Vinícius Andrade and Davison Santana, Bloomberg News

SAO PAULO
EnmergiesNet.com 03 08 2024

Brazilian markets slumped after a smaller-than-expected dividend payout from state oil giant Petroleo Brasileiro SA rekindled fears of increased government intervention in the nation’s largest companies.

The Brazilian real weakened as much as 1.1% on Friday, leading losses among major currencies around the world, while long-end swap rates climbed. The benchmark Ibovespa equity index fell to the lowest in more than three weeks, dragged down by Petrobras, which accounts for 13% of the index weightings. Shares in the firm fell more than 10%, erasing about 56 billion reais ($11 billion) in market value.

The oil producer’s lower payout adds to concerns that the nation’s left-wing government is looking to exert greater influence over the corporate sector to advance its political agenda. Analysts from Bank of America Corp. and Banco Santander SA rushed to remove their buy-equivalent ratings for Petrobras, whose chief executive officer has signaled greater caution toward shareholder remuneration as the firm focuses on becoming a renewable energy powerhouse, a key policy goal of Brazilian President Luiz Inacio Lula da Silva. 

“Signals are getting worse,” said Malcolm Dorson, senior portfolio manager and head of emerging-market strategy at Global X Management Company in New York. “Brazil has a significant amount of opportunities in front of it, but the equity benchmark is built off Petrobras and Vale — both of which have unpredictable political risk.”

The company’s board approved 1.10 reais a share, or 14.2 billion reais, in dividends for the fourth quarter, missing the average of four estimates reviewed by Bloomberg. It also refrained from distributing extraordinary dividends.

The dividend announcement comes as a setback for Brazilian investors after an extended period of relatively limited political noise at home, with the real being touted as an attractive destination for carry traders. 

Investors are also monitoring miner Vale SA’s ongoing CEO succession race for clues on whether President Lula’s administration may be successful in pushing for a candidate with strong ties to the government. 

–With assistance from Raphael Almeida Dos Santos and Jeremy R. Cooke.

bloomberg.com 03 08 2024