Brazil’s star, Petrbras, is hobbled by scandal and stagnation

April 16, 2014

Simon Romero & Landon Thomas Jr – The New York Times, 4/15/2014

No company has embodied Brazil’s rise like the oil giant Petrobras.

Bolstered by some of this century’s largest oil discoveries, Petrobras soared into the top ranks of global energy producers. Executives at the state-controlled company boasted that it could even outstrip Apple as the world’s most valuable publicly traded company. Political leaders here said Brazil was on the cusp of energy independence.

Now Petrobras is coming to symbolize something else entirely: the disarray afflicting Brazil’s sluggish economy and the reassessment of growth prospects in emerging markets around the world.

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They razed paradise and put up a soybean lot

April 8, 2014

Lucy Jordan – Global Post, 4/7/2014

 It might not look like much, but this little green bean is both villain and hero in Brazil’s Cinderella story.

Soybeans helped turn this South American nation from a country of peasants into the world’s seventh-largest economy. They’re also blamed for the destruction of vast swathes of rain forest, causing habitat loss and bloody land conflicts.

Brazil predicted this year it was going to out-bean world soy leader the United States. A nasty drought may have put the kibosh on that, but this country’s output is still expected to reach some 94 million tons, coming up close behind the US’s 99 million tons.

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Two heads are worse than one

April 4, 2014

The Economist, 4/5/2014

“UNIQUE.” That is how Credit Suisse, a bank, sums up Petrobras. It has a point. Most companies’ stocks would sag on the sort of news Brazil’s oil giant has faced in the past three weeks. A federal investigation was opened, into alleged backhanders paid to its employees by a Dutch company in exchange for oil-platform and drilling contracts. (Both companies deny the allegations.) A parliamentary inquiry is imminent, into the purchase in 2006 of a refinery in Texas which cost $1.2 billion but is now worth no more than $180m. A former director has been arrested in a money-laundering probe. If that were not enough, on March 24th Standard & Poor’s, a ratings agency, downgraded its corporate debt. Yet Petrobras’s shares have risen by 30%.

The reason for this seemingly irrational exuberance is that investors consider Petrobras’s prospects to be inversely linked to those of Brazil’s government, led by the president, Dilma Rousseff. The rally began with rumours (later proved premature) that Ms Rousseff’s poll lead over her likeliest challengers in a presidential election this October was dwindling. The government owns a majority stake in the company and makes most of the strategic decisions over the head of Maria das Graças Foster, the chief executive.

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Aluminum makers expect Brazil to ration power within year

April 1, 2014

Juan Pablo Spinetto & Gerson Freitas Jr. – Bloomberg, 4/1/2014

Brazilian aluminum producers, already cutting output as power price increases and metal price declines erode profit, expect authorities to ration supply as a drought curbs hydroelectric generation.

Rationing is “almost certain” within a year, Tito Martins Jr., chairman of the Brazilian Aluminum Association, told a conference in Sao Paulo today.

While electricity prices for aluminum producers were reduced 7.8 percent last year, power remains the industry’s biggest hindrance, said Martins, who is chief executive of Votorantim Metais. Brazilwon’t be competitive again in aluminum if it doesn’t rethink its energy pricing model, he said. Aluminum for three-month delivery on the London Metal Exchange has dropped about 5.8 percent in the past year.

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Chico Vive: The Legacy of Chico Mendes and the Global Grassroots Environmental Movement

March 31, 2014

The Chico Vive conference is bringing together grassroots activists, NGO’s, students, engaged scholars, applied scientists, policymakers, journalists and others to discuss the development of the global grassroots environmental movement in the 25 years since environmental martyr Chico Mendes’ death. Participants will plan strategies for coordinated international actions, networks, coalitions and initiatives to advance sustainability, defend the environment from depredation and climate change, and protect the rights of its traditional inhabitants.

When: April 4-6 2014

Where: American University School of International Service


More information here. 

Brazil’s cut a break as Petrobras avoids downgrade

March 27, 2014

Kenneth Rapoza – Forbes, 3/26/2014

For once, Petrobras is the source of good news.

Sort of.

After a week of credit rating downgrades at dozens of Brazilian banks, not to mention a sovereign credit downgrade for Brazil’s foreign debt by Standard & Poor’s on Tuesday, the beleaguered oil major got its AAA credit reaffirmed by Fitch on Wednesday.

The rating affects Petrobras’ roughly $48 billion in debt, including debt owed by its financial subsidiaries Petrobras International Finance and Petrobras Global Finance.  The foreign currency credit rating on both firms was maintained at BBB with a stable outlook.

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Opposition candidates criticize Brazil’s Rousseff

March 26, 2014

Matthew Cowley & Rogerio Jelmayer – The Wall Street Journal, 2/25/2014

Opposition candidates in this year’s presidential race in Brazil on Tuesday sharply criticized President Dilma Rousseff’s management of two of the cornerstones of her 2010 victory: the economy and the government-run oil company.

The two main opposition politicians attacked the government Standard & Poor’s Monday downgrade of the country’s sovereign credit rating, and backed congressional calls for an investigation into a series of scandals at the oil firm, Petróleo Brasileiro SA,

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Brazil’s Rio Bravo seeks partners to finance wind power growth

March 25, 2014

Christiana Sciaudone – Bloomberg Business Week, 3/25/2014

Rio Bravo Investimentos SA, the asset manager founded by former central bank president Gustavo Franco, is looking for new financial partners to help it become one of Brazil’s biggest wind power companies.

Rio Bravo plans to bring its first 503.5 megawatts of wind energy on line by the end of this year and will at least double that by 2017, said Paulo Bilyk, its chief investment officer. The Sao Paulo-based company needs 1.5 gigawatts to 2 gigawatts as it plans to go public within five to six years, he said.

“We’d like to build one of the biggest renewable energy companies,” Bilyk said in a March 6 interview in Sao Paulo. “Brazil needs energy. Even if Brazil’s economy grows at just 1 percent to 3 percent a year for the next five or six years, we won’t have enough energy.”

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Brazil scrambles to avoid power rationing as costs soar

March 25, 2014

Jeb Blount – Reuters, 3/24/2014

Brazil is fighting against time to avoid crippling power blackouts and electricity rationing as a drought prevents the world’s most water-rich nation from recharging its hydroelectric dams.

A decade of growth has diversified the electricity system away from hydropower, but policymakers, industrial companies and investors in the world’s seventh-largest economymay find little cause to relax.

Rio de Janeiro-based energy consultancy PSR puts the odds of rationing at nearly 1 in 4.

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Petrobras puts Brazil President Dilma in hot seat

March 24, 2014

Kenneth Rapoza – Forbes, 3/23/2014

Petrobras’ PBR +0.78% problems are becoming Dilma’s problems.

Brazil’s oil and gas major, Petrobras, can do no right. And now President Dilma Rousseff is being blamed for the problems. Of course, she is being blamed by politicians who don’t want to see her re-elected in October.  They probably won’t succeed at dethroning her, but one thing is certain: the deterioration of the shining star of Brazil’s state owned enterprises happened on her watch. This election season, Dilma isn’t the only one in the cross hairs.  Petrobras is now her problem, too.

Not long ago, as in 2007, Petrobras was heralded as the Latin America Aramco, finding oil deep under the ocean floor far off the coast of Rio and São Paulo states.  Goldman Sachs once put a $60 price target on the stock in early summer 2008. Today, Petrobras shares trade under $12, and its market cap is smaller than Colombia’s EcoPetrol EC +0.99%.

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