Brazil deal to end truckers' strike rattles Petrobras investors
(Recasts with closing stock price, new total market value
decline, latest numbers on trucker blockades)
By Marcela Ayres and Alexandra Alper
BRASILIA/SAO PAULO, May 28 (Reuters) - Petrobras shares
plunged 15 percent on Monday after Brazil's government offered
new fuel subsidies and softened the oil producer's pricing
policy in a bid to settle a truckers' strike that has wreaked
havoc on Latin America's largest economy.
As a result of tax cuts and subsidies announced by President
Michel Temer late on Sunday, domestic diesel prices would fall
0.46 real per liter, or about 13 percent of the current price at
the pump, and remain frozen for 60 days.
Shareholders in state-controlled Petróleo Brasileiro SA
, which earlier this month soared after the company
reported its highest profits in five years, have been hammered
as the stock lost nearly a third of its value in the past week.
Compounding the sense of crisis, Petrobras management sent a
letter to its workers urging them not to follow through on a
strike planned for later in the week, saying "paralysis and
pressure for adjusting prices" would hurt the company or country
as a whole.
Under the deal announced by Temer, after the initial 60-day
period price freeze, Petrobras will start adjusting diesel
prices monthly, a switch from its current policy of daily price
Petrobras said in a securities filing that the government
had agreed to compensate it for any losses. But investors were
Since May 18, when speculation began that the government
might need to negotiate with truckers over diesel prices,
Petrobras has lost 127.5 billion reais ($34.13 billion) in
Its drop on Monday led a broader sell-off in Brazil's
benchmark Bovespa index, which slumped 4.5 percent and
is now in negative territory for the year.
The latest pricing announcement "suggests increasing risk
that the government will interfere in Petrobras affairs again or
force them to subsidize the domestic market again," said
Morningstar analyst Allen Good, adding it was "a change in the
market-friendly policy implemented in the last couple of years."
For years, Petrobras subsidized domestic fuel prices,
boosting its debt load, a policy current Chief Executive Pedro
Parente - whose days some investors fear may be numbered - has
tried to reverse.
"There were rumors last week Parente might resign," Good
said. "The latest decisions might force his hand."
Petrobras has denied the rumors, saying Parente has no
intention of quitting.
The subsidy and tax cut measures represented Temer's latest
concessions to the truckers, whose strike has won popular
support even as it has severely hampered the flow of food, fuel
and key exports in Latin America's largest economy.
A truckers' association behind the nationwide protest has
told drivers to get back to work, but the government said
progress had been slow and highway police said 556 highway
blockades by protesters remained in place.
The moves also left Temer's government scrambling to win
congressional approval for several tax measures needed to avoid
breaking budget rules, a daunting endeavor ahead of October's
congressional and presidential elections.
Brazilian farm groups, meanwhile, warned that production and
exports of key commodities like coffee and soy would fall if the
truckers continue to block roads.
Some 64 million chickens have starved to death as a result
of the strike, meat group ABPA said on Sunday. Brazil is the
world's largest chicken exporter. As many as 150 poultry and
pork processing plants have stopped production for lack of feed
and storage space, the association said.
Among other sectors, Brazilian steelmakers like Cia
Siderurgica Nacional and Usiminas may lose
up to 20 percent of their revenue in May due to the strike,
analysts from XP Investimentos said in a research note.
Shares in food retailers Carrefour Brasil and GPA
SA also fell as analysts warned their supply chains
($1 = 3.7359 reais)
(Additional reporting by Ana Mano, Gram Slattery, Paula Laier
and Tatiana Bautzer; Writing by Bruno Federowski
Editing by James Dalgleish and Tom Brown)
First Published: 2018-05-28 01:53:55
Updated 2018-05-28 23:48:58
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