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Brazil ?��Ǩ�� Not Just a Property Investment

By Obelisk on 17 September 2009

Being in possession of a ‘millionaire's ticket' is the stuff of dreams, particularly in today's economic climate. For Brazil, the dream has come true in the shape of vast oil fields. President Lula describes the potentially massive reserves as the ‘millionaire's ticket' and ‘a passport to the future'. Probably not an exaggeration since oil revenue is likely to place Brazil among the big players in world economics, proof that Brazil property investment is a whole lot more than just a property destination.

Brazil is famed for its natural resources. Oil, the so-called ‘black gold', is just the latest natural treasure to join Brazil's long list of riches, which already includes iron ore, platinum, uranium and hydroelectric power.

The oil and gas fields under prospection in offshore Brazil are estimated to contain up to 50 billion barrels of oil and gas, enough to turn Brazil into an oil giant along with the likes of Saudi Arabia, Canada and Iran. The potential revenue from these vast natural resources - the ‘millionaire's ticket' - is set to revolutionise Brazil's finances.

The question many experts are asking is how well Brazil will administer the huge oil funds. Brazil has a history of spending without saving for a rainy day, although more recent history has proved otherwise - in April this year, Brazil became a net creditor to the International Monetary Fund thanks to Brazil's large accumulation of foreign reserves. Money from oil and gas is expected to boost Brazil's coffers to an extent never seen before. There has never been a better time for investing in Brazil.

In its decision on how to administer and spend its oil money, Brazil has looked to other oil-rich nations. Norway, a country that saves most of its revenue from North Sea oil, is seen as an example to follow. However, Lula's government also wants to use the money towards much-needed projects such as education, infrastructure improvement, the environment and culture.

Lula's government has prepared four bills, which will be presented to Congress this autumn. The central idea behind the bills is to increase government control over the oil business and to ensure all Brazilians receive maximum benefit from the exploitation of natural resources in their country. One of the bills proposes reducing the amount received by states nearest the oil fields and spreading the revenue among all states in Brazil, regardless of their proximity to the fields.

Political analysts believe it's unlikely that all four bills will be passed without amendment, but most Brazilian politicians are well aware of the importance of administering Brazil's new-found riches well and wisely. The oil wealth will add substantially to Brazil's revenue, which already accounts for nearly 36% of its GDP, a level usually seen in developed countries.

But as a recent article in The Economist points out, deciding how to gather and spend a vast amount of money are "nice problems to have. And Brazil is better placed to deal with them than many other countries". An argument that adds further weight to the theory that Brazilian real estate is well worth your money.

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