash—a probe that unveiled deeply-rooted corruption schemes within its ranks. The company was forced to settle deals in class action suits, filed by investors who claimed they lost money due to the scandals. In 2018, the company agreed to pay U.S. investors USD 2.9bn—the largest amount ever paid by a non-American entity.

CEO Roberto Castello Branco, however, still believes Petrobras is “way below” where it should be. He intends on continuing divestments and cost-cutting measures. As this newsletter informed yesterday, Petrobras will launch a voluntary redundancy program—it will also shut down offices in São Paulo, New York City, Africa, Iran, and Japan.

Venezuela’s opposition leader meets with Bolsonaro

Juan Guaidó, the self-proclaimed interim president of Venezuela and leader of the opposition against Nicolás Maduro, will meet with President Bolsonaro in Brasília today. Mr. Guaidó will try to persuade South American leaders into taking a harsher stance against the Maduro regime. However, the Brazilian government, as well as those of other members of the Lima Group (a 14-country forum for discussing alternatives in Venezuela), discards the possibility of intervention—despite recognizing Mr. Guaidó’s legitimacy over Mr. Maduro.

Mr. Guaidó left his country last week to meet with the Lima Group and U.S. Vice President Mike Pence, despite a travel ban imposed by the Venezuelan government. Mr. Maduro has threatened to jail Mr. Guaidó should he enter the country again. “A prisoner is no use to anyone. Neither is a president in exile,” the opposition leader told the press. “My role and my duty is to be in Caracas, despite the risks and regardless of what that implies.”

Venezuelan has turned into a powder keg which is evoking the years of the Cold War. On one side, the U.S. is trying to oust Mr. Maduro—who is backed by Russia and China. Over the weekend, a U.S.-backed mission to send humanitarian aid to Venezuela through Brazil and Colombia failed, as Mr. Maduro closed the country’s borders. Now, Venezuelan UN representatives have called for a meeting between Mr. Maduro and U.S. President Donald Trump to “find common ground.”

Old politics after all

Upon taking office, President Bolsonaro promised to lead an administration that wouldn’t bend to the traditional rules in Brazilian politics. Over were the days of horse-trading with Congress and the flimsy alliances based on favors. The “new politics” approach, however, seems to have run its course already. Without a cohesive coalition—and with his party increasingly isolated—the president will revert back to “old politics.” That is, allowing congressmen to appoint people to second-tier positions in the government and dishing out parliamentary grants with no contingencies.

The new leader of the Rural Caucus in the lower house, member of Congress Alceu Moreira, stated that Mr. Bolsonaro must use “the old textbook approach” if he wants the pension reform to pass. “The ends justify the means,” he said. That puts Mr. Bolsonaro is an awkward position, as giving in—while possibly the only path towards getting his agenda approved in Congress—could hurt him with his electoral base.

To make matters worse for the president, a prosecutor has accused him of illegally employing a friend’s daughter in his office while he served in the lower house. The employee received her money without ever showing up for work. As an extra complication, her father is Fabricio Queiroz—a man connected to Rio militias and at the center of a money laundering scheme involving Senator Flávio Bolsonaro, the president’s eldest son.

What else you need to know today

  • GDP. The government will release official 2018 GDP figures today. Analysts forecast an interruption in the 7 straight quarters of positive results—with the country’s GDP flatlining over the last trimester of 2018. The Brazilian economy is expected to have grown by just over 1% last year. While underwhelming, it would be a second straight year of (mild) growth, after the country’s worst recession on record.

  • Fox+Disney. Brazil’s antitrust watchdog Cade has approved the merger between Disney and Fox in Brazil, a deal worth USD 71bn. With one condition: The Fox Sports channel (and its assets, which include the broadcasting rights to the Copa Libertadores, South America’s leading club football competition) will have to be sold, as Disney already owns ESPN Brazil. Fox Sports, ESPN Brazil, and Globo’s Sportv control 95% of the sports cable TV market—which would essentially create a monopoly if two of them were under the same company.

  • Supreme Court. Former executives of the OAS construction group have given Operation Car Wash investigators a list of 21 politicians from 8 parties—including House Speaker Rodrigo Maia—who took a combined amount of BRL 125m in bribes over the last few years. The information was broke by newspaper O Globo, and the content of the statements by the executives remain sealed by the Supreme Court

  • Congress. 50 congressmen—or 10% of the lower house—are facing some sort of criminal accusation. Cases range from libel to corruption to fraud to torture. Congressman Boca Aberta, from Paraná, is a defendant in 30 cases (all for libel). Of the 30 parties represented in the House, 17 have elected congressmen facing trial.

  • Corruption. A state court in São Paulo has acquitted Fernando Haddad in a corruption and money laundering case. Mr. Haddad ran for president in 2018 for the Workers’ Party, and was the election’s runner-up. He was accused of accepting bribes from a construction firm in exchange for contracts with his administration while Mr. Haddad served as mayor of São Paulo. The court claimed the prosecution didn’t produce enough evidence.

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