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Petrobras Shields Itself From Damaging Government Interventions

02/16/2018 - 11h58

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NICOLA PAMPLONA
FROM RIO

Brazil's state-controlled oil company, Petrobras, included articles in its bylaws which force the government to indemnify the company in the event of damages due to subsidies on fuel prices or investments related to public interest.

The measure attempts to shield the company's price policy, which establishes the sale of products at prices higher than those in the international market, and to prevent its political use to make investments.

Between 2011 and 2014, the disparity of fuel prices and faulty projects determined by the government resulted in a loss of approximately R$ 90 billion (US$ 27.8 billion) for the refining area of the company, responsible for fuel sales and unwise investments in new refineries.

The amendment to the company's bylaws was approved by its shareholders in December, and it can get in the way of Michel Temer's administration intentions of providing subsidies to liquefied petroleum gas ("cooking gas") after the surge in prices which began in June 2017.

If the government wishes to force Petrobras to mark down prices, it will have to annually indemnify the company for any damages.

The new sections of the bylaws comply with the so-called "Law for State-Controlled Companies" (Lei das Estatais). It determines that companies should clarify, by means of an official announcement, situations in which they are acting on behalf of public interest, limiting its economic impact.

The company believes that having such rules in its bylaws will make it harder for future governments to revoke them, seeing such amendments depend on the approval of shareholders' meetings.

Translated by ANA BEATRIZ DEMARIA

Read the article in the original language

Ricardo Moraes/Reuters
Brazil's state-run Petrobras oil company headquarters is pictured in Rio de Janeiro, Brazil
Brazil's state-run Petrobras oil company headquarters is pictured in Rio de Janeiro, Brazil

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