Latinvex names Pedro Parente as CEO of the Year.

BY JOACHIM BAMRUD

Just as Brazil, Latin America’s top economy, has seen a dramatic turnaround, so has the state oil producer Petrobras, the top company on the Latinvex 500.

After years of politically-motivated decisions, the company is run professionally thanks to the decision by President Michel Temer to hire Pedro Parente and give him a free reign.

Before assuming the top job at Petrobras in May 2016, Parente was Chairman of the Brazilian stock exchange, CEO of Bunge Brasil four years and media company Grupo RBS for six years. He also served in various Brazilian governments, including as planning minister and deputy finance minister.

Parente has been heavily focused on the key challenge for Petrobras, reducing its heavy debt burden through asset sales and refinancing of debt. Thanks to bad decisions by Parente’s and Temer’s predecessors, Petrobras became the world’s most indebted oil company.

Parente has reduced net debt to 279.2 billion reais (US$88.1 billion) in the third quarter from 369.5 billion reais in the first quarter 2016 — the last one before he took over the company. In the third quarter 2015 debt had reached a whopping 402.3 billion reais.

More importantly, short-term debt has fallen to 23.4 billion reais in the third quarter this year from 36.5 billion in the second quarter 2016 and a whopping 62.1 billion reais in the first quarter 2016.

PROFIT RETURNS

Parente has also refinanced debt, but the key has been to sell assets. Petrobras is aiming for $21 billion in revenue from asset sales this year and in 2018 after achieving $13.7 billion in divestments last year, as the Financial Times reported recently.

Parente also changed the company’s pricing of gasoline to market prices in a break with the past policies of maintaining price controls to artificially low prices and reduced the work force through voluntary incentives.

During the first nine months this year, Petrobras posted a profit of 5 billion reais (US$1.7 billion) compared with a 17.3 billion reais loss a year earlier. The third quarter net income was 266 million reais (US$88.1 million) compared with a 16.5 billion loss a year earlier. The profits compare with a loss of 16.4 billion a year earlier.

Petrobras returned to profitability in the fourth quarter last year after years of losses. During all of 2016, Petrobras lost $4.5 billion. That follows losses of $8.9 billion in 2015 and $7.4 billion in 2014. The past three years results have placed Petrobras among the largest money-losers in Latin America, according to the Latinvex 500.

THE PETROBRAS CORRUPTION SCANDAL

Apart from Petrobras’ bad finances, Parente also inherited issues related to corruption at the oil giant, which became the largest bribe scandal in Latin America and some say world history.

In a scheme masterminded by then-president Luiz Inazio Lula da Silva, politicians and government officials charged bribes for Petrobras contracts during several years in a scheme whereby the contracts were inflated in return for the contractors paying between 1 percent and 5 percent of every deal into secret slush funds.

The Petrobras bribe scheme caused an estimated 42 billion reais (US$13.9 billion) in losses to shareholders and taxpayers, according to federal prosecutors, Reuters reported.

Petrobras is now in arbitration proceedings at B3 SA Brasil Bolsa Balcão – which operates the São Paulo Stock Exchange. The process currently includes more than 200 investors and around 20 investment funds which have 5 billion reais in claims against Petrobras, according to Valor Economico.

In June, the Petrobras board approved a settlement to end an United States-based lawsuit opened by some affiliates of The Vanguard Group, one of its largest shareholders.

Several investors have sued Petrobras in US courts over losses they incurred due to the corruption scheme.

Parente’s predecessor Aldemir Bendine was arrested in July on suspicion he received large bribes from construction conglomerate Odebrecht.

BR DISTRIBUIDORA IPO

Now Parente is facing what will surely be his other crown achievement – the widely-anticipated initial public offer of BR Distribuidra, the fuel distribution unit of Petrobras.

Parente expects to raise up to 7.5 billion reais ($2.3 billion) by floating a minority stake in the unit.

That would beat the $1.5 billion Carrefour Brasil IPO in July, the largest in Latin America the past three years.

“Today we can see we have a completely different company,” Parente told the Financial Times in October.

For his impressive turnaround of Petrobras, Latinvex has named Pedro Parente CEO of the Year.

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