SAO PAULO (Reuters) – Brazil’s lower house of Congress voted late on Tuesday to make it easier for politicians to take roles at state-run firms, hammering shares of the state-run oil company, devastated by a political graft scandal over the past decade.
The proposed change to the State-Owned Enterprise Law, which now heads to the Senate, cuts the quarantine from three years to just a month for people with decision-making roles in political parties or campaigns to take positions at state-owned companies.
Shares in state-run oil company Petroleo Brasileiro SA (Petrobras) closed 10% lower on Wednesday. State lender Banco do Brasil SA lost 2.5%.
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 under the Workers Party (PT), which returns to power next month.
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 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.”
Ratings agency Moody’s said the proposed changes were negative for public banks as they could raise governance risks and let political intervention affect their business strategies.
“The risk of extending credit at rates below market prices could result in profitability pressures amid a 2023 scenario of increased credit risk,” wrote Moody’s analysts.
Incoming Finance Minister Fernando Haddad did his best to downplay the looser controls on politicians running state firms, saying the most important way to fight corruption is with strong, independent auditors.
The proposal was approved on the same day that President-elect Luiz Inacio Lula da Silva announced Workers Party veteran Aloizio Mercadante as the next head of state development bank BNDES, in a move that rattled 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.