Petroleo Brasileiro S.A.’s chief executive quit on Friday in a surprise move that wiped $12- billion off the state-controlled oil producer’s market valuation, after Brazil’s government responded to a national trucking strike by intervening in the company’s fuel pricing policy.
Pedro Parente, who in two years in the job had succeeded in slashing the scandal-plagued company’s debt and restoring it to profitability, said in a resignation letter to President Michel Temer it was clear after the last week’s turmoil that new talks would be needed on pricing policy.
“Given this situation, it has become clear that my remaining as CEO of Petrobras has stopped being positive and will not contribute to the alternatives that the government must consider going forward,” Mr. Parente said in the letter.
His resignation appeared to have taken Mr. Temer’s already beleaguered government by surprise. A senior presidential source told Reuters on Thursday no such move was expected.
Petrobras said in a statement the board would choose an interim CEO on Friday and other top executives would remain. A company source said the board would meet at 4 p.m. (1900 GMT).
Mr. Parente urged Mr. Temer to adhere to the company’s corporate governance rules in naming a successor, which would bar any political appointees for the post.
Petrobras shares were down 13 per cent in early afternoon trading, pulling Brazil’s wider Bovespa index into negative territory. The real currency weakened as much as 1 per cent against the dollar.
The drop in Petrobras shares wiped some 45-billion reais ($12-billion) from the company’s capitalization, according to Reuters’ calculations.
Petrobras, one of the most widely held emerging market stocks, was at the epicentre of a bribery and graft scandal involving some of its key suppliers that began to roil Brazil’s political and business worlds four years ago.
Brazil’s former left-wing government also used the company to subsidize fuel prices, helping drive it heavily into debt.
TRUCK DRIVERS STRIKE
A key plank of Mr. Parente’s turnaround campaign for the company and a condition for his taking the top job in 2016 was freedom to control fuel prices. He sought to align those more closely with international markets through nearly daily price adjustments.
But on Sunday Mr. Temer, governing with rock-bottom approval ratings, announced plans to placate the striking truck drivers – who were protesting the high cost of diesel – by freezing fuel prices on a monthly basis and taking other measures to bring domestic diesel prices down.
Truckers have gradually returned to work since then after a protest that left gas stations and some airports without fuel and supermarket shelves bare. The government on Friday threatened to prosecute those calling for a new strike.
“The policy [Mr. Parente] put in place was the scapegoat of this whole crisis,” said Roberto Castello Branco, a former Petrobras board member, arguing that Mr. Temer’s weakened government must have asked Mr. Parente for changes he could not accept. “The pressure on him was enormous.”
“For the country, for the company, a great source of uncertainty has opened that is very dangerous,” he added.
Although Mr. Temer promised the government would compensate Petrobras for any losses incurred by its intervention on fuel prices, the move may have crossed Mr. Parente’s red line against political interference.
Mr. Parente had said he would not quit during the crisis. But rumours swirled about a possible exit after Mr. Parente, a turnaround expert, was named chairman of troubled poultry company BRF in April.
BRF shares soared 8 per cent after Mr. Parente’s resignation was announced.