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EFS Special Release
Petrobras - To be, or not to Be?

To understand the logic of the Petrobras capitalization transaction it is necessary to understand the control of billionaire oil group, regardless of its current shareholding, has always been exercised by the Federal Government. This happens because the Union belongs to a bloc of shareholders whose directors, all of whom are appointed by the President and Ministers of the Federative Republic of Brazil. Today, this block of shareholders, called the "majority", it controls over 51% of the total shares of the company. This group is formed, among others, (a) by the Union, (2) by the largest pension funds 'private' in Latin America (among them, Previ, Petros and Funcef), (3) Bank of Brazil (4) Caixa Economica Federal (5) and the BNDES (6) BNDESPAR, all private companies controlled by the Union

Therefore, to capitalize or consolidate more power over Petrobras it is not necessary the Brazilian Federal Government to spend a cent, because even 38.6% of the shares owned by investors who bought their positions at the New York Stock Exchange (NYSE), are the absolute minority , as it is the case of shares purchased with funds from FGTS on BOVESPA (2.1%) .

In a corporation the one to control is the one who - directly or indirectly - owns more than 50% of the total amount of shares. In the case of Petrobras, the controlling shareholders don not fear the CVM, the Brazilian public agency whose function is to oversee the stock market and the activity of corporations (similarly to the USA’s SEC). This impunity happens because the same "authorities" who choose the directors of Petrobras, are choosing the CVM. This means that: The supervisor is chosen by the supervised!

Once set this scenario of power and impunity within Petrobras, it is not justifiable that the Brazilian Federal Government gives Petrobras R$ 74,808 billion (USD 43,366.97 billion) in cash, money it would perfectly receive on the extraction of oil from the pre-salt, in exchange for shares that the Brazilian Federal Government does not need so as to control the company.

Surely, instead of giving this huge amount of cash to such a rich company this money could be better used if it were invested in health, education, security, roads, airports, sewage and energy distribution, or simply to assist states and municipalities that are unable to pay for their basic services exclusively with their own resources (or what is left of them).

On the other hand, if this money is not given to Petrobras, but kept in public saves, its use will be discussed in detail within the voting of the Federal Government’s general budget by the National Congress, with the participation and oversight of all senators and representatives of the States.

However, if the transfer of taxpayers’ money is to Petrobras is to be kept, this money will be spent by Petrobras under the sole initiative and decision of 04 or 05 directors who have not even have to undergo a vote of disagreement or congressional debate, because the other shareholders permanent minority. This makes it possible for these directors to decide how to spend hundreds of millions of dollars in advertising and press relations, instead of investing in schools and health, for instance.

That is: this "huge money", instead of helping all Brazilians, "in reality" will be used for achieving a "disguised form of "re-nationalization” of a company that is already controlled by the Brazilian Federal Government.

Any analyst or market investor knows that Petrobras does not need the favor of the Brazilian Federal Government or hard earned money form the Brazilian people that suffered to make the resources needed for a feasible exploration of oil in the pre-salt layer.

Petrobras has breadth and businesses more than enough for itself, requiring only the approval of the Brazilian Federal Government to issue debentures, and quickly see them being bought on the stock exchanges in Brazil and abroad, thus getting the funding needed by the company . This solution, moreover, was an operation under the Corporations Law, having been used with great success, other smaller Brazilian companies.

The issuance of common bonds, convertible into shares or not, or of debentures/bearer bonds, would be a much more transparent transaction, and certainly it would be better accepted by those who do not see with good eyes to the political interference in businesses.

However, without any opposition, counting with the generalized silece about this "ingenious operation", despite of their obvious goal is to remove the eyes of surveillance on the public funds from a developing country, and also to bring harm to the minority shareholders and their control power.

The capitalization of Petrobras occurs exactly on the eve of an election. For this reason we should seek to answer the following question: - Brazilian citizens, would you want the Brazilian government to invest R$ 74,808 billion (USD 43,366.97 billion) in improving your own living standards? Or would you rather give these billionaire funds to re-nationalize Petrobras and allow politicians to boss even more than today - with less overseeing from private shareholders?

"To be, or not to be" ... Our dilemma has long been our ruin!

Dr. Édison Freitas de Siqueira


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