Four More Years Of Pain For Petrobras
Brazil’s incumbent President Dilma Rousseff pulled off a victory on Oct. 26 in a runoff election, and the markets are not too happy about it.
As recently as September, President Rousseff was not seen as the preferred candidate.
In the end, Brazilian voters re-elected her for four more years, and the day after the vote, Ibovespa – a leading index of about 50 Brazilian stocks – dropped nearly five percent.
Take the semi-state-owned oil company Petrobras. Last week, Moody’s Investor’s Service downgraded Petrobras’ credit to Baa2 with a negative outlook.
Despite its offshore oil drilling prowess, Petrobras is deeply indebted. Much of that can be attributed to the expense of fuel subsidies for millions of people.
President Rousseff’s two main rivals – Marina Silva and Aecio Neves – both pledged to roll back fuel subsidies if they were elected.
But by mid-October, Aecio Neves, seemed to have a good chance at winning the runoff after he came in a surprising second place in the first round of voting. Neves was seen as the business-friendly candidate.
Moreover, he indicated he would consider supporting legislation that removed the requirement that Petrobras take at least a 30 percent stake in all new projects in the pre-salt region – oil located deep beneath a layer of salt in the Atlantic Ocean.
The morning after the election, Petrobras’ share price crumbled by 16 percent.
Source: oilpricecom-Four More Years Of Pain For Petrobras
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