Brazilian President Dilma Rousseff accepted resignations from top Petrobras CEOs on Tuesday, Bloomberg reports. Replacements will be chosen in a meeting on Friday. It’s the first sign of relief for investors since 86 people were charged in the petrolão (big oil mess) scandal that defrauded taxpayers and investors of billions of dollars. None of the 5 Petrobras CEOs are named as conspirators in the bribery scheme, but investigations are ongoing.
While politicians received over $800 million in bribes, prosecution will be slow going. Most of the 28 politicians charged by prosecutors enjoy parliamentary privilege, sending all of the cases to the notoriously slow Supreme Court. Prosecutors estimate that they’ll be able to recover $400 million dollars from politicians involved in the scandal. Numerous Petrobras functionaries were involved in the scandal as well. However, like the politicians, the bribes that they merely the grease of wheels of a larger and more corrupt machine.
The real fleecing that Petrobras officials oversaw was the $3.7 billion and possibly as much as $20 billion that were diverted from the oil giant over the last decade. Harmed investors include everyone from Brazilian taxpayers (who own 60 percent of the company) to foreign investors. One large foreign investor is the City of Providence, Rhode Island, who sued Petrobras through a New York court.
If Providence still owns stock in the company, it will be happy to learn that traders helped bump up Petrobras' worth 15% on Tuesday, largely as a result of the CEOs stepping down.
Yet in the long run, Brazil’s future in the oil industry looks grim. Aside from corruption problems, oil reserves and their ease of extraction were greatly exaggerated in Petrobras as well as by private venture capitalists. As I wrote last year in an article for AlterNet, Brazilian businessmen Eike Batista snagged as much as $63 million dollars as his own oil empire crumbled around him. His investors lost billions, and the government, it seems, did much of the same. The oil simply wasn't there.
“There were a lot of government authorities saying the reserves of Brazil were 50 billion barrels, 100 billion barrels, even 240 billion barrels, more than Saudi Arabia,” said geologist Wagner Freire, in an interview with the Washington Post. Friere oversaw exploration and production at Petrobras during the last illusions of the energy boom. “Lots of wells have been drilled in the pre-salt area, and the well comes up dry.”
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