Petrobras pension fund registers record-setting deficit - plus55

Petrobras pension fund registers record-setting deficit

Losses were caused by decisions detrimental to investors
Brazil Business

The Petros Foundation, which administrates the pensions of Petrobras employees, has finished the 2016 fiscal year with a deficit of 27.3 billion BRL. The 2016 deficit was 3.4 billion BRL larger than it was in 2015. For the 14th straight year, the foundation’s fiscal board rejected the annual balance. And in fact, it was the 4th straight year that the balance refusal was unanimous.

Board members consider that the foundation has not respected its fiduciary obligation towards pension owners. Instead of choosing investments based on the possible returns, Petros’ direction privileged the political interests of mainstream parties.

Over the past couple of years, the Petrobras pension fund has registered major losses due to high-risk investments. One of these investments is the offshore drilling company Sete Brasil. It was supposed to be the main supplier for companies extracting deep-water oil, but is now on the brink of bankruptcy.

In June 2016, consulting company EY identified glaring flaws in 70 investments that led to billion-dollar losses. The operations are under scrutiny by federal prosecutors. In August, Petrobras appointed a new CEO for Petros: Walter Mendes, a former board member.

Police investigation

There’s an ongoing police investigation into corruption at pension funds. The amount of money siphoned away in the last few years could reach up to 50bn BRL (including pension funds other than Petros).

The pension funds under investigation have registered billion-dollar deficits. According to investigators, in 8 out of every 10 cases, the losses are the result of fraud or conduct detrimental to investors. The 103 individuals under investigation have had their assets frozen by the police, amounting to $2.4 billion – a national record.