Could the horrendous result for Brazil’s football team yesterday actually lift Petrobras’ share price?
President Dilma Rousseff’s government has prevented Petrobras from raising domestic fuel prices, despite the weakness in the real versus the US dollar over the past year. Credit Suisse thinks domestic prices are 15-20 per cent too low.
Now, dismay over the football team’s performance may result in her poll approval ratings taking a beating. Petrobras’ shares have gone nowhere since May – around the time her approval ratings recovered.
While Lex worries about how Petrobras will pay for its $115bn of capital expenditure over 2014-16, a change of government later this year would increase the chances of a proper rebalancing of fuel prices and higher profits. Could Petrobras rally following the Brazil drubbing?