Petrobras Might Ease Local Content Rules
A corruption probe at Brazil's state-run oil company Petrobras is likely to promote less government intervention and more transparency, economists and analysts said on Tuesday.
The investigation could, however, also stir more political infighting, extend the scandal to other state companies and even put the brakes on an expected economic recovery next year, said Chris Garman, head of Latin America at political risk consultancy Eurasia Group.
Garman and other speakers at a seminar sponsored by Itaú BBA said that a positive consequence from the current scandal was the revision of rules governing the exploration of massive offshore oil reserves in an area known as the sub-salt.
Another possible change would be easing minimum thresholds for Brazil-made content in the equipment used by Petrobras.
Fallout from the scandal at Petrobras has already led President Dilma Rousseff to engage in a more business-friendly policy agenda, economists said.
"Although these don't seem to be full-blown reforms, the current adjustment policies are helping Brazil distance itself from a crisis, and that's good," said Ilan Goldfajn, chief economist of Itaú Unibanco Holding SA. Itaú is Brazil's largest bank by market value.
Andrés Velasco, a former Chilean finance minister, said Rousseff was heading in the right direction with efforts to dismantle years of budget profligacy, aimed at reducing national debt and adapting to lower commodity prices.
Brazil and other countries in Latin America were faced with tough times because of the end of the commodity boom, he added.
Results date set
News of a firm date to sign off on Petrobras's audited results sparked a rally in Brazilian bonds on Tuesday and set a positive tone for the rest of Latin America's credit markets.
Petrobras said its board would meet on April 22 to approve 2014 audited financials, raising hopes it would meet covenant deadlines for full-year results and avoid a downgrade to junk.
"I wouldn't say we are trading on optimism about Brazil but recovering from really bad expectations about Petrobras," said Klaus Spielkamp, head of fixed-income sales at Bulltick. "(But) I guess it is all good for Brazil."
Traders also reported positive price action across Brazilian corporates, including Caixa, Banco do Brasil, Itau and JBS. The sovereign's 2025s also pushed higher to end at 100.25-100.75.
The relief rally has cleared the air somewhat and set the stage for borrowers seeking to come to market as investors look to put money to work after a dearth of supply this year.
Copyright Reuters 2015.