PBR (and EWZ) could be in play shortly

Watch the news feed to see whether Petrobras — the biggest oil producer in Latin America much less its native Brazil — can get its bottom line under control.

Sad but true, Petrobras (PBR, quote) has been driven by its capital expenditures, which are always as fat and bloated as it gets — as befits a company that is sometimes run more like an arm of the Brazilian government.

The stock has had a hard time getting momentum as a result:

But now there are rumors that Brasilia will force PBR to rein in its five-year spending plan in order to keep inflation in check. And if oil prices do not collapse, that could be the catalyst for some real performance at last.

Look for a reduction of 20% to 30% in PBR’s spending on the Maranhao and Ceara refinery program over the next four years. There is talk out there that the plan could be released as early as tomorrow.

Improved performance for PBR means that large-cap Brazil ETFs like EWZ (quote) — heavily weighted with PBR common and preferred shares — could turn as well:

EWZ was a big laggard coming into this and a global “soft landing” is music to the Brazil finance minister’s ears.