Kenneth Rapoza from Forbes reports the Brazilian president stands strong with the oil giant. Mired in a political scandal involving money laundering and bogus government contracts, Brazilian oil firm Petrobras is being used by the political opposition to derail President Dilma Rousseff. Not one to mince words, Dilma had some Monday morning advice for presidential hopefuls: “No one and nothing will destroy Petrobras,” she told a gathering of Petrobras employees in Pernambuco state today.
Later this week, Congress will begin one of its favorite tasks since the Workers’ Party took over the government nearly 12 years ago: inquiries into wrong doings by the party. The last and most famous inquiry was into the so-called ” mensalão” scandal, which involved heavyweights from the Workers’ Party closely affiliated with then-president Luiz Inacio Lula da Silva. The pay-for-play scandal led to the downfall of many of the party’s lead singers, and now the opposition — led by the Social Democrats, know as the Tucanos — hopes the same can be said about Dilma.
Dilma is slipping in the polls. That doesn’t mean she won’t be re-elected in a second round of voting. Still, the opposition thinks her decline is a sign they can further chip away at her…and the possibility of 16 years of Workers’ Party rule. The party, long seen as the ugly and poor labor left in a country whose main opposition is a more elite and educated left, captured Brazil’s heart in 2002 with the Lula election. Surprisingly, the economy — including Petrobras — has been growing quite well ever since.
Today, barring the return of ex-Workers Party senator Marina Silva to the fore, Dilma is seen heading into a run-off election with Tucano senator Aécio Neves from Minas Gerais state. If history — and poll data — is to be trusted, the Workers’ Party will yet again triumph over their “ refined” rivals.
This oil giant is the mud they’ve chosen to sling at her.
Petrobras is being investigated for overspending by several hundred millions of dollars on a Texas oil refinery. In addition, a government agency is investigating allegations that Petrobras management — namely Nestor Cervero, who was fired last month — took bribes in exchange for steering contracts to SBM Offshore, a Dutch oil-production ship leasing company.
Petrobras CEO Maria Graça Foster will face questioning by the Senate on Tuesday over the oil refinery, which sits at the center of the scandal. She will be asked how the company failed to notice that it was being more than triple the market rate for the Pasadena refinery.
Petrobras is Brazil’s largest company by market cap, and one of the most important contributors to the economy. In 2007, it became the darling of the global oil and gas industry when it struck black gold deep under the ocean bedrock off the coast of Rio de Janeiro. Market analysts quickly gave Petrobras a price target of $60 per share. It hit over $72 in May 2008 when the country was granted investment grade status for the first time. The share price is now in the low teens.
Even though investors have always viewed Petrobras as the state-owned-enterprise that it is, Dilma has made it clear that under her, Petrobras is more a function of the state than the market. Petrobras has been used to control inflation as it usually sells gasoline and diesel below market rate. Prices are only high at the pump because of Brazil’s exorbitant taxes. Petrobras is also involved in Brazilian cultural activities and has become a vital part of arts and entertainment funding.
“Petrobras is bigger than all of us,” Dilma told a gathering of oil workers, cheering her name. “Petrobras is as big as Brazil.”