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Lula Summons Petrobras CEO Over Dividend Crisis

(Bloomberg) -- President Luiz Inacio Lula da Silva will demand that Petrobras’ chief executive officer explain his handling of a dividends crisis that wiped out $11 billion of the state-owned oil company’s market value last week, as well as its plans to accelerate investment projects he considers essential to boost Brazil’s economy.

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Lula is holding a meeting with Jean Paul Prates at the presidential palace Monday afternoon, according to his official agenda. The president also invited Finance Minister Fernando Haddad, Chief of Staff Rui Costa and Energy Minister Alexandre Silveira, according to different government officials.

The leftist leader will ask Prates why shareholders of Petroleo Brasileiro SA, as the company is formally known, were counting on the payment of extraordinary dividends even after he made it clear he wishes to invest oil profits into projects that can create jobs, one of the officials said. All of them spoke on condition of anonymity because the discussions are not public.

Haddad, who worried the non-payment of such dividends would raise prospects of government meddling in the company, intended to negotiate the distribution of at least part of them during Monday’s meeting, but was told by Lula to stand down, according to a member of Brazil’s economic team. Local press reports that the dividend decision could be reviewed sent Petrobras shares 0.5% higher at 4:45 p.m. ET.

Read More: Lula Sets Up Petrobras Dividend Rejection, Roiling Markets

Lula wasn’t happy about Prates’ decision to abstain from voting against the dividends proposal, which was eventually rejected by a majority of board members appointed by the government, the official said. He was even less happy about the chief executive’s failure to bring a discussion about fuel prices to the company’s board, the person added. Since the election campaign, the president has said Petrobras shouldn’t be tracking international prices, but should take into account its domestic costs into its pricing policy.

Lula’s office didn’t immediately reply to a request for comment.

With his popularity dropping in opinion polls released last week, Lula is demanding that his ministers come up with a list of investment projects that can be accelerated to boost the economy. He considers Petrobras as a key part of his plan, and wants Prates to be on board, one of the officials said.

Another official said Prates intends to present an investment plan in the naval industry during the meeting.

--With assistance from Daniel Carvalho.

(Updates fifth paragraph with Petrobras shares rising on Haddad’s efforts to distribute part of the extraordinary dividends. A previous version of this story corrected the spelling of Lula in headline.)

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