Worries about future of Brazil's oil giant

By Bradley Brooks UPI Business Correspondent

     RIO DE JANEIRO, Brazil, Dec. 30 (UPI) -- Brazil's president-elect is widely expected to name a relatively unknown Workers' Party senator to head the state-run oil giant Petrobras, as talk of reinstating price control swirls about the country. Top Stories • Powell insists N. Korea not a crisis • A sad ending and a happy one • Kim Jong-il a schemer in shadows • Panama wins in China-Taiwan spat • 'Total chaos' awaits travelers at airports

     President-elect Luiz Inacio Lula da Silva said Monday he won't unveil the name the new leader of Petrobras until Tuesday or after he takes office on Wednesday, but market chatter and the consensus in the local press is that Sen. Jose Eduardo Dutra will get the nod.

     Dutra -- who has served in the Senate since 1994 -- worries market players because few know much about him. And what they do know they don't necessarily like.

     A geologist by training, Dutra, 45, raises red flags for many because of his lack of experience on the business side of the oil industry. The fact that he will likely take over one of the country's most profitable companies and a heavyweight on the local stock index doesn't lessen concerns.

     The handling of Petrobras is being closely watched by many in Brazil for its clues as to how Lula -- as the president-elect is known -- and his team will shape economic policies.

     Some fear that Petrobras will be used by the government as a means of artificially holding down inflation by not allowing the company to implement price increases.

     Over the weekend, Dilma Roussef, tapped by Lula to be his mines and energy minister, said that price controls were being considered by the next government.

     "To define pricing policies, the petroleum policy, the policy of Brazil's electric energy ... is the role of the ministry, of the state," Roussef told reporters on Sunday.

     It was just in January that Brazil tentatively gave Petrobras the freedom to increase the prices of its products. Before that, the government set prices every few months on cooking gas and gasoline.

     Petrobras has come under fire this year for raising prices, spurring inflation in Brazil, which will be more than 10 percent for the first time since 1994.

     As for the electricity sector, companies can increase prices but only with the approval of Aneel -- the country's energy regulator -- and without the blessing of the ministry of mines and energy, a situation Roussef has criticized.

     While there was no official word from Lula, the local press also reported Monday that a professor and physicist was offered the presidency of Brazil's energy holding company, Eletrobras.

     Luiz Pinguelli Rosa told a local news agency that he had accepted the offer to head Eletrobras. He said he wanted to make the energy sector in Brazil attractive and a low-risk bet for investors, but gave no details on how that might happen.

     The bid for the presidency of Petrobras has been politically charged as smaller parties in Lula's nascent coalition government have pushed to have one of their own officials in the post.

     Rank and file members of Lula's Workers' Party, though, have demanded they take control of the company, and it was never too much in doubt that this would be the case.

     It has long been known that Lula would replace the current Petrobras head, Francisco Gros, whom the future president has criticized.

     During his campaign, Lula made an issue out of the fact that Petrobras had extended a contract for the construction of a $500 million sea-drilling platform to the Singapore-based Jurong Shipyard.

     In a campaign television ad, Lula said that the building of the platform would "be done in Brazil, period."

     Lula said the project could create about 25,000 jobs in Brazil and could mean some $1 billion in business.

     Earlier there were rumors that Anthony Garotinho -- who made an unsuccessful run for the Brazil's presidency -- would be named to head Petrobras in exchange for throwing support to Lula in the second round of the presidential vote.

     Investors were worried about the possibility of Garotinho -- or any official without solid CEO credentials -- taking over Petrobras. While the markets seem to have more trust in Dutra than the populist Garotinho, most are still quite concerned about the direction of the company.

     On Monday, Petrobras stock was up more than 3 percent, with investors' concerns about Dutra offset by the company's Sunday implementation of a 12.8 percent increase in the price of gasoline and a 7.7 percent increase in the price of cooking gas.