Petrobras scandal casts long shadow over Brazil
The scale of the corruption scandal in Brazil´s oil giant Petrobras is such that it is hardly a surprise that virtually the entire team at the top has gone.
Despite her tough, no nonsense reputation, chief executive Maria das Gracas Foster (Graca Foster) and five senior executives stepped aside on Wednesday amid the financial fallout caused by the scandal.
For months, the company has been weighed down by allegations of bribery and inflated contracts involving some of Brazil's biggest firms.
Petrobras directors are accused of illegally benefitting from this scheme and funnelling funds to the ruling Workers' Party (PT) and its allies.
Graca Foster was not directly accused of involvement - and it started before her tenure - but critics say it was going on while she was a key figure in the company.
The Petrobras scandal will have an impact on Brazil's whole economy
On Thursday, in the latest dramatic development, police questioned Joao Vaccari Neto, treasurer of the Workers' Party. It is a move which will undoubtedly increase the political repercussions of the case.
Economic blow
Petrobras is not just a huge oil company. It is emblematic of Brazil, and a source of great national pride. The scandal has shocked the country and shaken the government.
The company's crisis is having a negative impact on the economy, delaying investments in infrastructure and the oil and gas sector.
In December, executives from some of the country´s major construction companies were detained and a large number of documents were seized from their offices.
With Operation Car Wash - the name given to the police investigation - moving to a new and highly political phase few can say where it will end. (Police have rather curiously dubbed the latest stage of the inquiry 'My Way' after the Frank Sinatra hit of the same name.)
It certainly has already dwarfed previous scandals in a country where corruption has been an endemic problem. President Dilma Rousseff even said it would change the country "forever".
Petrobras CEO Graca Foster has been forced to resign over the scandal
Since September, Petrobras has lost almost two thirds of its value and the fact that the company has not been able to publish its audited third quarter results has added to its financial difficulties.
The problem is that the state-owned giant has not yet been able to say exactly how much money it has lost due to corruption so no-one knows for sure how much its assets are really worth.
Analysts say Graca Foster´s position became unsustainable after the company released a statement last week with preliminary estimates that its assets had been overvalued by R$88 billion (US$33 billion). This caused the company´s shares to plunge.
She also presented the unaudited third quarter earnings - which registered 38% fall in profits - and a plan to cut investments, delay the payment of dividends and sell assets to control the company's debt levels.
'Perfect storm'
Some analysts believe Graca Foster was dismissed for trying to "tell the truth" about the impact of the corruption scandal on the company's business.
Others argue that her biggest problem was that Ms Foster allowed the scandal to stop the company doing what it is supposed to do best.
"Once it was discovered that there was a group of criminals operating at the heart of Petrobras, the right thing to do was to quickly identify and isolate them, calculate the losses and go on with investing and exploring oil," says Wilber Colmerauer, director of Emerging Markets Funding in London.
"The bribery scheme must be investigated by the police. You cannot paralyse the whole company because of a corruption scandal - not even one of this scale."
Brazil's economic woes are being made worse by a drought affecting its industrial heartlands
There is a lot of speculation about who could be the next Petrobras chief executive and the company´s administration board is due to take a decision on Friday.
Brazil´s economy is suffering what some see as a "perfect storm" to which anxieties over Petrobras have no doubt contributed.
Most economic consultancies expect the country to sink into a recession this year - and even the government admits that growth will not recover in the short term.
A tighter fiscal and monetary policy is being imposed in an effort to help fight inflation and put the public accounts in order.
To add to an already complicated picture, a severe drought is affecting the industrial heart of the country in the south east - which could lead to blackouts and water rationing.
"Aside from solving this mess at Petrobras, the new chief executive will have to help limit its negative impact on the rest of the economy," says Michael Viriato, from the business school Insper.
It seems a long way from the heady days of around 2007 when some of the biggest new oil fields in the world were being discovered off the Brazilian coast and the country was getting ready for the 2014 World Cup and the 2016 Olympics.
The problems at Petrobras have cast a long shadow over South America's largest country.
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