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This excerpt taken from the PBR 20-F filed May 22, 2009. Risks
Relating to Our Relationship with the Brazilian
Government
The Brazilian
government, as our controlling shareholder, may cause us to
pursue certain macroeconomic and social objectives that may have
an adverse effect on our results of operations and financial
condition.
The Brazilian government, as our controlling shareholder, has
pursued, and may pursue in the future, certain of its
macroeconomic and social objectives through us. Brazilian law
requires the Brazilian government to own a majority of our
voting stock, and so long as it does, the Brazilian government
will have the power to elect a majority of the members of our
board of directors and, through them, a majority of the
executive officers who are responsible for our day-to-day
management. As a result, we may engage in activities that give
preference to the objectives of the Brazilian government rather
than to our own economic and business objectives.
In particular, we continue to assist the Brazilian government to
ensure that the supply and pricing of crude oil and oil products
in Brazil meets Brazilian consumption requirements. Accordingly,
we may make investments, incur costs and engage in sales on
terms that may have an adverse effect on our results of
operations and financial condition. Prior to January 2002,
prices for crude oil and oil products were regulated by the
Brazilian government, occasionally set below prices prevailing
in the world oil markets. We cannot assure you that future
governments in Brazil will not reinstate price controls.
We may not be
able to obtain financing for some of our planned investments,
and failure to do so could adversely affect our operating
results and financial condition.
The Brazilian government maintains control over our investment
budget and establishes limits on our investments and long-term
debt. As a state-controlled entity, we must submit our proposed
annual budgets to the Ministry of Planning, Budget and
Management, the Ministry of Mines and Energy, and the Brazilian
Congress for approval. If our approved budget reduces our
proposed investments and incurrence of new debt and we cannot
obtain financing that does not require Brazilian government
approval, we may not be able to make all the investments we
envision, including those we have agreed to make to expand and
develop our crude oil and natural gas fields. If we are unable
to make these investments, our operating results and financial
condition may be adversely affected.
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