SÃO PAULO—Oil giant Petrobras lost almost a fifth of its market value Monday after Brazil’s President Jair Bolsonaro named an army general to take ove
SÃO PAULO—Oil giant Petrobras lost almost a fifth of its market value Monday after Brazil’s President Jair Bolsonaro named an army general to take over the company in an apparent bid to control fuel prices, sparking a crisis of confidence as investors soured on his administration’s commitment to free-market policies.
Mr. Bolsonaro’s plan to appoint Gen. Joaquim Silva e Luna, who served alongside the president decades ago under Brazil’s military dictatorship, came as a blow to the oil producer. Petrobras—officially Petróleo Brasileiro SA —had spent the past few years trying to regain investors’ trust and selling billions of dollars of assets following an overspending binge under prior administrations that nearly drove the company bankrupt.
“Bolsonaro’s impetuous decision to replace the CEO of Petrobras with an army general is a red flag indicating a turn towards populist policies,” TS Lombard, an investment-research firm, said on Monday in a note to investors. The London-based company said the president’s plans indicate a shift toward the generous fuel-price subsidies that marked the leftist government of Dilma Rousseff, who was removed from office in 2016.
Since Friday, Petrobras has lost close to $20 billion in market value. The price for its preferred shares fell from 27.33 reais, or $5.00, at the close on Friday to 21.45 reais, or $3.92, by Monday’s close. The decline was the single biggest fall in Petrobras shares since March 9 of last year, when oil prices plummeted at the start of the coronavirus pandemic.
As investors fled Brazilian assets Monday, the country’s Bovespa stock index fell nearly 5%, while Brazil’s currency lost more than 1% against the dollar. Prices of bonds tied to Petrobras also fell.