Brazilian President Jair Bolsonaro moved to replace the head of state-run oil company Petrobras, naming a retired army general to the CEO post after weeks of tension with the current chief executive over fuel price hikes.
In a late Friday statement from the Mines and Energy Ministry, first shared on Bolsonaro’s Facebook page, the government said it had decided to appoint former Defense Minister Joaquim Silva e Luna to run Petroleo Brasileiro SA, as the firm is known formally.
Current CEO Roberto Castello Branco, a favorite of investors for his efforts to sell underperforming assets and cut debt, has drawn ire in recent weeks from Bolsonaro for raising fuel prices. Petrobras ADRs traded in New York slumped 8.9% in after-hours trading, adding to a drop of nearly 7% in its Brazil-listed preferred shares on Friday.
Castello Branco would be the second Petrobras CEO to fall in three years over the political fallout from fuel pricing. In 2018 then-CEO Pedro Parente resigned when the government forced fuel prices lower in a concession to striking truckers.
Parente vowed to set domestic prices in line with global markets, breaking with a policy under prior governments making Petrobras sell fuel below international parity, triggering some $40 billion in losses from 2011 to 2014.
Bolsonaro’s decision to force out Castello Branco after facing protests from truck drivers over soaring diesel prices at the pump could force a broader shakeup at Petrobras, which has steered toward more market-friendly and less politically-driven policies in recent years.
The company’s senior management is considering resigning en masse to protest the CEO’s replacement, three people close to the executives told Reuters on Friday evening.
Petrobras said in a statement that it had received notice from the Mines and Energy Ministry about the proposed CEO change, adding that the ministry had requested an extraordinary shareholders’ meeting.
The company’s board of directors is set to meet on Tuesday in a regularly scheduled session.
Most of the board has so far proven loyal to Castello Branco, although the majority of its members are government appointed, which could create a messy transition.
Castello Branco, whose current mandate officially expires on March 20, was appointed to lead Petrobras when Bolsonaro took office at the start of 2019.
A University of Chicago-trained economist and ally of Economy Minister Paulo Guedes, he is a strong advocate of free market policies and has previously turned away the president’s complaints about prices.
Silva e Luna, who has managed Brazil’s massive Itaipu hydroelectric dam on the border with Paraguay and Argentina since 2019, is little known to investors.
In April 2019, just months after Bolsonaro took office, he demanded explanations for Petrobras’ price hike, which was swiftly reversed. After company shares tumbled, Petrobras and the government assured investors that there would be no political interference in fuel pricing.
Tensions eased last year as crude prices tumbled, but truckers have renewed their complaints in recent months as diesel prices in Brazil tracked a global rebound.
During a late Thursday announcement about lower fuel taxes, Bolsonaro made clear his dissatisfaction with Castello Branco, saying there would be changes at Petrobras “in coming days,” even as he reiterated that he would not “interfere” in the firm.
