How corruption affect Petrobras:
Petroleo Brasileiro S.A. is a Brazilian based multinational company that explores, produce, transports, distributes oil and natural gas. Petrobras owns and operates biofuel, oil tankers, fertilizer plants and distribution pipelines across Brazilian territory. Petrobras is one of the largest producers of oil in the world and the biggest company in South America (employs over 80 thousand people) with a market value above $30billion. Most importantly, Petrobras has more than half of the voting rights are controlled by the government of Brazil (Standard & Poor’s, 2016a). Brazil’s rise was empowered by the oil giant Petrobras, with the biggest oil ...view middle of the document...
After a couple of weeks, prosecutors were seeking the arrest with charges of money laundering as well as false declaration. This would cause Lula a long sentence up to 13 years in prison (Margolis,2016a). Here, we are discussing of a man that was trusted and beloved by tons of Brazilians. An ex-president brought sustainable economic growth during his term and got the permission for Soccer World Cup and the Olympic Games. Due to the political corruption in Brazil, millions of protesters are on the streets of Brazil to request the current president Dilma Rousseff to resign. Other than the protests, Petrobras also suffer a lot in the Petrobras Scandal.
In total, Petrobras’ losses due to money laundering are estimated conservatively to be BRL88 billion (equivalent to USD 31.5 billion) (Istore, 2015). Also since September of 2014, stocks that held by Petrobras’ shareholders lost on average 50 percent of their market value (Noticias, 2016). What is more, in 2014 Petrobras lost $70 billion in market cap, which is more than half of its value (Segal, 2015). Other than losing their market value, it also increases its difficulty in terms of raising private capital to pay off their huge debts and fulfill their expansionary ambitions. Most of the analysts suggested that Petrobras’ massive debt would be most likely paid by Brazilian taxpayers.
The huge financial losses also hurt several Petrobras’ shareholders. After realizing their investment in a fraud company, many shareholders in Brazil and in United States “filed collective action lawsuits against Petrobras and its executives.” Some lawsuits claimed that Petrobras disobey rules established by the Securities and Exchange Commission (SEC), which regulated the stock market (Do, 2015). Due to the political scandal, Petrobras lost tons of loyal shareholders and lost trust between the company and the valuable shareholders.
Petrobras scandal also created difficulty to find successors to replace corrupted managers. For instance, Foster, the former head of Petrobras, and other directors resigned during Petrobras scandal. Rousseff (President of Brazil) is hard to find replacement because his decision would affect how public view the corporation. Rousseff chose Aldemir Bendine (president of Banco do Brasil) affect Petrobras even harder. Since Aldemir’s poor reputation in terms of accountability, Petrobras’ stock value decrease by 6.34 percent on the Ibovepa, Brazil’s largest stock exchange market (Aline, 2015). The political scandal also causes huge issues regarding talent management.
The Petrobras scandal destroy tons of lives of numerous stakeholders within Brazil and abroad as well. Due to the huge financial losses within the company, they decided to shut down many of its operations indefinitely. By doing so, thousands of workers have lost their jobs, nearly half of the employees in Petrobras got fired. Supply companies also filed for bankruptcy and the whole communities are hopeless.
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