Petrobras Nominates Vale CEO as Its Next Chairman – by Will Connors and Luciana Magalhaes (Wall Street Journal – March 27, 2015)

http://www.wsj.com/

Brazilian state-run oil company is in the midst of a widespread corruption scandal

RIO DE JANEIRO—Brazil’s government on Friday nominated the chief executive of mining giant Vale SA as the next board chairman of state-run oil firm Petroleo Brasileiro SA, disappointing those who were looking for sweeping changes at the oil company that has been devastated by a kickback-and-bribery scandal.

Murilo Ferreira’s nomination will be voted on at the next Petrobras shareholders meeting on April 29. If approved, as expected, he will succeed Guido Mantega, Brazil’s former finance minister, who has headed the Petrobras board since March 2010. The company on Thursday said that Luciano Coutinho, head of the country’s development bank, known as BNDES, will serve as interim chairman of Petrobras until next month’s board vote.

A career employee of Vale, which was state-owned until 1997, Mr. Ferreira is a trusted ally of President Dilma Rousseff. His appointment isn’t likely to shake up a board that has served as a rubber stamp for the policies of her ruling Worker’s Party, investors and analysts said.

Critics have faulted Ms. Rousseff for using the oil giant to advance her administration’s agenda, including forcing the company to subsidize fuel for consumers and do business with Brazilian suppliers, moves that have cost the oil giant billions.

“It’s a missed opportunity to put in someone from the market who can defend the interests of the company,” said Guilherme Figueiredo, a fund manager at M. Safra & Co, with $1.2 billion under management. He said his firm isn’t currently invested in Petrobras. “The concern is protecting the government. The government doesn’t want any surprises,” he said.

Economist João Pedro Brugger was more optimistic about the choice of Mr. Ferreira.

“It’s a considerable upgrade from some of the other names that were being circulated,” Mr. Brugger said. “It’s a name connected to the government, but it’s a good name.”

Petrobras shares fell 1.6% Friday in New York, while Vale was off 4.6%. A Vale spokesman declined to comment on Mr. Ferreira’s nomination to the Petrobras board; he is expected to remain at Vale. Ms. Rousseff’s press office didn’t respond to requests for comment.

Since assuming the helm at Vale in 2011, the 61-year-old Mr. Ferreira is best known for slashing costs and streamlining the firm after the global commodity boom fizzled. While he is respected for those efforts, Vale has underperformed peers such as Rio Tinto.

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