Ibovespa Falls With Petrobras as Recent Gains Deemed Excessive

August 12, 2014

Denyse Godoy – Bloomberg Businessweek, 8/12/2014

The Ibovespa fell, led by oil producer Petroleo Brasileiro SA, amid speculation that recent gains were excessive considering prospects for Brazil’s economy.

Banco Bradesco SA led financial stocks lower. Insurance group BB Seguridade Participacoes SA rallied after reporting profit that beat analysts’ estimates.

The Ibovespa fell 0.3 percent to 56,458.10 at 11:22 a.m. in Sao Paulo. Brazil’s benchmark index has rallied 26 percent from this year’s low on March 14 as Petrobras jumped on speculation that a new government will reduce intervention in state-controlled companies.

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Exclusive: Brazil may raise fuel prices by up to 6 percent

August 12, 2014

Luciana Otoni – Reuters, 8/11/2014

The Brazilian government could increase domestic fuel prices at refineries by up to 6 percent after the October presidential election, a senior government source told Reuters on Monday.

The official, who asked not to be named because of the sensitivity of the issue, said an increase of between 5.5 percent and 6 percent is a preliminary calculation and aims to help state-run oil company Petroleo Brasileiro (PETR4.SA), known as Petrobras.

President Dilma Rousseff, who is running for re-election on Oct. 5, has kept fuel prices below international levels to curb above-target inflation. That policy has hurt the finances of Petrobras, which is forced to buy fuel at international prices and sell it more cheaply in the local market.

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Brazil’s Petrobras: Tarred by corruption

August 11, 2014

Joe Leahy and Samantha Pearson – Financial Times, 8/10/2014

After years of allegedly secret dealings, the men at the centre of what is potentially Brazil’s biggest corruption case made a careless mistake.

In May 2013, convicted black market money dealer Alberto Youssef bought through third parties a luxury car for his friend and alleged accomplice, Paulo Roberto Costa, a former executive at state-oil company Petrobras.

But while negotiating the purchase of the R$250,000 ($110,000) Range Rover Evoque in São Paulo, they put their names together on a seemingly harm­less document: a proof of ad­dress. It was the only occasion in the mountains of police investigation documents seen by the Financial Times they voluntarily appeared together.

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Petrobras Floatel Signals Output Goals at Risk: Corporate Brazil

August 5, 2014

Sabrina Valle and Juan Pablo Spinetto – Bloomberg, 8/5/2014

Petroleo Brasileiro SA’s (PBR) chances of meeting output targets for the first time in a decade are fading as a rush to dispatch new oil platforms creates headaches miles offshore.

A floating hotel anchored last month at its P-62 platform symbolizes the state-run producer’s predicament. The so-called floatel is housing hundreds of workers sent to fix the new unit that’s already months behind schedule after a fire and emergency maintenance. Other new platforms at the Roncador, Sapinhoa and Lula Nordeste fields have reported safety breaches and equipment delays from suppliers, slowing the output ramp-up.

Petrobras, as the top producer in waters deeper than 1,000 feet is known, is relying on platforms like P-62 to tap vast offshore deposits after missing output targets for 10 straight years. Last year, it said production would start increasing in the fourth quarter as nine new platforms added a million barrels a day capacity. Through June, it’s up 1.4 percent compared with a 7.5 percent annual growth target.

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Brazil: When To Sell After The Rally?

July 29, 2014

Shuli Ren – Barron’s, 7/29/2014

Brazil’s equity market has had a stunning performance since mid-March. The iShares MSCI Brazil Capped ETF (EWZ) has gained around 30% since then. This ETF is up 16.7% this year.

Part of the rally is propelled by optimism in the state-owned sector. Investors bet that high-profile names such as Petrobras (PBR) and Electrobras (EBR) will operate better once a new government is ushered in after the October presidential elections. Last week, Barclays upgraded Petrobras to Buy for this precise reason. Petrobras outpaced the Brazil ETF, gaining 27.2% this year. Electrobras rose 17%. State-owned Banco de Brasil (BBAS3.Brazil) advanced 24%. Brazilian iron ore producer Vale (VALE), whose fate is tied to China, is the only high-profile underperformer, not even breaking even this year.

But some investors are skeptical of the Brazilian rally, asking “when to sell” Brazil. In a report published today, strategist Geoff Dennis suggested the time is “now.”

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Former exec of Brazil’s Petrobras charged with fraud

July 18, 2014

EFE – Fox News Latino, 7/17/2014

Prosecutors have filed fraud charges against an erstwhile executive of Petrobras and eight other suspects over alleged gross overbilling for a contract, the latest corruption scandal to rock the Brazilian state-controlled oil giant.

Petrobras’ former chief international officer, Jorge Luiz Zelada, is accused of favoring Brazil’s Odebrecht in a 2010 auction in which the construction group was awarded an $825.6 million contract, the Rio de Janeiro state Attorney General’s Office said in a statement.

Also under investigation are Odebrecht’s contract director, Marco Antonio Duran, and the Petrobras attorneys, technicians and engineers who were involved in the alleged fraud related to a project to adapt Petrobras’s assets in 11 countries.

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Brazil Gives Petrobras Added Rights for Billions in Advance Payments

June 25, 2014

Paul Kiernan and Will Connors – The Wall Street Journal, 6/24/2014

RIO DE JANEIRO—Brazil’s government agreed Tuesday to sign over additional production rights for potentially huge oil fields to state-run oil company Petróleo Brasileiro SA, or Petrobras, in exchange for billions of dollars in advance payments.

Petrobras will receive expanded production rights to four oil fields off the coast of Brazil that it acquired from the government in 2010. But the company will have to pay a “signing bonus” of two billion Brazilian reais ($898 million) to the government in 2014, plus an estimated BRL13 billion in oil during the following four years.

The unexpected deal came as Brazil’s federal government is looking for ways to meet its budget goals this year. Economists say slowing growth, high inflation and election-year spending will likely drive authorities to seek revenue from so-called nonrecurring sources to meet its 1.9% primary surplus target for 2014.

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