The Petrobras Scandal: Year in Review 2015

After much delay and controversy, on April 22, 2015, a somber-looking team of newly appointed managers at Petrobras announced at a press conference in Rio de Janeiro that Brazil’s giant majority state-owned oil and gas company had lost $17 billion to mismanagement and graft. Moreover, they said that the company would have to sell almost the same amount in assets and postpone investment plans to regain its financial footing. With Petrobras’s market value reduced by half and burdened by a $100 billion debt, the firm further acknowledged in documents filed with the U.S. Securities and Exchange Commission (SEC) in May that it would have to revise its ambitious program of investments. “We have a feeling of shame,” said newly named CEO Aldemir Bendine, describing the company as a victim of extensive wrongdoing. “I offer an apology on behalf of Petrobras’s employees, because I am now one of them,” he added before presenting the first audited balance sheet that the company had been able to produce in more than eight months.

The malfeasance was revealed by a federal investigation begun the previous year under the code name Lava Jato (“Car Wash”). The massive scheme to defraud Petrobras—Brazil’s largest enterprise and a symbol of the country’s entrenched economic nationalism—did not fully come to light, however, until after the narrow reelection of Pres. Dilma Rousseff on Oct. 26, 2014. By the time of her second inauguration, on Jan. 1, 2015, Rousseff’s approval rating had collapsed to 14%, with some two-thirds of Brazilians blaming her for Petrobras’s troubles.

Dubbed “Petrolão,” after “Mensalão,” the vote-buying scandal that had plagued the government of Rousseff’s predecessor and mentor, Luiz Inácio Lula da Silva, the episode came to be viewed as the largest corruption scandal in Brazilian history. Its political and economic repercussions were still being measured more than a year after the first disclosures were made in March 2014. By June 2015 a massive scheme to defraud Petrobras on contracts to develop the so-called pre-salt oil reserves found offshore in 2007 appeared on investigators’ radar. Moreover, reports suggested that federal prosecutors were also looking into the electricity-generating sector, pension funds for employees of state-owned companies, and the National Bank of Economic and Social Development (BNDES). The latter had provided billions of dollars in subsidized financing to Petrobras and other “national champions,” such as billionaire Eike Batista, whose wealth plummeted spectacularly in 2013.

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