Petroleo Brasiliero (PBR) — better known as Petrobras — is so entwined with the Brazilian economy that it actually has moved politics, rather than the other way around.
The discovery of bribes at Petrobas mushroomed into the largest corruption scandal in Latin American history, leading to the impeachment of President (and former chair of Petrobras) Dilma Rousseff. PBR shares have done nicely of late, buoyed by higher oil prices and progress in the resolution of the scandal. But political risk still exists.
New president Jair Bolsonaro seems like good news for PBR stock, which indeed rallied as his election seemed more likely. His recent pick for PBR chairman suggests privatization could be on the way and at least a more “hands off” approach to PBR’s business.
But Brazilian politics can change rather quickly and lower crude prices may change the political environment as well, given Petrobras’ importance to the Brazilian economy on the whole. Some traders clearly have decided to lock in gains over the past few weeks. More may elect to do so if any signs of trouble re-emerge.