(Bloomberg) — Latin America’s largest oil company, Petróleo Brasileiro SA, will have its third chief executive since early 2021 after Joaquim Silva e Luna was ousted following mounting political pressure to contain fuel prices.
Luna, who was only in that position for about a year, used the anger of Jair Bolsonaro with the announcement on March 10 of the increase in prices for diesel and gasoline. Although the president had repeatedly promised not to intervene in the company, Luna’s name was not included in the list of members of the government-appointed board that was released on Monday. Because Petrobras’ bylaws established that the CEO must be a member of the board, the measure was enough to get Luna out of office.
The government appointed Adriano Pires to replace Luna, a decision that must be ratified by the company’s board at a meeting scheduled for April 13.
As CEO, Pires will have to navigate domestic politics, where fuel prices are a key campaign issue in an election year. Luna’s predecessor was fired via a Facebook post after a fight with the president over fuel prices.
When Bolsonaro selected Luna, a general with no prior oil experience who wooed the close president, it caused concern that the state-owned company would begin spending billions of dollars on fuel subsidies as it did during the 2011-2014 oil boom. Stocks tumbled and analysts were quick to apply valuable selling to stocks. However, Luna maintained his predecessor’s focus on profits and debt reduction, and even retained most of the existing management team.
Last year, Petrobras cut its debt enough to resume regular dividend payments under the Luna Administration and largely stuck with Petrobras’ policy of tracking international fuel prices, drawing praise from investors, though no precision in Brazil. At home, the oil producer is at the center of a political debate where both Bolsonaro and his main opponent in October’s elections, Luiz Inacio Lula da Silva, have criticized Petrobras for charging high prices.
Until the adjustment earlier this month, Petrobras held prices steady for 57 days as oil even traded well above $100 a barrel after Russia invaded Ukraine. While Bolsonaro criticized the decision to raise prices, Petrobras defended the move on social media, citing concerns that there could be supply shortages because the company is not Brazil’s only importer. Although Bolsonaro cannot order Petrobras directly, the government is the largest shareholder and appoints most of the board members.
Luna is an engineer by training who rose to the rank of four-star general and managed several national projects, including the construction of a mega-highway through the Amazon that began in the 1980s and took two decades to complete. He also directed the Itaipu hydroelectric dam during the Bolsonaro Administration.
Petrobras CEO Luna e Silva is ousted amid dispute over fuel prices
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