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Privatization plans mask problems at Petrobras

(Bloomberg) – Despite President Jair Bolsonaro’s speech about the privatization of Brazil’s crown jewel, oil giant Petrobras has had trouble unloading even a handful of refineries. And your chances have never been worse.

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With fuel demand still unstable from the pandemic and refineries shutting down elsewhere, Brazil is giving potential buyers another reason to stop: Petrobras is under increasing pressure to sell cheaper gasoline and diesel, a practice that will encourage it. It has generated losses of tens of billions of dollars in the past and that would hurt the competition. The president himself has often demanded lower fuel prices as the country grapples with double-digit inflation in the run-up to next year’s election. Since emerging from a massive corruption probe, Petrobras has tried to present itself as a producer. independently managed and focused on the largest deepwater oil finds of this century. It has a goal of raising $ 35 billion from asset sales, including eight refineries, but has so far only managed to sell two of them and raise about a tenth of that goal.

This month it became clearer that the refinery sale plan launched in 2017 faced an obstacle after Ultrapar Participações SA withdrew from an agreement to buy the Refap plant, alluding to concerns that Petrobras will introduce cheap gasoline to the market to help the government. to contain inflation. Attempts to sell two other refineries earlier this year also failed.

“It’s not about the asset itself, but about how Petrobras will set the price of gasoline in the future,” said Fernando Valle, who covers oil and energy in the Americas for Bloomberg Intelligence. “Your best chance is to sell this year. If not, it is almost impossible; They really can’t do it in an election year. “

Petrobras said it remains committed to selling 50% of its refining capacity and declined to comment on the impact of the policy on its divestment plan.

Bolsonaro’s top contender in the 2022 presidential race, former President Luiz Inácio Lula da Silva, has repeatedly said that Petrobras should sell fuel below international prices. Since the government owns more than 50% of the producer’s voting shares, it doesn’t take much more than the president’s decision to change the company’s board, top management and policies.

The executive president, Joaquim Silva e Luna, a former general in the Army appointed by Bolsonaro, has been questioned by Brazilian lawmakers about the recent gasoline hike. The head of the central bank has also complained about the impact of energy prices on inflation.

In September, Brazil’s benchmark wholesale price index rose about 25% from the previous year, while consumer prices increased more than 10% for the first time since 2016.

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