Shares in Brazilian oil producer Petrobras plunged and the country’s currency slid against the dollar in the wake of President Jair Bolsonaro’s move to replace the company’s chief executive following a dispute over fuel prices.

Petrobras’s São Paulo-listed stock shed 20 per cent in trading on Monday morning, as investors reacted to the government’s announcement last week that it had nominated an army general with no experience in the oil and gas industry to be the new chief executive of the state-controlled group.

The aftermath spilled over into the broader market, with the benchmark Bovespa index falling more than 5 per cent. The Brazilian real lost 2.4 per cent of its value to change hands at 5.51 to the US dollar, its lowest point since November.

The abrupt decision over Petrobras came after Bolsonaro publicly criticised incumbent chief executive Roberto Castello Branco over recent increases in the price of petrol and diesel, which have sparked unrest among truckers and threats of strikes.

Despite the rightwing populist leader’s insistence that it did not amount to “interference” in the company, the escalation has sparked concerns among international investors that the government intended to take a more interventionist approach to the economy ahead of presidential elections next year.

It has also raised questions about the future of Paulo Guedes, Brazil’s finance minister, who has long decried government intervention in business, as well as the administration’s commitment to economic reform.

Fears of further government intrusion into business were stoked over the weekend as Bolsonaro hinted that similar moves might be on the way. 

“If the press is worried about yesterday’s switch [in CEO], next week there will be more,” he said. “We will put a finger on electricity, which is also a problem”.

Shares in Eletrobras, Latin America’s biggest power utility, fell almost 7 per cent. The government recently said the electricity provider was on a list of state-controlled companies it intended to privatise. 

Pedro Lang, an analyst at Valor Investimentos, said the market was “opening in despair”.

“This insecurity, fear of what may come, of what the next interferences will be, we are afraid of,” he added. “Today is going to be a long day.”

The board of Petrobras is due to meet this week to discuss the proposed appointment of Joaquim Silva e Luna, a general in the reserve army who was defence minister under former president Michel Temer, as the oil producer’s new chief. At present, he heads hydroelectricity generator Itaipu Binacional.

The Brazilian state holds about 36.8 per cent of Petrobras, but 50.5 per cent of voting rights.

Additional reporting by Carolina Pulice

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