Private Logic

With weakened social functionality, Petrobras cuts production and harms workers

Focus on exporting crude puts the state owned company at the mercy of markets, unable to help in the country’s recovery

Translated by: Ítalo Piva

Brasil de Fato | São Paulo |
Petrobras announced resilience measures without protecting workers - Tânia Rego/ Agência Brasil

Due to the measures implemented by Petrobras, aimed at minimizing the economic impact caused by the coronavirus, employees of the state owned company have appealed to federal authorities to aid them, in an effort to revert the loss of their rights. As it announced a 200 thousand barrel a day cut in production, the company reduced the hours of 20 thousand administrative workers by 25%, with a matching pay cut. Work hours have also been altered for 3200 oil rig workers, and there will be a 60% cut in gratuities at refineries, and a 95% cut on the rigs. 

The Unified Federation of Oil Workers (FUP) highlights that while asking more than fifty thousand workers to be resilient, the company is shielding managers, assistants, consultants, coordinators, supervisors and other managerial positions from the impacts of the crisis. These jobs will see their bonuses merely delayed, not slashed. In the complaint, FUP and other oil industry unions claim that the upper echelons of Petrobras are using the pandemic to intensify the deconstruction of the company. 

The organizations point out that the decisions have a strong impact on labor relations and were made without any type of negotiation. In the filing sent to the Rio de Janeiro Regional Labor Rights Bureau, FUP suggests alternatives that can keep workers afloat. The main one is the suspension of dividend payments to shareholders, wage adjustments, bonuses and other variable compensation programs for managers. According to the Federation’s math, the company would save up to 4,4 billion Reais, almost double what it announced in cuts for regular employees. 

Out goes sovereignty, in comes shareholder profits

Recent actions undertaken by Petrobras however, indicate that protecting workers is not their priority. Economists who spoke to Brasil de Fato, evaluate that under the current government, Petrobras’ main focus stopped being the sovereign Brazilian production of petroleum derivatives and energy, and became shareholder profits.

If the company were not going through a process of deconstruction since 2016, according to experts, the emergency measures could be of a more sustainable nature. Since then, activities have centered around the extraction and export of crude oil. With this, the company is bound by the prices set by the international oil markets, which are ever lower. 

Professor at the Federal University of Rio de Janeiro (UFRJ), and researcher at the Strategic Natural Gas, Petroleum and Bio-fuel Studies Institute (INEEP), Eduardo Costa, thinks that in the face of what may become the worst economic crisis since 1929, Petrobras is completely weakened. 

By becoming an exporter of crude and not investing in distribution and refinement, the Brazilian oil company will surely be one of the petroleum enterprises with the most difficulties to recover. Foreign competition, according to Costa, will get to the recovery point with huge advantages. Brazil looses out in manufacturing and technology, the skilled labor market and the preservation of the internal commercial system.  

“Some estimate that the international oil markets will see an 8% decrease in demand for petroleum just this year, which will result in an enormous economic slowdown. In the international markets, prices are already at rock bottom, and demand is going to drop. When the prices were high, the company was profiting tons in the consumer market. Nowadays, if it goes on not taking into account production costs, and price their product in accordance to the demand shortfall, they will sustain huge losses”, he argues. 

In the researcher’s opinion, the importance of investing in refinement is even more obvious in the face of this crisis. “The big wigs will realize that if it weren’t for the refineries, Petrobras would be broke. If it depended solely on selling oil to private refineries, it would have to sell it at international rates. That source of income, if selling 50% refined oil, would lower even more. This may precipitate some changes. I think it is hard for them to try and sell any refineries this year. I wouldn’t say it’s impossible though, given the degree of insanity in some our leaders and administrators”.  

Clovimar Cararine, economist at the Inter-Union Department of Statistics and Socioeconomic Studies (Diesee), and FUP consultant, is certain that even without the coronavirus, the drop in the price of oil barrels in the international market, already puts Petrobras’ current strategy in check. 
Cararine says that undervaluing refinement and concentrating on exports to a few select countries, already makes the state owned company more fragile. Last year, 70% of production went to China and 10% to the United States, countries whose economies have been deeply affected by the pandemic. Adding to this fragility, is the process of worker layoffs, occurring through a program of voluntary separation, which tends to see only more experienced workers go. 

“In regards to prices which have fallen, it’s a characteristic of this sector, this instability, and we are facing a pandemic, which will go away. Making long term structural decisions at a period like this is very bad. The best thing to do now is take mitigation actions, like reducing the risk of contagion for workers, but keeping in mind that all this will end, and being prepared for the possibility of further drops in pricing, which is something normal”. 

The economist goes on to say that the measures adopted till now do nothing to reduce the risk of contamination for refinery workers, as well as third party contractors. Diesee published a technical analysis comparing what has been done by large international oil companies, to what Petrobras is doing to combat the pandemic. The conclusion is that the state owned giant is lagging far behind. 

Clovimar Cararine reminds us that a nationalized enterprise has a role to play in moments of crisis. It’s his view that Petrobras’ efforts should be directed to fulfilling the demand for cooking gas for example, seeing that the need for it has grown with social isolation, and that their storage of petroleum is at capacity due to lower demand. Natural gas prices are going up in different regions. Petrobras could guarantee production and control pricing, but instead of this, Brazil is importing the product. He makes other suggestions for the company to consider during this time of crisis. 

“They could come up with so many ways to help the population: they could lower the value of derivatives, they could help with health and safety equipment or provide gasoline to emergency services for free. It’s a way of helping the country. Petrobras has one of the most advanced research facilities in the world. These researchers could help by creating technology to combat the pandemic”. 

The undertakings that affect workers lack any judicial basis. FUP’s findings show that the relocation of personnel without indemnification goes against Article 9 of Law 5.811, passed in 1972. Furthermore, the blanket reduction of wages and hours is prohibited under Article 468 of the Consolidated Labor Laws. The unions and the Federation are mobilizing to take the necessary steps to stop the measures.

Edited by: Rodrigo Chagas e Ítalo Piva