subject: Why Property Investors Are Excited over Brazils Petrobras [print this page] Never before has the world seen an operation of such magnitude we have made the largest capitalisation in the history of capitalism.'
These were the words of President Lula as Brazil announced the international public financing of its biggest company, Petrobras: a move that looks set to further reinforce the country's now well established growth trajectory.
Brazil has seen its reserves grow by over 40% in the last 12 years whereas most countries have witnessed shrinks. With the discoveries of the Tupi and Jupiter oil fields on the south-east coast, the nation has advanced up the global league table in terms of production, having grown 95 percent in the last 10 years (compared with the world average increasing by 22 percent).
The company's growing international presence is also noteworthy of merit with the fact of having major stake-holdings in several large operations in Latin America; further exploration of the deep-water fields in West Africa and the Gulf of Mexico as well as trade agreements with countries such as China (who Brazil have agreed to supply 100,000 to 160,000 barrels of oil in exchange for a $10bn development loan).
For real estate and land buyers, the increased wealth that the expansion will bring is a reassuring factor in a country which was previously viewed as risky from an investment perspective. The property markets located in the petroleum hubs of Brazil, both coastally and in-land, have also become hot beds of activity, largely due to increased employment opportunities, ongoing infrastructural improvements and higher standards of living notable regions including Maca, in Rio de Janeiro state (also known as the petroleum city' of Brazil); the coastal regions of Esprito Santo; Santos in So Paulo; Maranho and Sergipe (both in the country's north).
Whilst there are many reasons to be strongly optimistic about the future prospects that increased national wealth will bring, concern has arisen with regards to the risks that will need to be managed effectively. From a practical perspective, much of the country's reserves are located deep beneath the Atlantic Ocean as well as hard rock and salt and whilst a significant amount of investment is being earmarked, the hazards of refining have been further highlighted by the recent spills off the coast of the Mexican Gulf.
Echoing the comments of President Juan Pablo Prez Alfonzo (Venezuela's oil minister and founder of OPEC in the early 1960s) referring to oil as not black gold' but the devil's excrement' President Lula has stated that the country's new found wealth could be a curse a not a blessing if not controlled in the right way. Brazil has therefore been witnessed reforming its oil laws with the intention of diverting a significant portion of the country's oil wealth towards improving education systems and combating poverty one example of this is the Young People Learn' (Joven Aprendiz) programme, aimed at assisting people from lower income families between the ages of 14-24 to enter the formal world of employment.
The government also announced plans to auction off exploration and production blocks the winners being those who would be willing to grant the government the most oil. Winning bidders are also expected to make an upfront payment that will go towards a social investment fund.
Why Property Investors Are Excited over Brazils Petrobras
By: Les Calvert
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