“The pre-salt oil reserves is strong evidence that God is Brazilian”
- President Dilma Rousseff
In light of the enormous production potential of deep-sea oil reserves found off the coast of Brazil, how involved should the Brazilian government be in its exploitation? What are the positives and negatives of government control?
Since the discovery of the pre-salt reserves, the laws governing extraction have changed to favor Petrobras, asserting the state as a huge benefactor of the oil profits. There are four conditions foreign companies must adhere to in order to operate in the region (Duddy):
- Exploration of the pre-salt deposits will have to be done with consortium through Petrobras.
- Petrobras will retain at least 30% equity in the areas explored.
- Petrobras must be the operator on all future oil fields.
- 65% of all future inputs–rigs, equipment, machinery, etc.–must be made in Brazil.
It is understandable that the state wants to ensure that revenue from its own natural resources settles in their own hands. However, this is where the question of government involvement comes into play. Does the government stifle capitalistic ingenuity, or is federal control necessary to ensure the interests of the country? To gain a greater understanding of the issue, please explore my site and then visit my policy recommendation page where I explain why I believe Brazil should retain the controversial laws I noted above.