Can Petrobras' New CEO Handle The Company?

| About: Petrobras - (PBR)

By Marta Dhanis

There were high expectations for new Petrobras (NYSE:PBR) CEO Maria das Graças Foster. Five months later the market is still questioning if she can actually run the company. Is Foster really the Latin American 'iron lady'?

Image courtesy Agencia Petrobras

Petrobras CEO Maria das Gracas Silva Foster

The fact is that from mid-February, when Graças Foster took office until late June, PBR's stock has declined almost 30%. However, experts - and the market - have no doubt her management is better than predecessor José Sergio Gabrielli.

According to Itaú analysts, market criticism about Foster is not about her, but what she can actually do. "While Petrobras managed by Foster and her team is definitely a better company", they say, "two factors remain: we cannot fight the numbers, and the controlling shareholders remain the same."

Experts are also worried about political interference in Petrobras' operations, since it is a mixed economy company. However, in the past couple of weeks, a new precedent was set for PBR in Brazil. Against all odds, it was able to raise the wholesale price of gasoline by 7.83% and diesel by 3.94%. This increase represents a big victory for Foster. Moreover, this favors analysts' view that she will improve its management by reducing political manipulation in its operations.

The market reacted timidly to the move since it was considered a small adjustment, but there was more to come. After the raise on Monday, June 25, last Thursday PBR announced a second increase in fuel prices, this time sending the stock up.

Without these price rises, the company would be unable to pay for its five-year investment plan of $237 billion, Foster has stated.

The move has solidified the belief that Foster can offset political influence and is able to handle the board. She went against Brazil's Finance Minister Guido Mantega - also chairman of Petrobras' board of directors - who led the call for no increase in fuel prices.

Nevertheless, experts are aware it will take a while for PBR's new administration to prove that it is able to execute the company's largest investment plan ever without major hiccups.