The man who oversaw the transformation of Petrobras from a lumbering state oil monopoly into a thriving public-private partnership more than a decade ago is back in charge, tasked with another monumental overhaul.
There is much for Chief Executive Officer Pedro Parente to fix.
Since he stepped down as chairman in 2003, graft and mismanagement have wiped out more than $200 billion of shareholder value and saddled the company formally known as Petroleo Brasileiro SA with $130 billion of debt.
At the center of Brazil’s largest-ever corruption scandal, Petrobras also faces a U.S. Justice Department probe and investor lawsuits in the United States and Europe.
The company’s output is far below expectations, despite investments of $300 billion since 2003, as low oil prices have made promising discoveries uneconomical.
Those who have seen Parente pull off turnarounds before say his patience and professionalism will help get Petrobras back on track, facing down longstanding resistance from unions and their political allies.
“There’s no better person for Petrobras at this point: Parente knows the company inside-out,” said Ricardo Lacerda, a former Latin American investment banking chief at Goldman Sachs Group Inc and Citigroup Inc who advised Petrobras when Parente was chairman.
“He will rethink Petrobras’ strategy, improving management and efficiency like he did in the past.”
Neither Petrobras nor Parente’s personal office responded to requests for an interview with the CEO.
Parente, 63, has plenty of experience fixing problems.
Schooled as an engineer, he became a banker instead. Starting at state-run Banco do Brasil SA in 1971, Parente soon joined the central bank, working through crippling sovereign-debt defaults and a transition from military to civilian rule in the 1980s.
In the 1990s, he helped restructure Brazil’s debt, reopening the country to foreign investment.
Parente and his colleagues believed increased private investment would help relieve the public debt burden and ease its responsibility to fund state-led companies such as Petrobras.
In 1999, then-President Fernando Henrique Cardoso made Parente his chief of staff, and his management of Brazil’s 2001-2002 electricity crisis made him a household name.
In 2001, the Cardoso government found its vast hydroelectric-power system was running out of water, threatening to plunge millions into darkness within months.
Before that could happen, Parente convinced Brazilians to cut electricity use by a quarter, avoiding blackouts, and started an emergency power plant-building program to supplement the overstressed hydro system.
“His handling of the crisis was nothing short of amazing,” said Mario Veiga, president of Rio de Janeiro-based power research group PSR Consultoria. “People were in panic, nobody was in charge, and he handled the situation quickly.”
While Cardoso and his predecessors sold state-owned steel, mining and phone companies, selling Petrobras was politically impossible.
Instead, Parente cut Brazil’s voting stake to 50.1 percent, the minimum needed for control, and listed Petrobras on the New York Stock Exchange.
The partial privatization, the government said, would release more information to the public, limiting political interference and boosting investors’ confidence.
It worked. By 2008, after some of the world’s largest oil discoveries in decades, the market value of Petrobras had grown nearly twentyfold to more than $290 billion.
At the time, however, the public listing was an uphill battle. Unions fought it bitterly, and investors were spooked by swings in the value of Brazil’s currency, bureaucratic delays and a Rio de Janeiro oil spill.
“Pedro’s best quality is his Biblical patience with slow-moving state companies and government affairs,” said a banker who worked with Parente on the New York listing.
“He listens a lot,” the banker said, requesting anonymity due to confidentiality accords.
After Petrobras, Parente kept the same playbook. From 2003 to 2009, he ran media group RBS, moving it from family to professional management and slashing costs and debt.
From 2010 to 2014, he headed the Brazil unit of agricultural commodities company Bunge Ltd as the industry’s global boom cooled.
Parente again faces fierce internal Petrobras opposition. Unions, which accuse him of harming the company with his emergency power plants under Cardoso, say he now plans to sell assets to foreigners at bargain prices.
Unions held their longest strike in 20 years last year to protest his predecessor’s plan to sell $15 billion in assets by the end of 2016. To date, Petrobras has sold just over $1 billion.
Parente will probably move quickly to implement a clear fuel-pricing policy, an important goal for investors, said Plinio Nastari, president of Brazilian agricultural consultancy Datagro.
At Bunge, a major ethanol producer, Parente clashed with the government over a policy that used Petrobras to shield the Brazilian market from world fuel prices.
The policy helped check inflation but cost Petrobras $28.5 billion in gasoline subsidies, Nastari said. It also made ethanol uncompetitive with gasoline, costing producers $22 billion, he added.
“Parente is an excellent choice,” Nastari said. “Nobody knows better how fuel price subsidies hurt Petrobras and ethanol producers. The government made a clear statement with his appointment.”