Brazil’s compelling energy profile demands continued consideration. The country is the eighth largest energy consumer in the world and third largest in the Americas. In terms of production Brazil is the ninth largest globally and trails only the United States and Canada in the Western Hemisphere. In South America, Brazil is second only to Venezuela in oil production terms. But the country faces critical questions for attracting energy investment.
Brazil’s Finance Minister Joaquim Levy and a wide range of government representatives and industry executives convened at the Institute of the Americas’ Brazil Energy Roundtable on October 23 in Rio de Janeiro to contemplate whether Brazil was at the dawn of a new energy era.
Despite strong economic headwinds, Brazil’s energy sector has proved surprisingly resilient. But it is important to disaggregate the various segments of the sector. Significant progress in renewable energy deployment and increased natural gas for power generation, as well as laudatory emissions reductions targets in advance of the Paris climate meeting must be separated from the discouraging performance of Brazil’s oil sector. Even the power sector, though facing financing issues will see more immediate returns from fiscal balance measures being developed by the government. The same is not true for the oil sector.
There are signs that the elements of a broader macroeconomic recovery exist, but only given important contingencies and tough decisions being made by the federal government and all of Brazil. For the energy sector, how the country’s authorities manage the oil sector and adopt a more flexible posture are critical. And while the power sector is, by comparison, in a better position the question of financing and how the BNDES financing gap will be filled remains unanswered. There are a litany of tough choices facing both the government and industry alike in Brazil’s oil sector, not the least of which is how Petrobras will emerge from its debilitating corruption scandal.