The government of Brazilian President Luiz Inacio Lula da Silva, known as Lula, dismissed the CEO of the public oil giant Petrobras, Jean Paul Prates, on Tuesday May 14 after a controversy concerning the distribution of dividends to shareholders. “Prates has been fired,” a presidential spokesperson told Agence France-Presse (AFP).
The government will propose to the board of directors to replace him with Magda Chambriard, former director general of the National Petroleum Agency, which regulates the oil industry in Brazil, the same source said. For its part, Petrobras announced in a press release that Mr. Prates had requested a meeting of the board of directors to examine “the early end of his mandate (…) in a negotiated manner” and present his resignation.
Mr. Prates’ dismissal took place after Brazilian markets closed. But in New York, Petrobras’ ADRs fell 8% after the announcement. ADRs (American Depositary Receipt) are negotiable certificates issued by an American bank which represent a share of a foreign company, and are traded on the stock markets in the United States like any share of an American company.
Government interference in company affairs
Jean Paul Prates, 55, is a former senator for Lula’s left-wing Workers’ Party. He was appointed head of Petrobras shortly after the new president came to power in January 2023. His difficulties began on March 7, when the Petrobras board of directors decided not to pay its shareholders any extraordinary dividend for the 2023 financial year, during which the oil flagship had achieved the second largest profit in its history.
The price of Petrobras shares collapsed on the stock market, with analysts seeing this lack of dividends as the result of government interference in the company’s affairs. A possibility that has worried the markets since Lula came to power, who has repeatedly accused Petrobras managers of only thinking about satisfying the group’s shareholders, to the detriment of consumers.
Mr. Prates himself had affirmed that it was “legitimate” for the Petrobras board of directors to be “guided by the President of the Republic.” A little more than half of the capital of Petrobras is held by the Brazilian state, and the rest belongs to private shareholders.
Finally, on April 25, Petrobras shareholders approved the payment of 22 billion reais (4 billion euros) in extraordinary dividends for 2023, and the placement of another 22 billion in a fund intended to guarantee the payment of dividends in the future.
Waltz of Presidents
Although shareholders were partially satisfied, Mr. Prates remained in an unstable position. According to Brazilian media, there were strong tensions between him and the Minister of Energy, Alexandre Silveira.
After his return to power, Lula put a stop to the Petrobras privatization process launched by his far-right predecessor Jair Bolsonaro (2019-2022), under which the group had experienced serious turbulence: four presidents were succeeded at the head of the company, due to violent disagreements over Petrobras’ pricing policy.
In its 68 years of existence, Petrobras has experienced a succession of presidents: 39 precisely – Ms. Chamberbriard will be the 40th – with an average longevity of less than two years.
