Ouvre-toi Bresil: The Time is Ripe to Enter Brazil

In the wake of the recent financial crisis Brazil has emerged as one of the most promising and economically resilient locations in the world. A number of companies are already entering the Brazilian market, eager to benefit from the plethora of opportunities available in a country that was once characaterized as "the sleeping giant".

So Why Brazil? Why Now?

Economic Growth & Resilience

• Brazil will be the 5th largest world economy by 2050 in terms of GDP.
• The country was able to sustain the global crisis better than most developing and developed countries in the world.
• Exports have doubled in the last four years, and imports have increased in a similar pace.
• Brazil ranks amongst the world’s 6 biggest economies ahead of Spain, Mexico and South Korea.

BRIC

• Part of the leading emerging economies denominated BRIC by Goldman Sachs.
• By 2050, Goldman Sachs predicts that Brazilian GDP will grow at a faster rate than that of China and Russia
• Unlike other BRIC countries, Brazil has a stable democracy, no ethnic or regional conflicts and speaks one language

Company Value Growth

• The Brazilian banking industry has an enviable outlook. No Brazilian bank went bankrupt following the financial crisis.
• Companies listed in BOVESPA Stock Exchange (Bolsa de Valores de Sao Paulo – the main stock exchange in Brazil) have more than doubled between 2008-2009.
• The finance sector in Brazil is set to become a key player in the international arena.
• Companies like Vale and Petrobras are growing exponentially

International Investment Status

• The rating agency Standard & Poor’s upgraded Brazil’s investment grading to BBB-
• The 30% increase in FDI in Brazil in 2009 is a reflection of the new confidence of global business in Brazil.
• Foreign companies settled down in Brazil are free to send their profits to their country of origin.

Stable Political Environment

• Brazil is one of the biggest democracies in the world
• It has one language and one faith and does not face ethnic, religious, linguistic conflicts, terrorism or troublesome neighbours
• Brazil has no border disputes
• Brazil does not have ideological polarisation nor extremist political parties.

Tourism

• The 2014 Football World Cup will be held in Brazil
• The 2016 Olympic Games will be held in Rio de Janeiro
• Construction, transport, tourism and steel manufacturing in particular, are likely to benefit substantially from increased demand for local facilities.

Natural Resources

• One of the worldwide largest producer and exporter of agricultural products.
• The world’s largest producer of iron ore
• Self-sufficient in oil and predicted to become a major player in the Oil & Gas industry
• The worldwide largest producer and exporter of coffee, sugar cane and fruit juices.
• The world’s largest exporter of soy, meat, chicken and leather.
• The world’s largest producer of ethanol

Infrastructure

• 67 airports with annual flow of 110 million people.
• Ports with capacity for over 600 million tons/year
• 29,596 km of railways – the eleventh world railway mesh.
• 1.6 million km of roads – the third world road mesh.
• 100% digital telephone lines in Brazil
• Government to invest US$313 billion in roads, railways and ports by end of 2010.

Growing Retail Market

• 3rd largest cosmetics market4th largest cellular phone market
• 5th largest population, market for books and music
• In the next 15 years, São Paulo, will establish itself as one of the main consumer centres in the world and it will have a middle and high income population bigger than London and Paris.
• The consumption market covers more than 900 million of potential consumers, considering Brazil, Latin America and North America

Innovation and Technology

• A competitive differential within the sectors of aircraft building, oil exploration in depth water and software development.
• The biggest and most diversified science, technology and innovation system of Latin America.
• The growth rate in number of personal computers between 2002 and 2007 increased more than 120%
• Expected to be the 3rd largest market for PCs by end of 2010

A political duty of care?

In Donoghue v Stevenson, Lord Atkinson eloquently set out the neighbour test:

"You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour. Who, then, in law is my neighbour? The answer seems to be - persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question."

Should politicans owe a legally enforceable duty of care to its constituents? Arguably, yes. But realistically, never. One cannot expect lawmakers to commit political and legal suicide.

Perhaps this is good material for what I call "legal fiction"; laws that will never come to see the light on this planet - but that can blossom in the creative fields of our imagination.

Rig Types

To know more about the different breeds of rigs, the following site provides some comprehensive information:

http://hydrocarbonkid.blogspot.com/2008/04/offshore-drilling-rigs.html

Oil Rigs in Rio (CLICK ON PICTURE TO ENLARGE!)

Brazil Oil: New legislation update

Brazil’s President Luiz Inacio Lula da Silva has proposed new legislation aimed at governing the development of his country’s potentially enormous reserves of oil in the offshore presalt layer, about 270 km off Brazil. As the President put it: “The subsalt oil fields are a gift from God—wealth which, if properly managed, can drive major transformations in Brazil, improving living conditions for our people.” Lula also reiterated that Brazil does not want to be a “mere exporter of crude oil” and that the plan also aims to establish a powerful petrochemical industry to refine the oil into derivatives in order to export value-added products like gasoline. The development model, which must be ratified by Brazil’s Congress, includes: a new production-sharing system for contracts; a new public company for presalt contract agreement and administration; and a new social fund for investment in education and mitigating poverty in Brazil.

The new development model involves Brazil’s move from a concession model to a production-sharing system for the award of new contracts. Brazil’s Minister of Mines and Energy Edison Lobao said the proposed production-sharing system reflects a change in Brazil’s standing from an oil importer to a self-sufficient global energy producer.

The government's new model also includes the creation of a public company responsible for controlling and monitoring the cost of E&P of presalt and the administration of sharing contracts. This company will represent the country in the consortia and operating committees to be created for directly managing different sharing contracts and monitoring all activities in E&P. The presalt development model will establish a social fund that will set up a means to direct revenues from presalt exploration toward investment in poverty reduction, in education and in science and technology. The new social fund will take the form of a public savings account that receives income from various sources such as royalties, signature, bonuses, and commercial revenues from petroleum and gas, originated in production sharing, and resources from activities such as mining.

Incorpolis in Rio!

After writing numerous articles on Brazil oil from my squeaky chair in Oxford, Incorpolis is now in a position to write about the commodity, the market and industry in general. Expect pictures of oil rigs, pipes and ships soon!

Piracy and gobal redistribution of wealth

Piracy is undoubtedly a crime. That cannot be disputed. However, as Marcus Aurelius argued, "hunger is the mother of all crimes". Thus I ask: is piracy merely a manifestation of the unequal distribution of wealth in the world? Arguably, some pirates enjoy what they do: the thrill, the drama, the weapons. But if we look closer, we can see how it is simply mankind's struggle for economic equality. It is essentially an economic crime. And one cannot fight such crimes with use of force - what is needed is long-term regional economic reform.








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