Petrobras Rotates Chairmen as It Prolongs Earnings Debate

Petroleo Brasileiro SA appointed two chairmen in two days as the state-run producer struggles to report audited results financial results and emerge from Brazil’s biggest corruption scandal.

At a board meeting Thursday, directors agreed to resume discussions April 17 on a graft-related writedown to be included in financial results, according to two people with knowledge of the talks. That meeting will take place before the top executive at iron-ore miner Vale SA becomes chairman at the end of the month. The company had planned to present writedown estimates to the board Thursday, people familiar with the matter said earlier this week.

Petrobras, based in Rio de Janeiro, said in a regulatory filing Friday that Vale Chief Executive Officer Murilo Ferreira is its candidate for chairman at an April 29 shareholders meeting. Luciano Coutinho, who heads development bank BNDES, replaced former Finance Minister Guido Mantega as chairman on Thursday until the meeting is held, it said in a separate statement that didn’t mention Ferreirra.

“The confusion surrounding the announcement might indicate it was hard to find someone willing to do the job,” Bernardo Rodarte, who oversees 1 billion reais ($309 million) at Sita Corretora, said by telephone. “There’s a lot of work to do to regain the faith.”

‘Enormous’ Task

Choosing the 61-year-old Vale executive breaks from a tradition of political appointees. Investors want the government to improve transparency in a company that lost about $200 billion in market value in the past four years amid production shortfalls and allegations of political interference and corruption. In naming Coutinho late Thursday, Petrobras said the appointment was valid until the next shareholders meeting, without mentioning a permanent solution.

“While a competent and market-friendly management team is crucial, the scale of what needs to be done to restore confidence in Petrobras is enormous and goes far beyond personalities,” Nicholas Spiro, managing director at Spiro Sovereign Strategy in London, said in an e-mailed response to questions. “The company’s reputation is in tatters right now and its financial situation remains dire.”

New Team

Ferreira, who has spent most of his career in the mining industry, earlier this year was appointed to President Dilma Rousseff’s industrial development council. He started at Vale, the world’s largest iron-ore producer, as an analyst in 1977.

Friday’s appointment comes less than two months after the overhaul of Petrobras’s management. Aldemir Bendine, a 51-year-old state banker backed by Rousseff’s party, replaced Maria das Gracas Foster as CEO on Feb. 6.

Ferreira’s most urgent task in his new role will be to release Petrobras’s long overdue audited third-quarter results after quantifying losses from a decades-long kickback scheme.

The oil producer founded in 1953 by dictator Getulio Vargas is at the center of Brazil’s biggest graft and money laundering scandal in which contractors allegedly colluded to inflate bids, Petrobras executives took bribes and politicians shared in the proceeds. The scandal has transfixed Brazil and left Rousseff struggling to contain the damage.

Petrobras needs a “radical change” in its management after the corruption scandal, minority shareholder association Amec said in a statement March 11. Amec called for “a prudent, responsible and professional administration.”

‘Political Appointees’

Ferreira’s name had been mentioned by local press as a possible replacement for Mantega as finance minister after Rousseff won re-election in October, and again as a candidate to replace Gracas Foster as Petrobras CEO. Both times Ferreira said the positions weren’t offered to him. Vale didn’t provide additional comment when contacted by e-mail.

“This is a great opportunity to change the board members for more market-friendly people,” Mariana Bertone, an equity analyst at GBM Grupo Bursatil Mexicano SA, said in e-mailed comments before the announcement. “It’s fundamental for investors’ confidence that Petrobras behaves like a company and gets rid of political appointees.”

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