Editorial: Shadowy Goings-On at Petrobras

03/21/2014 - 08h41

In questions such as these, it is always possible to produce complex technical explanations. However, the recklessness of the decision by Petrobras bosses in 2006 to buy half of a refinery located in Pasadena, in the U.S., is becoming increasingly clear.

Petrobras paid $360 million, despite the fact that only a year before the entire refinery had been valued at just $42.5 million. What could possibly have motivated Brazil's largest state-controlled company to by half a refinery for nearly eight times the original price of the whole property?

If that weren't enough, it appears that some Petrobras executives were not aware of a clause in the contract - the so-called "put option" - which meant the company would be forced to buy the other half of the refinery in the event of a disagreement between the partners.

This was indeed what occurred, and Petrobras found itself obliged to purchase of the other half of the refinery - except that by that time, the price had risen to $820.5 million. In short, Petrobras spent $1.19 billion on a refinery that cost less than 5% of that value in 2005.

So, when the deal was concluded in 2012, it wasn't long before suspicions were raised regarding the wisdom of those involved, suspicions which became even more serious yesterday, when the police arrested an ex-director of the refining and supply sector of the company.

He is being investigated for his participation in the Pasadena deal and is accused of destroying evidence which would incriminate him in a money laundering case.

Moreover, the scope of the investigation is unlikely to be limited to this individual. As Lula's Chief of Staff, it was Dilma Rousseff who was responsible for the administrative council of Petrobras in 2006, when the acquisition of the Pasadena refinery took place.

Although the disquiet around this case has been building for months, it was only this week that Dilma published a statement in the newspaper "O Estado de S. Paulo", in which she claims to have authorized the deal without having complete information, using advice which was 'technically and legally flawed.'

Petrobras executives told Folha, however, that all the information regarding deals of this nature is always available to members of the administrative council. At the very least, this tarnishes the image of the thorough and meticulous administrator which Dilma has tried so hard to cultivate during her political career, including as President of the Republic.

However, if, as is expected, the investigations proceed with due diligence, the political and legal consequences have the potential to be even greater.

Translated by TOM GATEHOUSE

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