*The following post was published on 15/02/02 and updated on 17/02/02.
Graca Foster was appointed Petrobras new CEO last Monday. The self-made woman, nicknamed “the Iron Lady of Oil” by Brazilian press, grew up in a favela in Rio de Janeiro and started working when she was 8 years old as a rag-picker. Maria das Gracas Foster becomes the first woman to head the Brazilian oil giant, the largest company in South America.
Foster replaces Jose Sergio Gabrielli, well-known for heading the operation that lead Petrobras to raise $ 70 billion in the largest share offering ever in 2010. Gabrielli is a protégée of Lula and became Petrobas CEO in 2005. Although he was appointed oil executive of the year in 2011, he did not have very good relations with the current president, Dilma Rousseff, and so was sacked. Gabrielli will now enter politics: he will probably start preparing to run for governor of his home state Bahia, the country's sixth-largest state in terms of gross domestic product, in 2013.
Lula once said “If Petrobras were a woman, it would be the one that all mothers would like their sons to be married to.” In fact, Lula was the main responsible for placing Gabrielli as Petrobras CEO in 2005. Similarly, Rousseff wants someone she trusts in the head of Brazil’s largest enterprise. Foster is the first woman to head a major state-owned corporation in Brazil. According to Brazilian daily Folha de Sao Paulo, “Foster is highly trusted by the president and they are personal friends.” Graca Foster worked for Dilma at the Mines and Energy Ministry from 2003 to 2006, while Dilma headed that institution. “It’s been through the President’s influence that, since 2003, Foster has been appointed to top positions,” Folha reported.
Graça Foster, as she prefers to be called, has one main objective: to accelerate the pace of the production of the 54% state-owned company. Graça Foster will have a budget for investments of $ 224.7 billion between 2011 and 2015. Yesterday, she added that "Increasing investments is not the plan." Some might believe that this is an obvious statement considering that the budget she already has is larger than the total amount NASA spent to send man to the moon in the 1960s. However, let’s remember that we are talking about a national champion with ambitions of becoming the world's largest company and the world's third largest oil producer, after Saudi Arabia and Russia, over the next 10 years. (See: Will Petrobras Become The World's Largest Company? )
Another main goal of the new CEO is to change Petrobras’ aura of “expect the unexpected.” The new CEO stated that no major changes in staff will take place "The team currently in place, the department heads, this is my team. "
Alongside Gisele Bündchen (who could be on track to becoming a billionaire) and president Dilma Rousseff, both on the Forbes list of the “World’s Most Powerfull women” last year, Foster joins a group of Brazilian leaders focused on changing Brazil’s gender disparity in the near future. In 2010, 86.3% of executives in Brazil’s 500 largest companies were men. Even though the trend is towards gender equality (the ratio was 94% in 2001), there is still a very long way to go, according to a study by IBOPE and Ethos Institute. IBOPE is Brazil's most credible research institution and the only Latin American company to appear in the ranking Honomichl top 25 global research organizations.
Graça Foster, 58, is a technocrat that has been working for Petrobras for the past 34 years and holds a Bachelor’s and two Master’s from Brazil’s leading universities. Before reaching the post that will make her the second most powerful woman in Brazil she was the director of the Gas and Energy division, where she did a superb job. During a quarter with bad results for Petrobras, the area she headed presented net income of $ 483 million in the fourth quarter, up 34.54% over the last three months of 2010.
However, similarly to many people in powerful positions in state-owned companies in Brazil, Foster has been allegedly involved in corruption scandals. The Financial Times is surprised that, after the nomination of the “Iron Lady of Oil” as Petrobras new CEO, the Brazilian press seems to be paying no attention to Foster’s main corruption scandal:
“A leading member of the British and Commonwealth Society of Rio de Janeiro, he ( Foster’s husband or Mr. Foster) is president of C. Foster, a company offering telecommunications and other electronic systems to the offshore oil & gas industry, among others.The Brazilian press reported in November 2010 that C.Foster had 43 contracts with Petrobras – of which Maria das Graças was then director for gas and energy – worth R$614,000 ($350,000). Petrobras confirmed that the contracts existed in response to the reports.”
* The quote above is from FT blog beyondbrics.
It was brought to my attention that these allegations are false. Following is Petrobras’ rebuttal:
Fact: There have not been any corruption scandals. Petrobras does not and did not have "contracts" with the C. Foster company. Petrobras made minor component purchases in one-off transactions. Contracts presuppose the provision of a particular service or the delivery of a particular good for a determined period of time. Twenty purchases exempt from public bidding were made because the amounts were less than R$ 10,000 (USD5,000). The purchases were made by four different Company areas, none of which have anything to do with the Gas & Energy area, directed by Ms. Foster."
What is Petrobras Current situation?
On the evening of last Thursday, Petrobras announced a net profit of 5.05 billion R$ ($2.94 billion) in the fourth quarter of 2011, down 52.4 percent over the same period in 2010.
This huge decline in earnings was not expected by analysts. For instance, Reuters survey forecasted R$9.2bn. Consequently, Petrobras stock fell 8.28% the following day as markets digested the news. Since Petrobras shares account for about 10 percent of the Bovespa index, it is easy to imagine the meltdown of Brazil’s main benchmark index, -2,34% on the same day.
In 2011, the national champion company failed for the second consecutive year on its main goal: reach the milestone of 2.1 million barrels of oil produced domestically. Production in 2011 reached 2.021 million barrels per day, a new record, but still less than expected by Petrobras board. On her first speech as CEO, Foster made it clear that: “Production targets are a priority for Petrobras.”
Petrobras's profit fell in 2011 because of economic problems that limited production and reduced the company's ability to invest. The chain of supply of equipment has not expanded enough and as a result, the company could not make all the necessary investments, which were lower than expected in 2011. According to former CEO Gabrielli, the company reached its limit of the production of petrol, gas, diesel and naphtha, which forced to increase imports.
According to Gabrielli, problems with fuel supply will not be resolved until 2013. "We are definitely in a transition period," he said.
The movie “Iron Lady” starring Meryl Streep in the main role as Margaret Thatcher has recently been released in Europe. In Brazil, the legacy of the “Iron Lady of Oil” has started last Monday. Thatcher was the first woman to head a major political party in the UK. Foster is the first woman to head a major state-owned corporation in Brazil. Both “ Iron ladies” took over during periods of instability. Margaret Thatcher marked history. Let’s see what Graca Foster will achieve.
