Colombia’s state-run oil company Ecopetrol has surpassed Brazil’s Petroleo Brasileiro SA as Latin America’s biggest company by market value, the Wall Street Journal reported Wednesday.
According to a study conducted by Sao Paulo-based consulting group Economatica, the value of Ecopetrol’s outstanding shares or market capitalization, increased by $37 billion this year, resulting in a $127 billion market value as of close of trading Tuesday.
Brazil’s state-run oil company, Petrobras, which had been Latin America’s biggest company for at least 10 years, lost a reported $32 billion this year, leaving its market capitalization at $124 billion.
The shift is partly due to the two countries’ diverging exchange rates. The Colombian peso has continued to strengthen, gaining 8% against the dollar this year, whereas the Brazilian Real has seen a significant drop since February, falling 9% against the dollar in 2012.
Differing government stategies also account for the discrepancy in profit margin. While the Brazilian government frequently intervened in Petrobras’ operations while the Colombian government took a hands-off approach with Ecopetrol.
“There is very limited political interference [in Colombia],” said Nathan Piper, an oil analyst at RBC Capital Markets. While the Brazilian government demands that goods and services in oil exploration and production be solicited locally, the Colombian government is willing these processes, Piper noted.
Petrobras’s decline was further exacerbated by a shortfall in refining compounded by strong domestic demand. To compensate for the decreased production, the company imported gasoline and sold it to Brazilian consumers for less than the original pricetag.
Ecopetrol on the other hand, has seen its share price quadruple since it was partially privatized in 2007.