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CEO quits Brazil's scandal-hit Petrobras

Wednesday, February 04, 2015 - 02:11

The chief executive and other senior management at Brazil's state-run oil company Petrobras have resigned amid a festering corruption scandal, sending shares higher. As Hayley Platt reports, it's the latest in a series of economic challenges facing the President just a month into her second term.

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It's the driest spell in more than 80 years. And the drought in Brazil isn't just taking its toll on farming. Hydropower reserves are being drained and costly thermal plants are being used to keep electricity supplies going. But selective power cuts are already being implemented. And economist Mauro Rochlin says energy rationing is inevitable. (SOUNDBITE) (Portuguese) ECONOMIST, MAURO ROCHLIN, SAYING: "We are expecting energy prices to rise by an average of 30 percent this year, so the impact on the cost of industry and the subsequent effects on prices in general is tremendous. I think we can expect to see inflation in electrical energy and fuel prices." President Dilma Rousseff is just a month into her second term in office. And her economic challenges are growing. The state-run oil company Petrobras is one of them. It's reportedly lost three quarters of its market value in recent years due to inflated investment policy and a massive corruption scandal. Three former directors have been arrested as have scores of executives from suppliers. They're accused of paying kickbacks that were funneled to politicians. As much as $28 billion may have been diverted from the company's coffers. It seems the crisis has finally led to Petrobras' CEO Maria das Graca Foster losing her job. Shares in the company soared after she and other senior management resigned. (SOUNDBITE) (Portuguese) ECONOMIST, MAURO ROCHLIN, SAYING: "All the networks of corruption in Petrobras and the fact that this is the largest Brazilian company, give an awful image outside Brazil of the state's ability to manage." Brazil's currency is suffering and interest rates are expected to rise to over 12% - their highest in three and half years. Rousseff also has to fulfill a promise to lower above-target inflation. (SOUNDBITE) (Portuguese) ECONOMIST, MAURO ROCHLIN, SAYING: "The rise in interest rates is meant to reduce consumption and put the brake on rising prices. But that discourages production which has a big impact on the economy and on employment." The new power crisis won't help inflation either. Power companies have been told they no longer need to keep electricity rates down - some are predicting they could rise by 60 percent within a year.

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CEO quits Brazil's scandal-hit Petrobras

Wednesday, February 04, 2015 - 02:11