RIO DE JANEIRO, Aug 21 (Reuters) - Brazil's state-led oil company Petrobras is not in negotiations with the government over raising fuel prices, the company's chief executive, Maria das Gracas Foster, said on Tuesday.
Petrobras has posted heavy losses from its domestic fuels business due to the government's policy of holding gasoline and diesel prices largely unchanged at the pump over the past eight years.
"No, there isn't any negotiation on this subject," Foster told reporters in Rio de Janeiro when asked if the company was in talks with the government on raising fuel prices.
Petrobras has a monopoly on refining in Brazil but lacks sufficient capacity to meet domestic fuel demand. So the company is required to import gasoline and diesel at international prices and sell them at home at a loss.
To make this money-losing obligation worse, drought, poor investment and weak profits from cane ethanol production have held back production of the biofuel, prompting more drivers of Brazil's flex-fuel cars to use gasoline.
Brazil is approaching municipal elections in October, which will likely keep any adjustments in the price of fuels off the table until at least November.
In June, the government granted Petrobras modest increases in the price of wholesale gasoline and diesel for the first time in eight years. But the increases were hardly sufficient to close the gap between local and international fuel prices.