Labor Strike May Threaten Petrobras

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Petroleo Brasileiro S.A. (NYSE: PBR), or Petrobras, may have a new problem on its hands. This is in the form of a labor issue. Wednesday's 24-hour "warning" strike makes good on a promise or warning from last week its oils workers were going to strike. At issue was the 6.5% pay increase with a one-time bonus offered by the company versus a union target of more than 15% which is more like a 10% increase plus an inflation adjustment.

What makes this first round interesting is that the workers specifically did not interrupt production. What was not said is "yet." This matters as Petrobras is trying to increase production on the heels of a very rare operating loss in the second quarter. It also matters to long-term investors that Petrobras has never recovered from that massive share offering of 2.9 billion shares at $34.49. The ADRs trade at just over $23.00 as of now against a 52-week range of $17.27 to $32.60.

Brazil's labor movement has been staging a call for higher wages in many industries and service sectors. Postal workers and bank workers are on strike and a news search showed that the last real Petrobras worker strike took place about four years ago and that lasted for a period of five days.

If Petrobras has a deeper strike than before, its woes in the price of the ADRs may be far from over.

JON C. OGG


Filed under: 24/7 Wall St. Wire, ADR, International Markets, Labor & Unions Tagged: PBR
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