Inside the Gringo Oil Grab: Parente leaves, Petrobras hikes prices

Unions claim partial victory as top PSDB insider and Shell executive resign from Petrobras leadership

by Brian Mier

On May 30th, as a trucker’s strike that paralyzed the country for 9 days began to wind down, Brazilian petroleum workers initiated a 3 day, nationwide “warning strike.” Their demands were: 1) the immediate firing of Royal Dutch Shell Corporation insider, José Alberto de Paula Torres Lima, from the Petrobras Board of Directors; 2) the firing of Petrobras President Pedro Parente; 3) the reversal of Parente’s disastrous pricing policy which caused cooking gas, diesel and gasoline prices to rise by over 50% in less than a year; and 4) a halt to Parente’s dismantlement of the company and undervalued sale of its assets.

Hours after the strike began, Lima resigned. The next day, as a judge threatened the unions with a R$2million/day fine per demonstration, they agreed to return to work if Parente resigned, and announced that another strike would take place in June if the rest of their demands were not met. Parente stepped down, but the pricing policy remains intact – they have already risen fuel prices by 2.25% since he left. As the conservative Brazilian media, led by Globo, gave him the hero treatment, he said, “I’m leaving because I accomplished everything I promised.”

For the past 25 years Pedro Parente has been a top power broker within the inappropriately-named, center-right Partido da Social Democracia Brasileira (Brazilian Social Democracy Party/PSDB). A former IMF official, as Fernando Henrique Cardoso’s Minister of Mines and Energy and Chief of Staff he oversaw privatization of the state mining company Vale do Rio Doce and large sectors of the Brazilian electrical grid, which culminated in 7 months of blackouts in 2001 and 2002. The scandal critically wounded the PSDB party in the eyes of the Brazilian public and it has never won a presidential election since.

Immediately after the 2016 coup, Michel Temer nominated Parente as Petrobras president as part of his power sharing deal with the PSDB and he immediately began dismantling the company. He cut production in Petrobras refineries by 30%, unnecessarily increased petroleum derivative imports, and linked the national price for gasoline, diesel and cooking gas to international market prices with daily price adjustments, abandoning the previous government’s policy of price stabilization as a national development tool. Within 10 months, Petrobras increased fuel prices over 200 times. Prices for gasoline and diesel rose by over 50%. Cooking gas rose by 60% and, during a time when extreme poverty increased by 11%, 1.2 million families were forced to abandon the use of gas and start scavenging for and burning scrap wood to meet their cooking needs.

In order to understand the scope of the damage the dismantlement and neoliberal pricing policy has caused, it is important to understand the role Petrobras, the mixed capital, state controlled Petroleum company, played in Brazilian society before the 2016 coup and why international capital would be so interested in its privatization. After discovery of the massive pre-salt offshore petroleum reserves was announced in 2006, promising to catapult Brazil to the position of one of the world’s largest producers, the US government began illegally spying on the company. Shortly thereafter, the US DOJ and FBI initiated a partnership with the Brazilian prosecutors office and judiciary to investigate the company for corruption. From 2014 forewords, the Northern commercial media, which receives millions in advertising funding from petroleum multinationals, worked to build a narrative that Petrobras was one of the most corrupt companies in the World. To be frank, this would not sound like much of a stretch to the average reader because the extractive industry, including petroleum, generally is considered to be the most corupt industry in the world. Like in most extractive industry companies, there have been massive bribery, fraud and kickback scandals going on inside Petrobras since it was founded. Whereas there is no evidence that this level of corruption increased during the PT governments, they certainly could have done more to combat it. However, as corrupt as Petrobras has been –and billions of dollars in bribes have certainly changed hands over the last 65 years – it cannot be put in the same category as the major private sector petroleum corporations who’s post-coup takeover of Brazil’s offshore oil reserves proceeds with no criticism from the same northern papers that spent years attacking Petrobras. Unlike the largest private sector petroleum corporations, Petrobras never lobbied to start a $2 trillion war that killed hundreds of thousands in Iraq (BP), caused $61 billion in environmental damage to the Gulf of Mexico (BP), has never been accused by Amnesty International of complicity in the murder, rape and torture of thousands of people in the Niger Delta region (Shell) or hired Edelman PR company to run an international climate change misinformation campaign to mask its refinaries’ effects on global warming (Chevron). Furthermore, although petroleum is a filthy industry that is destroying the world’s environment, Petrobras is also the world’s largest alternative energy company. During the 1970s, when the dictatorship decided that Brazil should be self sufficient in energy, Petrobras developed the first, large scale production and distribution system for sugar cane-based ethanol fuel which, although not without faults, emits only 14% of the carbon dioxide emissions of petroleum. Since then regular Brazilian gasoline has contained 20-25% ethanol and consumers have had the option of buying cars that run on gasoline, alcohol or both, with alcohol sales surpasing gasoline in Brazil in 2008. Furthermore, thanks to Petrobras, Brazil also has one of the world’s largest natural gas powered auto and bus fleets.

Unlike, for example, Shell or Chevron, with their comparatively small corporate social responsibility departments which fund paternalistic charities in the areas around where their plants are located, Petrobras has a history of funding truly transformative social programs nation-wide that have improved the lives of millions of people in Brazil. I witnessed this first hand while working with the Redes NGO in Rio de Janeiro’s Complexo da Maré favela on a series of projects between 2006-2012. Redes is one of the world’s best NGOs, and during this period, Petrobras was funding them to run extra-curricular activities, after school programs and homework tutoring in 7 schools within the favela as well as providing vocational training to local teenagers and hiring them in their refinery. With support from Petrobras, Redes helped over 1000, primarily Afro-Brazilian local youth pass free public university entrance exams and enroll. This is just one anecdotal example of the type of projects it funded around the country. On broader terms, in 2013-2014, through a transparent, public bidding process, Petrobras spent around $100 million USD on social and environmental projects and a similar amount on the arts. And in 2013, Dilma Rousseff passed a law earmarking 75% of Petrobras’ royalties for the public education system and 25% for the public health system. The massive increases that this law promised were put on hold after the coup in 2016, when the Temer government started selling the offshore reserves at below market rates to foreign companies and passed a constitutional ammendment freezing health and education spending for 20 years.

Due to its strategic importance for national development and sovereignty coupled with its social commitment to the Brazilian people as a publicly owned company, when the corruption scandal broke Petrobras should have been treated as too big to fail. As the US government did with Goldman Sachs, corrupt executives should have been arrested while the government did everything possible to guarantee that the company could continue operating at full capacity and maintain employment levels. Instead, as the Brazilian and Northern media did everything it could to connect Petrobras to non-existent corruption charges against Luiz Inacio Lula da Silva and Dilma Rousseff, Pedro Parente and his cronies silently began dismantling the company and selling off its assets at, as we say in Brazil, the “price of bananas”.

The results of this criminal dismantling of national patrimony are manifest in the current crisis, with truckers and petroleum workers threatening further strikes this month. As the damage caused by privatizing Petrobras plays out, the Petroleum industry-funded northern media and think thanks are doing what they can to obfuscate the issue, focusing on consequences of the crisis, such as a moderate rise in fascism, instead of addressing its root cause.


By Brian Mier

Writer, geographer and former development professional who has lived in Brazil for 26 years. Former directorate member of the Fórum Nacional de Reforma Urbana (National Urban Reform Forum). Has lived in São Luis, Recife, Salvador, Rio de Janeiro and São Paulo. Author of “Os Megaeventos Esportivos na Cidade do Rio de Janeiro e o Direito á Cidade” (CEPR: Porto Alegre. 2016). Editor of "Voices of the Brazilian Left" (Sumare: São Paulo. 2018). Editor of "Year of Lead: Washington, Wall Street and the New Imperialism in Brazil" ((Sumare: São Paulo. 2019) Irregular correspondent for the Chicago radio show This is Hell.