Petrobras scandal clouds Brazil presidential vote

Laura Bonilla Cal
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The headquarters of the Brazilian state oil giant Petrobras in Rio de Janeiro on May 12, 2014

The headquarters of the Brazilian state oil giant Petrobras in Rio de Janeiro on May 12, 2014 (AFP Photo/Vanderlei Almeida)

Rio de Janeiro (AFP) - A multi-billion dollar kickback scandal at Brazilian oil giant Petrobras, the country's state-owned industrial jewel, could affect the outcome of next month's presidential election.

Two years ago, the firm embarked on the world's biggest corporate investment plan, aimed at doubling crude production by 2020 and turning the country into a net oil exporter.

Now, scandal threatens not just to hurt the company but to affect the October 5 election pitting incumbent president and former Petrobras board chair Dilma Rousseff against ecologist Marina Silva.

The latest polls have the two running almost neck and neck.

Here are five keys to understanding how the case could affect the vote:

1. Allegations

Paulo Roberto Costa, who headed Petrobras' refining and supply unit between 2004 and 2012, has accused more than 50 politicians, mainly from Rousseff's ruling Workers Party (PT) of taking kickbacks.

They deny wrongdoing.

Facing money-laundering charges, Costa has agreed to cooperate with investigators as part of a plea bargain, but his list of names has leaked and triggered a media frenzy.

Former Socialist Party candidate Eduardo Campos, was was killed in an August 13 air crash and replaced on the ticket by his running mate Silva, was also mentioned in the allegations.

According to Costa, the kickbacks started a decade ago.

Rousseff was energy minister from 2003 to 2005 and headed the Petrobras board from 2003 to 2010 but she has not been directly implicated and says she has no knowledge of wrongdoing.

2. Deja vu

Given Petrobras' pedigree in Brazil and the fact the electorate is fed up with corruption, the case "could have an explosive effect" said political scientist Daniel Alves of the Getulio Vargas Foundation.

Observers have likened the scandal to the "mensalao," a vote-buying scheme from the first term of Rousseff's predecessor Luiz Inacio Lula da Silva, president from 2003 to 2010.

Lula managed to stay above the fray and win re-election but with his fellow PT leader Rousseff battling to keep Silva at bay, Alves ponders: "Will the people be as generous again?"

3. Poor deals

Members of Congress are also investigating other cases involving Petrobras, such as the acquisition from Belgian-based Astra Oil of a refinery in Pasadena, Texas, for $1.2 billion.

Astra had acquired the refinery just a year earlier for only $42.5 million.

Petrobras has made further missteps. It decided in 2007 to build, in partnership with Venezuela, the Abreu y Lima refinery in Pernambuco on an initial budget of $2.3 billion.

Venezuela never put its money on the table for the project, whose cost is today estimated at ballooning to $20 billion.

4. Hitting profit margins

"It is obvious that these new allegations are going to impact on the company's profit margin; it's shares are sliding on the market," said Rio University economist Margarida Gutierrez.

"If they are going to start revising every one of the firm's contracts this will impact very much on the oil and gas industry," says Andre Perfeito, analyst with Gradual Investments.

Share price losses have been limited by polls showing Silva could beat Rousseff in a run-off slated for October 26, an outcome which would cheer a market depressed by four years of sluggish growth.

Brazil is in recession, the market already sees Rousseff's administration far too interventionist and analysts now foresee a clamor for less political interference in the running of Petrobras.

5. The candidates

Rousseff insists she cannot be blamed for the scandal. "If anything was up, and everything indicates that there was, the bleeding has stopped," she insisted.

Silva has accused the government of overseeing "a gang which is in the process of finishing Petrobras off." She denies that here late running mate Campos had had anything to with the scandal.

Social democrat Aecio Neves, running a distant third in the polls but perhaps the preferred choice of the stock market, says alleges Rousseff "must have known what was going on around her."