Sep 14 2009

DIY Brazil

September 14, 2009

First Hotelling, and now Ricardo? Brazil’s new resource policy has already sent efficientarians into gruff, neo-classical orbit. They’re predictably irked that Brazil no longer intends to extract its oil as quickly as possible at current market prices! Now the South American giant has additional gravel to drop on the heads of economists: it’s decided to build all its future drilling rigs at home:

Asian yards miss out on Petrobras drillship contracts – Rio De Janeiro: Asian shipyards are to lose out on a lucrative offshore opportunity in light of the news that that Brazilian oil company Petrobras is to hand out around $9.8bn in chartering costs to offshore operators for expensive drillships – but only if they are built in Brazil. –SeaTrade Asia Online, 11 September 2009

Brazil Ex Votos Wooden ArtBrazil sourced its previous (and current) rig building contract the old fashioned way: by making a global tender. But given the capacity of Brazilian shipyards, myriad other resources found in Brazil, and especially the ability to make the full range of specialty metals, why not build all the drill rigs and drillships at home? Fabricado em Brasil, in contrast to Ricardian comparative advantage, will make economists very unhappy. As Brazil intends to spend at least 175 billion over the next 5 years developing offshore oil, making western economists unhappy (who neither understand oil) is not such a bad thing.

-Gregor

Further Reading: Petrobras Expects Brazil Government to Increase Stake: Bloomberg | Petrobras kicks off big rig build plans: Upstream Online | Is Resource Nationalism Back?: Nouriel Roubini via Forbes |

Photo: Hand carved Brazilian ex votos: SacredWorldArt.com

• Comments (5)
Author: Gregor Macdonald   Posted in: Americas  non-OPEC  Policy   Tagged:                
  • http://economic-undertow.blogspot.com steve_from_virginia

    This is just the first tiny step toward a new form of petroleum economic. Other producers will follow, perhaps Mexico. Oil IS too valuable to export cheaply to Americans that tney might burn it up driving in circles, it's just taken too long for all and sundry to come to that conclusion.

    Then again, there is nothing to prevent the Brazilians from racing through their newly- discovered oil bounty in a hearbeat all by themsslves. They (stupidly) make cars in Brazil, too.

  • Blair Rogers

    Coupled with the Export Land Model, Importing Countries are finding themselves backing up to the hard place before the rocks are unleashed.

  • Militiades

    I would like to see the United States adapt a similar policy with regards to it's workers. Getting away from the free trade (cheap labor) policy might allow us to rebuild our gutted industrial economy.

  • Militiades

    I would like to see the United States adapt a similar policy with regards to it's workers. Getting away from the free trade (cheap labor) policy might allow us to rebuild our gutted industrial economy.

  • Militiades

    I would like to see the United States adapt a similar policy with regards to it's workers. Getting away from the free trade (cheap labor) policy might allow us to rebuild our gutted industrial economy.