Petrobras Case Study

1023 Words 5 Pages
Petrobras is a Brazilian oil company that was created by the Brazilian government in 1953. For the first decade Petrobras struggled to be successful despite being given a constitutional monopoly by the Brazilian government. Brazil did not have any oil reserves or the knowledge in oil exploration, and the goal for Petrobras was to become a world class oil producer. Petrobras began to see success in the 1980s when they developed deep water and ultra-deep oil production. This new technology increased their oil production to 600,000 bpd by 1987, an increase from 3000 bpd in 1953. Despite their new technology and expertise in deep water production, Petrobras was highly bureaucratic and slow to react. Experts estimated that their upstream …show more content…
A high ranking executive for Petrobras, Paulo Costa was arrested having more than $25 million in overseas bank accounts. Costa eventually pled to guilty and as part of his plea bargain helped uncover a massive scandal with Petrobras. Costa testified that he inflated the budgets of massive projects for refineries and took kickbacks from the construction companies contracted. It was uncovered that Petrobras executives created a cartel to bid on large projects with certain construction companies. Those construction companies would come to an agreement on how much to bid among themselves and who would get the award. Petrobras executives would agree to the bid and sign off on the inflated rates. The construction companies would then create fake companies to launder the money back to the executives in the form of kickbacks. The kickbacks were shared among the executives and politicians who were closely tied to Petrobras. The kickbacks were then laundered to foreign bank accounts for each party. The scandal rocked Petrobras and Brazil, and ended with 117 indictments including most of Petrobras top executives with 13 different companies involved. It is estimated that around $3 billion in bribes changed hands. The chart above shows the movement of money throughout the …show more content…
1.Brazil has a history of corruption. Petrobras executives and politicians could not resist the urge of the million dollar contracts, and the desire to benefit themselves.

2.Petrobras had diversified their portfolio away from oil and became very large. This large diverse structure became very difficult to control and made it easy for executives to go undetected.

3.The success of Petrobras in the 2000s created an environment of invisibility causing top executives and government agents to not check the books.

4.Incompetence by auditors, accountants, top executives, and board members to detect the corruption and stop it.

5.Top executives had gained so much political power that there was little action against them to stop the corruption if it was

Related Documents