Petrobras and Brazil’s Political Crisis

Abstract

Abstract This chapter offers a panoramic view of the political crisis in Brazil that arguably began within its most prized NOC, Petrobras. Examining the connections between Petrobras and the Lava Jato scandal, it traces the erosion of Petrobras’s corporate autonomy and the contradictions emerging from the Workers’ Party (PT) industrial strategy. Government policy—specifically Rousseff and the PT’s response to Brazil’s economic stagnation between 2010 and 2014—was largely responsible for Petrobras’s rapid accumulation of debts. To complicate matters further, Petrobras’s business strategy would fall apart as oil prices collapsed in 2014. Its hard-won autonomy was further compromised as the company became subject to systematic corruption exposed by the Lava Jato investigation. This constant tension between corporate autonomy and state control is an example of the difficulty in insulating SOEs from rent-seeking and political intervention. To a large degree, the Lava Jato scandal is rooted in the underlying political dynamics connected to the PT’s industrial policy. Therefore, its impact is less about driving Petrobras towards privatization; instead, the scandal shook the coalitional foundations of state-based developmental interventions that have guided Brazilian industrial policy since the 1930s.