New Petrobras chief is sworn in as market worries Brazil's government will have heavier hand

RIO DE JANEIRO -- The head of Brazil’s state-run oil giant Petrobras, Magda Chambriard, was sworn in Wednesday amid market concerns of increased government intervention in the company.

President Luiz Inácio Lula da Silva — who nominated Chambriard — attended the ceremony at a Petrobras research center in Rio de Janeiro, along with Finance Minister Fernando Haddad and Mines and Energy Minister Alexandre Silveira.

Chambriard's predecessor, Jean Paul Prates, stepped down last month following months of tensions with the federal government. The market viewed Prates as putting the interests of shareholders above those of the nation, and is skeptical Chambriard — who headed oil and gas regulator ANP between 2012 and 2016 — will have the same approach.

“Our management, as expected, is fully aligned with President Lula’s and the federal government’s vision for the country,” Chambriard said during the ceremony. “After all, they are our majority shareholders.”

Fears of government interventionism in Petrobras date to the sprawling “Car Wash” investigation that began a decade ago. The yearslong investigation discovered billions of dollars in kickbacks related to construction contracts that Petrobras awarded. Investigators found illicit funds filled party coffers and lined politicians’ pockets, at a time when Lula’s Workers’ Party was in power.

Lula himself was jailed for almost 600 days as a result, although his conviction was later annulled. During the ceremony on Wednesday, Lula slammed the investigation's legacy.

“With the false argument of fighting corruption, Operation Car Wash was actually aimed at dismantling and privatizing Petrobras,” he said. “If the objective was to combat corruption, the corrupt should be punished and our people’s assets left intact. But that’s not what was done; what was done was an attempt to destroy the company’s image.”

The Intercept Brasil revealed collusion between prosecutors and Car Wash's crusading judge, Sergio Moro, who later joined former far-right President Jair Bolsonaro’s Cabinet. That tainted the investigation's credibility and fueled Lula allies’ accusations that it was politically motivated.

After beating Bolsonaro in the 2022 presidential election, Lula returned to power for a third, non-consecutive term. Car Wash's prosecutions of scores of politicians and executives — celebrated at the time as great achievements in attacking longstanding impunity — have been further dismantled since last year. The Supreme Court has suspended fines stemming from leniency agreements, annulled convictions and closed investigations.

Such developments have contributed to worry that the scope or tolerance for graft may return. But Rafael Schiozer, a finance professor at the Getulio Vargas Foundation, a university and think tank, said such concern about Petrobras is unwarranted.

“The company's governance has improved a lot. Managers today are aware of the responsibilities they have, and corruption is obviously punished,” he said.

Brazil’s government has a controlling stake in Petrobras and some Brazilian politicians see the company as a means to leverage national development. That represents a clash of interests with minority shareholders who want the company to focus on maximizing profits.

At the event on Wednesday, Lula said he wants the company to be profitable — and that profits are a boon for investments and public spending across Brazil.

Earlier this year, Petrobras decided to not pay extraordinary dividends to shareholders, prompting company shares to plunge. Lula defended the move and called the market a “voracious dinosaur”, while Brazilian media reported Prates had been opposed.

Prates’ departure in the aftermath caused the company’s shares to fall a further 9% on the day of the announcement, before paring losses.

“Prates clearly had a philosophy of creating value for shareholders as the company’s primary objective,” said Schiozer, adding that Chambriard appears to give greater weight to the company's political role.

“That could be a problem if this involves investing in inefficient and/or unprofitable projects. We’re not sure this will occur, but that’s what happened under previous administrations,” he added.

Like Prates, Chambriard has defended oil and gas exploration in a region known as the Equatorial Margin, an environmentally sensitive region near the mouth of the Amazon River.

She argues that Petrobras must open the frontier to replace dwindling reserves in the lucrative oil fields located off the country’s southeastern coast. Lula is also in favor.

Ibama, the country’s environmental watchdog, has so far denied Petrobras a license to drill an exploratory well in the Equatorial Margin, citing a lack of knowledge about the region’s rich biodiversity.

The push to boost oil output is at odds with efforts to limit climate change, caused by the burning of fossil fuels. Lula has sought to cast himself as a climate leader while also supporting greater domestic production.

“Is it contradictory? Yes,” Lula said in an interview with radio station CBN on Tuesday. “We're betting big on the energy transition. Now, until the energy transition resolves our problem, Brazil needs to keep making money with this oil.”

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