RIO DE JANEIRO (Reuters) – Shares of Brazil’s Petrobras plunged 8% on Wednesday after the state-run oil firm said its chief executive would step down, to be replaced by a former regulator with views closer those of President Luiz Inacio Lula da Silva.
Industry analysts expressed concern, as CEO Jean Paul Prates was seen as balancing the market demands for disciplined capital spending and healthy dividends with political demands to stabilize fuel prices and invest in job-creating sectors.
“It was unnecessary, because Jean Paul Prates was doing a very reasonable job,” said Frederico Nobre, chief equities analyst at Warren Investimentos.
Prates served for less than a year and a half, becoming the fourth Petrobras CEO dismissed for political reasons. His firing sparks concerns about prioritizing the Brazilian economy over minority shareholders.
Analysts at Jefferies suggested the CEO swap indicates a heightened effort to intervene in the company. Consequently, they downgraded Petrobras from “buy” to “hold” in a note to clients.
Prates’ removal signifies a victory for Lula’s cabinet members advocating for lower fuel prices and increased capital spending. They aim to stimulate job creation and economic growth.
“We see it as negative, as we believe it increases uncertainties in Petrobras’ investment case amid a period of stability, particularly as it relates to capital allocation,” Santander analysts said in a note to clients.
Lula’s decision to swap the CEO at Petrobras sends shockwaves through Brazil’s financial markets. Analysts speculate about the implications of the leadership shake-up on the oil giant’s operations. Furthermore, stakeholders express concerns about potential disruptions in Petrobras’ long-term plans.
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