SAO PAULO (Reuters) – Brazil’s lower house of Congress voted late on Tuesday to change the country’s State-Owned Enterprise Law to make it easier for politicians to take roles at state-run firms, triggering an early Wednesday sell-off in local financial markets.
The bill, which now heads to the Senate, cuts the quarantine from 36 months to just one month for people with decision-making roles in political parties or electoral campaigns to take positions at state-owned companies.
Brazil’s real tumbled as much as 1.2% against the dollar in the wake of the news, while the benchmark Bovespa stock index slid 0.8% on Wednesday morning.
Shares in state-run firms took some of the biggest hits, with oil company Petroleo Brasileiro SA (Petrobras) dropping 4% and lender Banco do Brasil SA down 2%.
Petrobras was at the center of a record-breaking political corruption scandal over the past decade, due in part to political appointments in its senior management.
Analysts at BTG Pactual said the revised law would be bad for governance at state-owned firms as it eliminates one of their main mechanisms of defense from political influence.
Goldman Sachs echoed the concerns, adding that the large majority by which the bill passed showed “the new government could potentially have enough political capital to gather congressional support and make further adjustments to the law”.
The proposal was approved on the same day that President-elect Luiz Inacio Lula da Silva announced a veteran from his Workers Party, Aloizio Mercadante, as the next head of state development bank BNDES, in a move that upset financial markets.
In a campaign interview with Reuters in late September, Congressman Alexandre Padilha – one of Lula’s key interlocutors with investors and business leaders – said Lula had no plans to change the State-Owned Enterprise Law.