Brazilian oil company Petrobras has been thrown into chaos after the government’s election of a new chief executive out of office, a day after the withdrawal of an incoming president also handpicked by Brasilia.
Adriano Pires, an economist, was nominated to run the $96 billion company just a week ago.
Jair Bolsonaro, the president of Brazil, had moved to replace the current head of the state-controlled group, an army reserve general in the job less than a year, after clashes over a rise in fuel prices.
But on Monday night, Pires formally stepped aside following media scrutiny over potential conflicts of interest stemming from his consulting activity in the energy industry.
“It became clear to me that I could not reconcile my work as a consultant with the role of CEO of Petrobras,” he wrote in a letter to the minister of mines and energy.
Pires added that it was not possible to disassociate himself from his own business in the short time required.
The development left the Bolsonaro administration needing to find an alternative candidate to run Latin America’s biggest oil producer at a politically sensitive time ahead of presidential elections in October.
Petrobras has come under public pressure over the cost of diesel, gasoline and cooking gas, which rose recently after Russia’s invasion of Ukraine caused global crude benchmarks to spike.
Outgoing CEO Joaquim Silva e Luna has stuck to the company’s practice of following international tariffs for domestic fuel, angering Bolsonaro, whose popularity is being hit by double-digit inflation.
Investors reacted calmly last week to the nomination of Pires, who had previously spoken in favor of maintaining the fuel price policy. Both Bolsonaro and his main rival, leftist former president Luiz Inácio Lula da Silva, who is ahead in the polls, have criticized the policy.
After speculation increased on Monday, Petrobras’ preferred shares ended the day down nearly 1 percent, weighing on the São Paulo Bovespa stock index, which was trading 0.24 percent lower.
Claudio Porto, founder of the consulting firm MacroPlan, said that he has known Pires for more than 20 years and described him as “a competent professional.”
“But the signs indicate that there was indeed a conflict of interest and Petrobras’ governance filters were very strict, which is one of the pillars that sustain the value of the company,” he said in comments made before the decision was officially announced. of Pires.
“I think the best thing for the shareholders, the company’s executives and for Adriano himself is to give up this adventure,” added Porto.
Brasilia owns about 37 percent of Petrobras, but with just over half of the voting rights it effectively dictates the appointment of the top job.
Pires’ departure followed Rodolfo Landim’s announcement on Sunday that he would reject the nomination to chair the group.
Landim said he wanted to focus on the soccer club he is president of, Rio de Janeiro’s Flamengo, after it lost a state championship.
However, the local press also suggested possible conflicts of interest. Neither Pires nor Landim could be reached for comment.
The government must fill the two gaps in a list of board nominees to be approved at a shareholders meeting this month.
Petrobras said it had received no information from the ministry about replacement candidates.
Additional reporting by Carolina Ingizza
Reference-www.ft.com