Brazil Seeks Greater Share in Oil Wealth, and Knows How to Use it.

As Brazil takes another step towards tapping its immense, virgin oil fields, it’s facing a question familiar to every commodity-rich country: how will this natural wealth be distributed?

If tradition were the standard, we’d see a bottleneck at the upper-class, with some populist crusts thrown to those beneath. Latin America’s newly emergent “Hard Left,” however, has, at least nominally, inverted the model. Best exemplified by Chavez in Venezuela, politicians riding the commodity boom have made hay of leveling the playing field, nationalizing industry and promising heavy investment in social programs. They demand capitulations from private corporations, a greater share of the spoils for the homeland, and a more just redistribution across class lines. Now that Brazil is preparing to take its place at the trough, it’s voiced some similar demands.

From the BBC:

The new finds have prompted the Brazilian government to say it wants a bigger share of the profits. These would be used to help confront the country’s social problems, rather than just leave this to Petrobras, the state-run oil company, and its international partners.

While Petrobras is state-controlled, around 60% of its capital is in private hands.

One alternative being considered is to create a fully state-owned company to manage the new reserves found in what are called the pre-salt area, because of their depth under layers of rock and salt.

In spite of these comments, concern that this is just the first step of a lurch left for Brazilian President Lula, one that’ll end in lockstep with Chavez, is misplaced: Brazil is not Venezuela, and the pragmatic Lula is a far cry from his Venezuelan counterpart.

While Chavez’ Bolivarian Revolution is contingent on oil and its boom, Brazil’s economic star has risen without the help of the recently-discovered fields (projected to be over 30 billion barrels worth). Its exports are among the most diversified in the world — from iron ore to ethanol, beef to soya — and mature policy has assured that a US slowdown will do little to dent Brazilian growth.

From the AP, via the IHT:

Central Bank president Henrique Meirelles said it illustrates the newfound stability of Brazil’s once notoriously volatile economy. Brazil defaulted on its debt and declared a moratorium on debt payments in the 1980s, but predictable monetary policy and steady growth in recent years have most experts calling the boom-and-bust economic cycles a thing of the past.

After wallowing in debt for so long, Brazil is now a net foreign creditor. In April, Standard & Poor’s rewarded the Brazilian government’s fiscal responsibility with a promotion to “Investment Grade.” It’s trade surplus was nearly $40 billion last year. It’s international reserves have nearly tripled since 2003, the beginning of a strong 5-year uptrend, to $188.2 billion.

Some argue that the economic growth of Brazil is an illusion, more the result of a benign global economy than sound economic policy. I’m not convinced by the argument (which itself admits it’s devil’s-advocate nature), and see little room for fault in Brazil’s handling of these fat times. With the coeval implementation of prudent savings and investment campaigns and progressive social spending programs like Bolsa Familia – the largest conditional cash transfer program in the world — it’s improving the national standard of living of both the near and the short term. I look forward to the day America can say the same.

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