Energy Losses Expose Petrobras Fuel Distortion: Corporate Brazil

Refinaria de Petroleos de Manguinhos SA, the worst performing Latin American energy stock this year, is showing investors how Brazil’s fuel subsidies are hurting the ability of non-government refineries to make money.

Manguinhos, based in Rio de Janeiro, had been trying to reduce its tax burden by using securities backed by unpaid government liabilities purchased at a discount, known locally as precatorios, a practice the Rio state government was disputing in court. Shares tumbled after Rio issued an Oct. 15 decree to expropriate land where Manguinhos operates, saying that was needed to settle unpaid taxes and for low-income housing.