Shares in Brazilian oil producer Petrobras plummeted and the country’s currency fell against the dollar in the wake of President Jair Bolsonaro’s decision to replace the company’s CEO following a dispute over fuel prices.
Shares of Petrobras, quoted in São Paulo, fell 20 percent in trading Monday morning, as investors responded to the government’s announcement last week that it had appointed an army general with no experience in the oil and gas industry as the new CEO of the state. controlled group.
The aftermath spilled over to the broader market, with the benchmark Bovespa index falling more than 5 percent. The Brazilian real lost 2.4 percent of its value by changing hands at 5.51 against the US dollar, its lowest point since November.
The abrupt decision over Petrobras came after Bolsonaro publicly criticized incumbent CEO Roberto Castello Branco over recent increases in gasoline and diesel prices, which have sparked unrest among truck drivers and threats of strikes.
Despite the right-wing populist leader’s insistence that it did not amount to “interference” in the company, the escalation has raised concerns among international investors that the government planned to intervene more in the economy ahead of next year’s presidential election.
It has also raised questions about the future of Paulo Guedes, Brazil’s finance minister, who has long disapproved of government intervention in business, as well as the government’s commitment to economic reform.
Fears of further government interference in business were fueled this weekend when Bolsonaro hinted that similar measures might be coming.
“If the press is concerned about yesterday’s switch [in CEO], there will be more next week, ”he said. “We put our finger on electricity, which is also a problem”.
Shares in Eletrobras, Latin America’s largest electricity company, fell by nearly 7 percent. The government recently said the electricity supplier was on a list of state-controlled companies it planned to privatize.
Pedro Lang, an analyst at Valor Investimentos, said the market opened “in desperation”.
“This uncertainty, fear of what may come next, of what the next failures will be, we are afraid of,” he added. “Today will be a long day.”
The Petrobras board is meeting this week to discuss the proposed appointment of Joaquim Silva e Luna, a reserve army general who was defense minister under former president Michel Temer, as the oil producer’s new chief. He currently heads the Itaipu Binacional hydroelectric power station.
The Brazilian state owns about 36.8 percent of Petrobras, but 50.5 percent of the voting rights.
Additional reporting by Carolina Pulice