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Gold/Mining/Energy : Big Dog's Boom Boom Room
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To: DewDiligence_on_SI who wrote (147959)3/26/2011 3:49:20 AM
From: elmatador  Read Replies (1) of 206140
 
"The federal government of Brazil can ‘easily’ dilute your equity stake again."

That is the cost of doing business me and you have to take on. to be on board with PBR.

PBR is a tool of government management of the Brazilian economy.

Brazilian government also want Vale to act as a tool of government management of the Brazilian economy.

I am more in favor of government intervention of the economy that let all actors free and only act when the cow is grounded into the swamp and requires a lot of government intervention to bail the cow out.

See banks and finance US/Europe 2008 onwards.

Take Vale case for instance: Government want them to invest in fertilizer. They were seating on the mining concessions while the country was importing 60% of its Potash.

By the same token, government forced PBR to invest in refineries rather to concentrate only in the file Mignon of oil finding and extracting oil.

Government knows that managing a self sufficient energy country requires some fine tuning at times. See the case when the sugar/ethanol people prefer to make sugar and gorge in profits rather than produce ethanol.

PBR has to import gasoline to make for the shortage of gas as drivers full their tanks with gasoline prices climb.

PBR also acts as inflation-fighter. As inflation goes up, PBR holds gas prices. As oil comes down, PBR holds gas prices and make for the losses incurred when oil spiked.
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