Petrobras’ delayed pricing changes shakes Lula-Prates relationship, sources say

(Reuters) – Brazil’s desire for a faster change in Petrobras’ fuel pricing policy (PETR4.SA) has caused friction between President Luiz Inacio Lula da Silva and the oil company’s CEO, sources with knowledge of the matter told Reuters.

Petrobras Chief Executive Jean Paul Prates, who took office in January after being appointed by Lula, has said several times that he will change the company’s policy, the so-called PPI, which tracks international factors such as global oil prices and foreign exchange rates.

However, he is still waiting for a complete overhaul of the company’s top management – which must follow governance rites – so that he can make strategic changes.

Mines and Energy Minister Alexandre Silveira on Wednesday said the government would alter the firm’s pricing policy based on national standards.

He said Lula had told ministers the oil company and the government would work to reduce the impacts of potential fuel price hikes on inflation.

A government source talking on the condition of anonymity said there was a tense atmosphere between Lula and Prates. “Lula wants to see a new direction,” the source said.

“There is pressure from Brasilia, yes,” a second source said. “He (Lula) wants a new pricing policy. Prates has already talked about it, but he needs to wait for the conclusion of the management changes (made last week) and the board of directors.”

Petrobras’ new executive board was sworn in last week, and the new board of directors will be voted on at the end of this month, when a shareholders’ meeting will take place.

Another person with knowledge of Lula and Prates’ relationship said though there was pressure from the president for results, there were no specific problems with the firm’s CEO.

“There is no crisis. Of course, if you don’t deliver, there will be, but for now it is under control,” the source said, noting a “general pressure” from the government to deliver in all areas.

“Lula is calling on everyone, he wants results,” the person added.

A high-ranking government source said there were “many legal limitations” between what Prates promised Lula and what he can do, noting that the former Workers’ Party senator had little room to maneuver within company policy.

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