(Bloomberg) -- A spiraling dispute over the leadership of Petroleo Brasileiro SA is exposing fault lines in President Luiz Inacio Lula da Silva’s administration, repeatedly roiling markets.

The battle over Petrobras’s top job erupted last week, when Mines and Energy Minister Alexandre Silveira lobbed his latest round of criticism at Chief Executive Officer Jean Paul Prates over his handling of the state-controlled oil company. Prates, in response, requested a meeting with Lula to seek a show of support as rumors that his firing was imminent swirled.

The result was a turbulent end of the week for markets, with the company’s shares swinging wildly as investors struggled to keep up while Lula remained on the sidelines. They continued to bounce back and forth Monday ahead of an evening meeting between the president and Finance Minister Fernando Haddad, where they were expected to discuss the situation.

Preferred shares in Petrobras jumped as much as 1.32% in Sao Paulo on Tuesday — leading gains on Brazil’s stock index Ibovespa — on reports that the government may propose to the board a payout of 50% of extraordinary dividends the company previously decided not to distribute, another issue that has divided the administration. 

Haddad would pitch the idea during the Monday meeting, the report from local newspaper Valor said. Lula’s government declined to comment on the meeting or the potential proposal. 

The veteran Lula, who previously served as Brazil’s president from 2003 to 2010, has long encouraged members of his administration to offer dissenting views, and typically only makes final decisions after he has weighed competing arguments. 

But the most recent fight is an example of the risks the resulting rivalries can pose. The Petrobras spat, investors say, typifies the sort of public squabbling within the administration that has become common since Lula returned to office, and that has made it far more difficult to discern the direction of Latin America’s largest economy. The uncertainty has decreased investor appetite for shares in state-owned enterprises, and made them more cautious about Brazil as a whole.

Read More: Petrobras CEO Seeks Lula Meeting Amid Speculation He’ll Be Fired

Since assuming control of Petrobras last year, Prates has regularly found himself at odds with members of Lula’s cabinet, including Silveira, who has repeatedly criticized the chief executive’s perceived lack of alignment with government priorities. They have recently sparred over the extraordinary dividend payouts that have attracted scrutiny from investors.

What Bloomberg Economics Says

“President Luiz Inacio Lula da Silva’s acute interest in Brazilian oil giant Petrobras is stoking concerns of interventionism that, in the past, did little to boost the economy and was very costly to shareholders. The government might be tempted to interfere with Petrobras’ dividend, investment and pricing strategies in order to leverage its fiscal, growth and inflation objectives — but the risks may outweigh the benefits.”

— Adriana Dupita, Brazil & Argentina economist

Click here to read the full report.

For all the contradictions of a company that’s both controlled by the state and owned by private shareholders, Petrobras’s chief executive has one of the most coveted jobs in Brazil. The sheer size of the company’s investment plan — an estimated $102 billion between 2024 and 2028 — makes the oil firm a potential instrument of development. Whether the government should use it to boost growth and jobs or refrain from intervening in its corporate decisions has served as a key point of debate within Lula’s administration.

But it is far from the first fight to burst into public view. Last year, Haddad faced criticism from leftist allies that his attempts to cut spending were too market-friendly and had put Lula’s economic goals at risk. Later, he and Chief of Staff Rui Costa engaged in a tug-of-war over the government’s fiscal target, with Haddad fighting to maintain a zero-deficit goal that Costa and others wanted to make more lenient.

After months of backing Haddad’s plans, Lula questioned the importance of eliminating the primary deficit in October, sending markets into a tailspin on fears his government would abandon its commitment to shoring up the country’s public accounts. 

He later reversed course and reaffirmed support for the goal, but the impact on investors has persisted. While the government currently projects that it will finish 2024 with a deficit within its target range, markets are pricing in significantly larger primary deficits of 0.7% of GDP in 2024 and 0.6% next year, according to the central bank’s weekly survey of economists.

Read More: Brazil Finance Chief’s Market-Friendly Pose Alienates the Left

Ministerial rivalries are a regular feature of any government, and commonplace in Brazil, where a working governing coalition requires handing cabinet jobs to an array of parties that often have different ideological aims. 

But in his third term, Lula has kept his own positions on major issues closer to vest, delegating less to advisers and allies than in previous years. As a result, ministers and others within the administration have more often resorted to public arguments as they attempt to win him over. That has increased the odds of dragged-out struggles that leave analysts and investors confused about the approach the president will ultimately take.

“This is a crisis completely created by the government itself,” said Thomas Traumann, a Rio de Janeiro-based communications consultant who served in the administration of former President Dilma Rousseff. “There was no big investment loss, oil didn’t go up or down. It’s only a crisis because there’s a fight, and it’s paralyzing Petrobras.”

--With assistance from Leda Alvim, Mariana Durao and Simone Iglesias.

(Updates with share move on reports of extraordinary dividend proposal in fourth paragraph.)

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