Andres Oppenheimer: Brazil's oil: new wealth or petro-populism?
Article Last Updated: 11/27/2007 05:20:28 PM MST
By Andres Oppenheimer
Miami Herald
No wonder that Brazil's president, Luiz Inacio Lula da Silva, proclaimed "God is Brazilian" after the discovery of massive oil reserves in his country earlier this month: The find could soon turn Brazil into a major oil exporter, and a big player in world affairs.
But before I tell you why the find could also threaten to derail Brazil's slow but steady march into a successful economy, let's look at the facts.
On Nov. 8, Brazil's state-controlled oil firm Petrobras confirmed the finding of huge oil reserves that could hold up to 8 billion barrels of light crude in the Tupi fields, off Brazil's southeastern coast. Some experts say that Brazil's oil officials usually downplay the size of the country's oil findings, and the new reserves could be up to 10 billion barrels.
The discovery is likely to raise Brazil's oil reserves by 50 percent, and turn it into the country with the eighth-largest oil and gas reserves in the world. Petrobras President Sergio Gabrielli said that the reserves "will lie somewhere between those of Nigeria and Venezuela."
Brazil imported 85 percent of the oil it consumed until the late 1970s, but has since become a world model of oil self-sufficiency by gradually replacing its oil imports with home-produced ethanol. Half of all new cars in Brazil run on ethanol, which allowed the country
to become a marginal oil exporter last year. Oil exports are likely to soar starting in 2013, when commercial production of the Tupi field starts.
"This has changed our reality," Lula's chief of staff, Dilma Rousseff, was quoted as saying by The Associated Press. "It will transform the nation to another level, with exporting capabilities like Venezuela, Arab nations and others."
Soon after the oil discovery, the government announced an acceleration of existing plans to build a nuclear submarine.
Defense Minister Nelson Jobim said Brazil will now need such a submarine more than ever, to protect is new oil fields from potential terrorist attacks. Jobim ridiculed the idea that Brazil would try to build a nuclear bomb as "total nonsense," the official Agencia Brazil reported.
There is little question that, with its new oil windfall, nuclear capabilities, world-class aviation and agricultural industries, and increased commercial clout to negotiate with the rest of the world, Brazil - which already accounts for more than 50 percent of South America's economy - will be much closer to joining China and India as the world's biggest new economic powers.
For one thing, Brazil will be much less dependent on unreliable energy suppliers such as Bolivia, which recently created a crisis in Brazil by nationalizing its gas reserves and effectively raising the prices of its gas exports.
But what about the danger that oil will go to the heads of Brazil's leaders, much like happened in Venezuela, Ecuador and many other oil-producing countries? Will the avalanche of petrodollars increase Brazil's corruption and fuel messianic-populist regimes?
Most experts say that's not likely to happen, among other reasons because Petrobras is run pretty much like a private company, and because the country's economy is much more diversified than those of Venezuela, Ecuador, Bolivia and other oil producers.
Paulo Leme, managing director for emerging markets research at the Goldman Sachs investment bank, noted that nearly half of Petrobras' stock is privately owned. "It's very different from Mexico's Pemex or Venezuela's PDVSA," which are government monopolies that are much more vulnerable to political pressures, he said.
Paulo Sotero, head of the Brazilian Institute at the Woodrow Wilson Center in Washington, adds that, unlike Venezuela, "Brazil will not become a single-export country; it produces Embraer aircraft, agricultural goods, mining, a whole array of things."
My opinion: I agree. But I can't keep from wondering whether Brazil, which has one of the world's biggest income gaps between the rich and poor, will be able to resist a petrodollar-fueled populist presidential hopeful once the money starts rolling in.
We may soon get a hint. If Lula, who recently announced he will not run for a third term, now decides to change the law and run again, as some political analysts suspect, it may be the first sign of petro-populist contagion.
Brazil is poised to become a major emerging world power, but only if it keeps a cool head.
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Andres Oppenheimer is a Latin America correspondent for the Miami Herald, 1 Herald Plaza, Miami, Fla. 33132; e-mail: aoppenheimermiamiherald.com.
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