Case | HBS Case Collection | November 2003 (Revised March 2004)

Drilling South: Petrobras Evaluates Pecom

by Mihir A. Desai and Ricardo Reisen de Pinho


The Brazilian oil company, Petrobras, is evaluating the acquisition of an Argentine oil company, the Perez Companc Group (Pecom). The acquisition would increase Petrobras' oil reserves and expand its interests outside Brazil, a significant step for the largest company in Brazil. Pecom is for sale because it has been severely affected by the financial crisis in Argentina. Students have the opportunity to assess the impact of a severe devaluation on a company. There is also considerable uncertainty about how to value Pecom, and students must weigh the importance of country risk in determining the appropriate discount rate to use in the valuation. Finally, there is also uncertainty about Petrobras's own future as the Brazilian government has controlled it. Students are allowed to review the efficacy of changes in corporate governance implemented by Petrobras, despite its ongoing link to the Brazilian state and the associated political uncertainties of that affiliation. Students will consider different methods of valuation and the impact of politics on cross-border acquisitions. To obtain executable spreadsheets (courseware), please contact our customer service department at

Keywords: Mergers and Acquisitions; Forecasting and Prediction; Financial Crisis; Non-Renewable Energy; Cross-Cultural and Cross-Border Issues; Corporate Governance; Risk Management; Emerging Markets; State Ownership; Performance Evaluation; Risk and Uncertainty; Valuation; Energy Industry; Argentina; Brazil;


Desai, Mihir A., and Ricardo Reisen de Pinho. "Drilling South: Petrobras Evaluates Pecom." Harvard Business School Case 204-043, November 2003. (Revised March 2004.)