Reports this morning that Pedro Parente, CEO of Brazilian oil company Petrobras, has resigned have sent shares tumbling by 15%. The company has stated that an interim CEO will be selected today by the Board and that no other senior executives are leaving the company.
The resignation comes after Brazil’s government announced it would subsidize diesel prices for sixty days in order to end a nine-day strike by the country’s truck drivers. Petrobras had been pricing diesel fuel under a system that adjusted to international prices, but with global oil prices rising and the Brazilian real trending weaker, diesel prices jumped 50% this past year.
Petrobras is a publicly traded corporation, but 64% of its shares are held by the Brazilian government. The company had been battered in recent years by corruption scandals and financial mismanagement. Many analysts credit Parente with turning the company around since he took over about two years ago. In his resignation letter, Parente said:
“My permanence at Petrobras is no longer positive for the construction of alternatives, and I will not be in the way of having these alternatives discussed.”
Investors are clearly afraid now – and not without good reason – that Petrobras will return to being a vehicle for government policy rather than a business with the ability to set market prices.