By Jay Forte, Contributing Reporter

RIO DE JANEIRO, BRAZIL – A new report by market research company Capital Economics has tried to calculate the cost of the Petrobras scandal in Brazil, which has caused political and financial ripples across the country. Brazil’s stock market has fallen by 35 percent in terms of U.S. dollars since the start of September, just under half of that has been caused by a drop in the value of Petrobras shares.

Maria das Graças Silva Foster, Petrobras scandal, Rio de Janeiro, Brazil, Brazil News
In February 2012, Maria das Graças Silva Foster was sworn in as head of Petrobras, which is 54 percent owned by the Brazilian goverment, photo by Fernando Frazão/Agência Brasil.

However even without the fall in Petrobras shares, Capital Economics estimates that Brazil’s stock market would still have dropped by about twenty percent over the same period. This is in part due to a swing of currency exchange, slowing of demand for exports and the drop in oil prices globally.

Still, the stock market fall is the largest drop of any major market with the exception of Greece and a few oil producers (for example Nigeria and Colombia). Despite recent steep falls in its share price, Petrobras still accounts for almost ten percent of the total market capitalization of the Bovespa equity index.

The scandal around Petrobras surfaced due to Operação Lava Jato (Operation Car Wash), and it has been alleged that for much of the past decade Petrobras executives conspired with suppliers to inflate the value of the firm’s contracts. This money was then used to finance kick-backs with some estimates suggesting that as much as US$20 billion could have been illegally siphoned off over the past decade.

Neil Shearing, Chief Emerging Markets Economist at Capital Economics writes “It’s difficult to be precise, but we think the direct impact of the corruption scandal at Petrobras, including the effects of reduced investment by the company and others that have been implicated, could shave around 0.5 percent off Brazil’s GDP this year.”

“But there will be indirect costs too. Brazil’s international investment image is likely to suffer and the political fallout from the scandal will make much-needed reforms to raise growth even more difficult to push through Congress.”

On February 6th Brazilian government named Banco do Brasil President, Aldemir Bendine, to head oil giant Petrobras, after its CEO, Maria das Graças Foster resigned along with five top board members on Wednesday, February 4, 2015.

In February 2012, Maria das Graças Silva Foster had been sworn in to replace the outgoing José Sérgio Gabrielli at the largest company in Latin America by revenue, which is 54 percent owned by the Brazilian government.


  1. If Brazil had a “foreign Corruption Provision” players would think twice. Additionally there is no concern on building shareholder value; which equity could act asa catalyst in capital markets and allow alternatives for financing capital investments. Time for government to reduce every year their ownership position and let corporate governance take hold.


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