Petrobras – after the end of the PPI

Image: Loïc Manegarium


Something has moved, in a government that, despite its good intentions, seems to have so much difficulty facing rentism

Will the Lula government free Petrobras from the clutches of the rentiers? The immense power of the company – whose profits, in 2022, were equal to double than obtained by the five largest Brazilian banks together – can it boost national reconstruction on new bases? A thread of hope reappeared. On Tuesday (16/05) the PPI finally ended, the price policy that, imposed since the Michel Temer government, forced the state-owned company to sell its fuels at the same price as those imported.

A day later, a significant reduction was announced in the quotations of gasoline (-12,5%), diesel oil (-12,5%) and cooking gas (-21,42%). It was a relief. Fuel prices have a huge impact on the inflation of the poorest. The previous policy generated enormous economic unpredictability, resulting, in certain periods, in almost a new price every day.

Mandatory matching to international quotations – when Petrobras could produce for much less – opened up space for undesirable competition. Private companies imported derivatives that Brazil learned to produce decades ago, stimulating the idleness of national refineries. For all these reasons, the end of the PPI was hailed even by acid critics of the oil policy, such as the engineer Ildo Sauer, former director of Business in Gas and Energy at the state-owned company. He equated the previous mechanism with a “fundamentalist delirium of rentiers, interested in extracting every last penny of Brazilian oil”.

But will it be enough to reduce fuel prices to put Petrobras at the service of the majority? Journalist Maria Cristina Fernandes noted that the change in direction was viewed with peace of mind by the company's private shareholders. Papers went up. Like the Prince of Salina, immortalized in the novel the leopard, the rentiers seem to be waiting for “something to change, so that everything remains as it is”.

Ildo Sauer explains why. The slight drop in prices this week will not be enough for the abundant income provided by Brazilian oil. The country's natural wealth and the technologies developed by Petrobras make it possible to extract 1 billion barrels per year – 75% of which are produced by the state-owned company. As Brazilian oil is abundant, the total cost of extraction does not exceed 8 to 10 dollars per barrel on average, which results in a gain today close to 70 dollars. Even after paying taxes, royalties and financial expenses, the state-owned company is left with a profit that reached BRL 2022 billion in 188. The crux of the matter is what you do with it.

A week before announcing the end of the PPI, Petrobras released its balance sheet for the first quarter of the year – already under Lula's government, therefore. The numbers were analyzed by Ineep – Institute for Strategic Studies in Petroleum – and reveal that the policies introduced by Michel Temer and Jair Bolsonaro persist, including because they serve very powerful interests.

In just three months, the state-owned company earned R$ 38,1 billion. Corporate law obliges it to distribute 25% of this amount to shareholders. However, following the example of what it has been doing for at least three years, Petrobras far exceeded this threshold, distributing 64% of its profits, or R$ 24,7 billion. According to Ildo Sauer's calculations, the amount is equivalent to two-thirds of what is needed to build a refinery with the capacity to process 1 million barrels per day, generate thousands of jobs and make Brazil, once again, self-sufficient in fuel production. Rather, who did these profits benefit?

The Brazilian state owns, by law, the majority of voting shares in Petrobras, but is not the largest shareholder. Added all types of papers, private shareholders control 63,31% of the capital. Of this total, 70% are in the hands of foreigners, usually mega pension funds like BlackRock. They are the ones who snapped up the lion's share of profits under Michel Temer and Jair Bolsonaro, and continued to do so in Lula's first three months.

On the other hand, the dramatic reduction in Petrobras' investments also persisted in this period. They were limited to R$ 2,48 billion. The Association of Petrobras Engineers warns that this amount is not even enough to replenish the company's oil reserves. In other words: to line the pockets of its private shareholders, the Brazilian state-owned company compromises its own future. The table below, also prepared by the Association of Petrobras Engineers based on company data, exposes this absurdity. Between 2005 and 2014, what it transferred to shareholders revolved around one fifth than she invested in herself. From 2021, however, rentiers are paid between seven and eight times more what is invested. An indispensable step for Petrobras to be able to link up with a new national project, therefore, is to radically change the profit distribution policy, bypassing speculators in favor of actions linked to a new development cycle for the country.

And what are they? One of the first actions is to reverse the movement of slicing from Petrobras, which, as stated by Jair Bolsonaro and Paulo Guedes, clearly aimed to create conditions for the complete privatization of the company. Divestment had one purpose: to transfer strategic assets to large private corporations. As a result, the state-owned company lost three of its large refineries (Bahia, Amazonas and Salvador). It gave up its fuel distributor (BR Distribuidora). He abandoned his fertilizer factories. It was involved in an operation that could deprive it of Brasken, its petrochemical arm (built in partnership with Odebrecht). All of this can be reviewed and reversed, as long as there are resources and political will.

Recovered from the dismantling policy, Petrobras will have the strength to help reverse the reprimarization of production in Brazil. It will be able to do so by restoring the “national content policy”, which led it to prioritize Brazilian suppliers, in its very large purchases. It was essential to revive, in previous Lula administrations, the shipbuilding industry. But, annulled by Michel Temer and Jair Bolsonaro, it has not yet been reinstated.

Today, there would be ways to expand it. As proposes the economist Luiz Gonzaga Belluzzo, Petrobras needs to stop being an oil company and become a full power generation company – preferably in partnership with a renationalized Eletrobrás. It means immersing yourself, for example in large solar energy generation projects on mobile plates, installed on hydroelectric reservoirs. It also implies technologically stimulating the development of an industrial and services sector in which small companies, employing thousands of workers, turn to the installation of solar panels in smaller areas – from agrarian reform settlements and small agricultural properties to urban residences.

Ildo Sauer waits an even more ambitious future. Brazilian society needs to find ways to appropriate most of its oil wealth. This means, for example, reviewing the concession of relevant oil areas, delivered in auctions to Petrobras' international competitors. But it should lead to another Brazilian oil exploration regime. In it, the State would directly assume responsibility for oil prospecting and extraction. For this purpose, it would hire Petrobras services, remunerating it accordingly. It would channel the gains, however, towards the social and technological development of the country – in particular, health, education and public security and scientific research.

Given the scenario in perspective, the end of the PPI, decreed this week, is a timid beginning. Even so, something moved in a government that, despite its good intentions, seems to have so much difficulty facing rent seeking. Every great march starts with a first step, someone said. It remains to wait if the next ones come — and fight for them.

* Antonio Martins is a journalist and editor of the site Other words.

Originally published on the website Other words.

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