Lula's Petrobras Comments Cause Concern

Brazil's President Luiz Inacio Lula da Silva has caused some concern among the private sector by saying federal energy company Petrobras (NYSE: PBR) must follow the government's development strategy.

"It's not about dictating rules to Petrobras," Lula said in a ceremony for the company's transport unit Transpetro. "It's about saying Petrobras is controlled by the Brazilian government and the company needs to fit in a strategy to develop the country, while respecting its specific interests."

Petrobras must focus on social issues and not solely on profits, he said.


Some market analysts were concerned about Lula's comments.

"Lula's statement was worrying because we cannot say how much his government's policy of purchasing the maximum amount of Brazilian-made equipment for Petrobras is going to cost the company," Felipe Cunha, market analyst for brokerage Brascan Corretora told BNamericas.

"It's also worrying that Lula wants to use Petrobras as an instrument for Brazil's economic development," he said.

Petrobras must answer to shareholders as well as the government, another analyst said.

"The Brazilian government should act directly to encourage the naval construction sector and not use Petrobras as a vehicle to do so as the company has minority shareholders," said Nelson Rodrigues de Matos, market analyst for Banco do Brasil Investimentos.

Further, Brazil's government needs to change the tax structure for fuels rather than squeeze Petrobras' refining margins, he said. And Petrobras agreements with Bolivia, which has negotiated natural gas export prices and nationalization moves with the Brazilian company, "made more political than commercial sense."

But Lula's comments came as no surprise.

"President Lula always said he would use Petrobras as a platform for his government's policies," Rodrigues de Matos said. "Petrobras has always had the pros and cons of being a state-owned company."

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