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Pelé has told unhappy Brazilians to forget the protests and focus on the football. If only. As emerging market investors took fright on Thursday at a possible end to asset purchases by the U.S. Federal Reserve, a casualty was Petrobras. Shares of Brazil's national oil company fell 3 per cent. The concern is justified. Any shift away from emerging markets threatens to take more gloss off the already tarnished Petrobras story.
In truth, Petrobras has plenty to worry about even without the Fed. A combination of a sluggish Brazilian economy and its own stuttering performance has taken a toll already. Since early June, the company's share price has fallen 18 per cent; it trails Statoil, another national oil company, by a distance over one, two and three years. That may be an unfair comparison: Petrobras is an emerging oil producer while Statoil is mature, and they operate in quite different environments. But that is life in the oil business.
Petrobras has been taking steps to restructure and bring in outside expertise. Independent directors have been added to its board. It signed letters of intent this month with Sinopec and South Korea's GS Energy Corp to help finance the construction of two new refineries. It is restructuring its petrochemicals unit. And it has sold $1.5-billion (U.S.) of assets in Africa into a joint venture with BTG Pactual, the Brazilian bank, as part of a $10-billion disposal programme. But it has $72-billion of net debt – 2.5 times 2012 earnings before interest, tax, depreciation and amortisation, and is creaking under the weight of excessive national expectations.
Two things would turn investor sentiment towards Petrobras around. One is for the domestic economy to pick up. The other is for Petrobras to build up a consistent record of meeting its production targets, which keep eluding it. Only then will Petrobras and Brazil stop scoring own goals. And Pelé too, maybe.
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