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Petrobras Affair | Not the Better Part of Valor?

Obsessivlely acquisitiive Totvs aspires to the condition of an Oracle or Sun

Obsessively acquisitive Totvs aspires to the grandeur of an Oracle or Sun. 

Source: GGN | Luis Nassif

This year, the Brazilian opposition hopes to gain political advantage with a parliamentary commission (CPI) into the dealings leading to the purchase of the Pasadena — Texas — Refinery in 2006-7 by state-owned Petrobras.

The current president was in instrumental in setting political for Petrobras as Energy Minister. Vague rumors of bribery and cartel formation  — not to mention fudged numbers and gabbling sophismas — make their rounds.

Today, the response of Senate leadership on the opposition side of the Congress has been to call for a highly visible probe into the Petrobras deal. The situation faction wants to consolidate several corruption investigations into one in order to neutralize the expected media blitz on the case.

The pro-government troops are close to a deal to expand the purview of the CPI to include several other cases of misuse public fund.

The problem in the case of Petrobras is that the numbers do not add up to a capital-C Crisis of Capitalism we are expected to fear.

Luis Nassif explains.

Generally more objective in its coverage, the daily Valor Economico seems to have gradually let go of its reputation for journalistic accuracy, sinking to the level of other major newspapers when it comes to factual accuracy.

In today’s Analysis section, the article “Former President works to insulate state-owned company,” is riddled with technical errors, faulty information and misinterpretation.

First – Valor says that Petrobrás “flushed” US$ 2 billion “down the drain” in its deal for the U.S. oil company Pasadena. None of the accusations levied against the company so far come close to that number.

Second – At the moment the company was was said to be suffering what was considered a total loss, Valor reports on US$ 485 paid for the refinery, plus US$ 340 million in stored crude oil and $R 340 millon more in fines, interest and attorney’s fees. Even when these glaring errors are corrected in the calculation of losses,the amount is US$ 825 million, a far cry from the US$ 2 billion reported.

Third – Without any explanation, the value of bank guarantees, interest and legal costs doubled, from the original US$ 173 million to US$ 355 million. Immediate impacts on earnings (legal fees, fines) were not separated from operating cost.

Fourth – The article treats as a loss the US$ 340 million paid for stored petroleum, ignoring the fact that this material was refined and resold.

Fifth– It treats as scandalous a condition of the shareholder agreement that provided for 20% to Astra Oil (20% of the deal as originally negogiated)  in the event it exited the business, leaving Petrobras in charge. It ignores the existence of a so-called control premium – that is, an extra payment to shareholders that enables them to maintain majority control.

Sixth – To criticize these features of the Pasadena deal, Valor interviewed José Sérgio Gabrielli, lead in-house counsel at the time,.but it ignored all the explanations he provided regarding market conditions at the time of the sale — under which the acquisition looked attractive — followed by the 2007 crisis, when it ceased to be so and seemed to be turning more profitable.

Seventh – When it came time to account for losses, Valor failed to take into account the current value of the refinery, which produces 100,000 barrels a day of petroleum derivatives and is yielding income. .

Eighth – Valor mentions “Menciona “evidências encontradas até agora nas dezenas de documento relacionadas à compra da refinaria que tornaram públicas negociatas”. A matéria não explica o que considera como “negociatas”. Os documentos até agora divulgados não trazem menção a nenhuma “negociata”. No máximo, cláusulas de negócio que poderiam ser classificadas ou como usuais ou como mal negociadas.