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Petrobras CEO is caught between dividend-hungry investors and Lula

(Bloomberg) — Petrobras’ new chief executive officer is navigating Brazil’s ambitions for industrial development and investors expecting to be compensated with profits and dividends.

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During his first earnings call with analysts and investors, Jean Paul Prates said that Petroleo Brasileiro SA, as the company is formally known, will continue to pay solid dividends, while also saying it needs enough money to invest in traditional oil activities and the energy transition. The company can return to petrochemicals and fertilizer production, he added.

While speaking, President Luiz Inacio Lula da Silva said that half of Petrobras’ dividends should fund investments, underlining how much pressure the company will face to create jobs and growth in a faltering economy. The tension gets to the heart of Petrobras’ dual role as a publicly traded oil company that is also a national champion that many politicians and residents believe should provide affordable fuel and create jobs.

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“Companies propose a trade-off to shareholders; leave money with me and I will show you very good projects,’ Prates said. “The investor decides whether to stay with us or with the right cash from the short-term dividend.”

The future of how Petrobras pays dividends is sure to change. Prates said he had doubts about how strict dividend payment rules should be, and the company has already started setting aside some of the dividends in a separate fund.

A major concern for Petrobras investors is what will happen to gasoline and diesel prices. Politicians of all stripes in Brazil have been pressuring the oil giant to rein in fuel inflation, terrifying the investors of Petrobras that it subsidizes.

Prates promised tougher competition with rival importers who have gained market share in recent years. He added that strictly following import parity when setting prices is not always in Petrobras’ best interests.

“This is the best price for our competitors, not necessarily for us,” he said.

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