Petrobras Privatization Is Just a Healthy Debate, BNDES CEO Says

(Bloomberg) -- The debate about whether to privatize Brazilian oil giant Petrobras is “healthy” and productive, but nothing more than that for now, the head of the nation’s government development bank said.

“We as a society and the political class are realizing there is no direct economic benefit of having a state-owned oil producer,” Gustavo Montezano, chief executive officer of BNDES, said in an interview. “It just generates political noise since we’re blamed when oil goes up.” 

Still, Montezano made clear that selling off the state-controlled asset is unlikely anytime soon. BNDES, which has been coordinating privatizations for President Jair Bolsonaro, hasn’t even been notified by the government to start the process, said Montezano, who spoke before heading off to attend the COP26 climate conference in Glasgow, which starts on Sunday.  

The privatization debate took on new life this year as gasoline prices surged 65%. That’s contributed to higher inflation and a tumble in Bolsonaro’s popularity. The president said in a television interview this week that he asked Economy Minister Paulo Guedes to start studying the divestment process for Petroleo Brasileiro SA, as Petrobras is formally known.

Read about Bolsonaro’s comments on Petrobras’s profitability

The fastest privatization BNDES managed under Montezano’s tenure was for Cia. Energetica de Brasilia, an electric utility whose market value is less than 1% that of Petrobras. That process took 11 months, Montezano said. 

“I would never say it’s impossible to do it next year,” Montezano said of a possible sale of Petrobras. “I am just giving you the data.” 

Meanwhile, Rio de Janeiro-based BNDES is selling as much of its holdings in publicly traded companies as the market allows, said Montezano, who called those shares a “speculative equity portfolio” because they create volatility for the bank’s capital. 

Since Montezano took over as CEO in 2019, BNDES has sold roughly 65 billion reais ($11.5 billion) of such holdings, he said, including shares of Petrobras, iron-ore producer Vale SA, pulp maker Suzano SA and meat producer Marfrig Global Foods SA. 

“We can take part of that money and allocate it to carbon credits, for example,” he said. “The climate agenda was more of a secondary concern for those divestments, but it’s a positive side effect.”

The development bank still owns stakes in publicly traded companies totaling about 70 billion reais, including Petrobras, meat packer JBS SA, and utilities Eletrobras and Copel. He said the plan is to continue divesting, but declined to provide a timeline. 

“In the long run, BNDES should have zero assets that have no ESG component to them,” he said, referring to environmental, social and governance criteria used to screen potential investments.

One BNDES initiative is to stop financing thermal power plants that use coal, and another is to offer lower interest rates to firms willing to improve ESG standards. 

One of the bank’s main goals is to help the government and private sector reach Brazil’s target of becoming carbon neutral by 2050.  

Montezano is now trying to prove he can do more than sell assets and reduce BNDES’s new lending concessions, which fell to 23.9 billion reais this year through June, down 8% from the same period in 2020. He said he also wants to help repair Brazil’s damaged environmental image. Montezano will be attending COP26 at a time when the nation has come under increasing international pressure after a jump in wildfires and illegal deforestation.

“We’re looking for ways of monetizing the standing forests and conserving parks that we have, to give concessions to the private sector in order to create jobs and help preserve biodiversity,” he said. “We are against illegal deforestation, but that is not easy to stop, and yes, we need a lot of help.”

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