Bellerbys Economics - Mr Stephenson

Monday, November 12, 2007

Is Brazil the new Kazakhstan?

News of the discovery of major oil reserves off the coast of Brazil has certainly gladdened a few hearts in this large South American country - it now finds itself in much the same position as Kazakhstan ten years ago - about to become self-sufficient in terms of oil - and very soon now, it will be earning large sums of money from selling its oil abroad.

It will take a little while of course - as it did in Kazakhstan - about 10 years worth of investment perhaps - but the signs are good.

But is Brazil going to be the new Kazakhstan. Well, probably not - the two societies are at the moment, very different. Kazakhstan has one of the world's lowest Gini coefficients, suggesting it is one of the world's most equal societies, whereas Brazil is one of the world's most unequal societies.

Brazil is much bigger with a population of 187 m (and growing by about 2% a year) whereas Kazakhstan has only 15m and a stable population. However, they both share similar rates of economic growth and have similar levels of oil reserves (about 40 years worth at current production levels).

Brazil have the world's best football team and Kazakhstan has possibly the worst - like the old joke - eleven young men in search of a goal.

What is certain is that - like Kazakhstan - the influence of Brazil on the world stage should now begin to grow significantly and we will all be hearing a lot more about the Brazilian economic miracle as the profits begin to filter through the different levels in the economy - provided the rich in Brazil aren't allowed to take all their profits overseas of course.

1 Comments:

  • The oil reserve you mentioned is covered by 7 kms of water, sand and rock. Furthermore, the oil is heavy oil, which means that it can be extracted only at high cost. Of course, at oil prices around $100, it is not a problem. What is problem, is that Petrobras, a majority owner of that field, has very stretched balance sheet as a result of recent M&As.
    I would like to mention that consortium of companies, including Eni, BG, BP, Mobil, Shell and Total, have long struggled to extract oil in relatively easier Caspian Sea.(Kashagan field, KAZ) What will it take to company like Petrobras to start commercial extraction of oil?

    P.S. And Kashagan is probably twice as large, compensating the effect of poor football team. hehe

    By Blogger LSE, at 11:21 pm  

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