ÃO PAULO, Brazil — Petróleo Brasileiro S.A., Brazil's biggest company, ought to be riding high on the recent run-up in world oil prices. But the growing likelihood that Brazil's presidential election will produce a left-wing government has put the company, still partly owned by the state, under a thick cloud of uncertainty, and investors have driven its stock down sharply.
Advertisement
|
|
|
Petrobras, as the giant oil company is known, is far from alone in suffering from investors' fears about the election. With Luiz Inácio Lula da Silva of the Workers' Party opening a wide-enough lead in opinion polls to make an outright victory in the first round of voting on Oct. 6 a real possibility, investors have been hammering Brazil's stocks and bonds.
Its currency, the real, fell in value from about 44 cents in mid-April to just 27 cents at the end of September.
But Petrobras is seen as especially exposed to the political tide. Its management is still effectively appointed by the government, which owns 32 percent of the company's stock and has 56 percent of the voting rights. Many analysts and investors worry that a new government that emphasizes its social and political goals over profits and efficiency will turn the company back into what it was before privatization in the early 1990's: a sprawling, mismanaged political fief.
The slide in Petrobras's stock price — off about 20 percent in local-currency terms and by nearly half in dollar terms since the start of the year — is a sign that investors still do not trust the Workers' Party, despite Mr. Silva's public transformation from default-defending radical to market-friendly moderate.
Making matters worse, Mr. Silva discarded a chance to calm market fears in late September when he publicly ruled out retaining Armínio Fraga as the governor of the central bank. Analysts said the announcement reinforced doubts about Mr. Silva's heralded shift to the political center.
Then, Mr. Silva and a top economic adviser signaled that a Workers' Party government could intervene at Petrobras and at Banco do Brasil, the country's largest commercial bank, to de-emphasize profits. Guido Mantega, Mr. Silva's top economic adviser and an architect of the Workers' Party's recent moves toward a more market-friendly economic program, was quoted in the financial daily Valor Economico as saying, "Petrobras must make a profit, but it wasn't created to make extraordinary profits."
Mr. Mantega, who has advocated creating jobs by encouraging Brazilian companies to make substitutes for some imported goods, criticized Petrobras's plans to have new oil platforms built in shipyards outside the country. Most analysts said the company had little choice, because Brazil does not have the technology to build more than the shells of new oil rigs.
Mr. Silva's attitude toward Banco do Brasil is already clear: He sees it as a policy tool that ought to remain state-controlled (the government owns about 72 percent of the bank's shares, but is preparing to sell about one-fourth of its stake). Criticizing short-term lending that "increases the bank's profits but detracts from its public function," Mr. Silva said the bank must "carry out public policies."
In past elections, no one would have been surprised to hear such talk from a Workers' Party candidate. But this time around, the party had been working hard to shed its image as an unreconstructed backer of the old state-bureaucracy approach to running the most important enterprises in the country.
"With such comments, the Workers' Party is beginning to show its true face," said José Barrionuevo, chief Latin American economist at Barclays Capital in New York. "It tells you they know very little about free market policies."
Brazilian stock analysts who were once nearly unanimous in recommending Petrobras shares to any buyer are now deeply split on its future.
"We're saying `buy,' " said Edmo Chagas, an oil analyst at UBS Warburg in Rio de Janeiro. "The risks of political intervention and price control are being overestimated."
But Luís Paulo Foggetti, oil analyst at the Saõ Paulo brokerage firm Fator Doria, warns investors off Petrobras. "The shares are cheap, but — and it's `but' with a large `B'," he said. "If the Workers' Party wins, there will be a new Petrobras." The present management, led by Francisco Gros, "will not last a week," Mr. Foggetti said.
"There will be changes in strategy, a redirection of the company's investments to the domestic market and possibly price controls," he predicted, adding that growth, profits and production capacity would all suffer as a result.
Petrobras declined comment.
Mr. Foggetti said that "this interventionist attitude could spread to other sectors" like banking, electricity and petrochemicals, where the state still holds major stakes in large companies.
Some analysts point out that Petrobras is already used by the current government for political ends. During the election campaign, the company reduced the price of the bottled cooking gas, used in most Brazilian homes, and kept gasoline about 15 percent lower than world average market prices, according to Fabiana Fantoni, an analyst at the Tendencias consulting firm in São Paulo — all to help the chances of the government's candidate for president, José Serra, who is running a distant second in the polls.
"But the Workers' Party will surely adopt a tougher stance on using the company to make public policy," Ms. Fantoni said.
If that happens, Brazil's attractiveness to investors is likely to suffer even more. An annual ranking of recipients of foreign direct investment published by the A. T. Kearney consulting firm put Brazil in third place worldwide in 2001; the latest ranking, released in late September, showed the country falling to 13th place.