Rodrigo Janot, the top prosecutor of Brazil, will likely file cases against the politicians involved in the Petroleo Brasileiro S.A. or Petrobras (PBR) money-laundering scandal, going by Reuters. The politicians’ list might include the government of president Dilma Rousseff and Congress members. The turmoil has hit hard the country and the stock of its largest integrated player. Petrobras fell more than 3% on the NYSE.
As per the team of prosecutors, led by Janot, Petrobras executives made a secret plan with the contractors of Brazilian state-run energy giant for embezzling multibillion dollars from the firm’s funds. A significant portion of the money was also transferred to these politicians. According to media sources, more than 40 politicians have allegedly taken money.
The majority of politicians involved in the scandal are from the Workers' Party currently ruling Brazil – the largest country in both South America and Latin American region. The list also includes some names of the opposition party which supposedly misappropriated money from Petrobras’ overpriced contracts.
Within the next few days, the cases are anticipated to be filed with the Supreme Court as the cabinet members and the lawmakers could only be called by the highest court of law in Brazil.
According to Janot’s spokesman, in order to establish solid proof for most of the cases, he will request the court to approve more extensive investigations.
The escalating tensions might hurt the relation between Rousseff, the current president of the country, and Congress − the legislative body. This might set hurdles in the passage of laws to protect Petrobras from the recent credit rating downgrade by Moody’s Investors Service. (Read our blog: Brazil Stocks Down, Real Tumbles, Petrobras Cut to Junk.)
Investors should note that Petrobras attracts considerable direct foreign investment into the country. Moreover, Brazil – the 2014 FIFA World Cup organizer – has been selected to host the Rio 2016 Summer Olympics. But now Brazil is losing all the goodwill owing to this scandal and is spreading negative vibes among big foreign investors. Amid this weakening Brazilian economy, the middle class is expected to be the worst hit.
Petrobras currently carries a Zacks Rank #3 (Hold). Better-ranked players in the energy space like VTTI Energy Partners L.P. (VTTI), Western Gas Equity Partners L.P. (WGP) and Valero Energy Partners L.P. (VLP) sport a Zacks Rank #1 (Strong Buy).
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