The Mess at Petrobras

Whenever the subject of oil comes up, Brazil's politicians unfailingly quote two slogans. "The oil is ours," is one cry, and the second goes, "Petrobras is untouchable." Petrobras is Brazil's staterun oil company, and the country's biggest single business. It provides jobs for 30,000 people, produces 30% of Brazil's crude-oil needs, grosses almost $350 million a year. But Petrobras is also one of Brazil's sickest companies --hard hit by graft and inefficiency, and honeycombed with far-leftists. Last week, after a jolt of scandals, Petrobras was anything but untouchable.

In the space of a few days, the president and three directors of Petrobras had been fired. Congressional and presidential committees were digging into company affairs. Wrote Rio's Jornal do Brasil: "The situation is a national shame and a menace to the security of the country."

Labor in Management. In the ten years since Petrobras started out to make Brazil largely self-sufficient in oil, the company's production of crude oil has grown from 990,000 bbl. to 36.5 million bbl. annually, and its refining output has risen from 907,000 bbl. to 90 million bbl. Yet Brazil still depends on private oilmen, both domestic and foreign, for 65% of its crude oil needs.

Almost everyone agrees that Petrobras' operations are hampered by ill-trained and featherbedding workers. Last year Petrobras held up construction on an ammonia plant in Bahia, yet kept on most of the 400 workers hired for the plant, transferring them to other jobs. Companies doing business with Petrobras also complain that its personnel solicit bribes and kickbacks. On several deals, according to insiders, Petrobras has imported crude oil at prices well above the market and exported refined products at a loss. Moreover, Communist-leaning agitators dominate Petrobras' powerful refining and pro duction unions--which, in turn, suggest their candidates for two of Petrobras' three directorships.

"Agent" of the Yankees. The present scandal erupted when Petrobras President Albino Silva, 54, a peppery army general appointed last year, started a one-man campaign against corruption and Communist influence within the company. He stopped all hiring (8,000 new employees were added during the two preceding years), looked into shady dealings of Petrobras executives, twice blocked strikes approved by a Petrobras director, and cracked down sharply on lavish publicity spending. Silva took his evidence to Brazil's President Joao Goulart. When word leaked out, a newspaper article appeared with statements accusing the general himself of engineering a "major underhanded deal" involving the purchase of $200 million worth of oil from "a large petroleum company"--later identified as U.S.-owned Esso Brasileira. Silva, said a union-nominated director, was a "docile agent" of the Yankee oilmen.

Brazil's Congress took up the case. A congressional committee sat for 40 hours, listened to 15 witnesses and collected another 600 documents. Said one Brazilian Deputy: "A complete reorganization of Petrobras is necessary."

Goulart called the whole blowup a "campaign which certain interests are carrying out against the government under the pretext of disclosing scandals in companies that belong to the people's patrimony. What they want is to destroy Petrobras. I believe in the defense of Petrobras." As part of that defense, he fired the company's three directors and its crusading President Silva. To replace Silva, Goulart chose Marshal Osvino Alves, 66, an old friend and former chief of Brazil's first army --who took over as the eighth president of Petrobras in ten years.

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