Why Brazil Could Be the U.S.’s Next Great Trade Partner
The U.S. and Brazil are the largest economies in the Americas, and all signs point to an even more active relationship between the two powerhouses in the future. Just this year it was confirmed that U.S. citizens would no longer need a visa to travel to Brazil and can remain in the country for at least 90 days, allowing for more frequent interactions at a very basic level. Since that announcement, Brazil has seen increased travel interest from American tourists, with searches for flights from the U.S. to Brazil up more than 30 percent in March alone, compared to the previous year.
While tourism is a great way to build strong country relationships, what’s even more significant is a recent report that shows investment interactions between the U.S. and Brazil increased – and improved – between 2008 and 2017. More specifically, the report highlighted growth and opportunity across three of the most powerful indicators of economic health between 2008 and 2017: direct investments, exportation and employment.
Consider that by the end of 2017, U.S. investments into the Brazilian economy reached a whopping $68 billion, comprising nearly 3.3 percent of Brazil’s overall gross domestic product (GDP) – according to the report. For its part, Brazil’s foreign direct investments into the U.S. surged dramatically (356.5 percent) over the last decade, reaching over $42 billion in 2017. What’s more, from an exportation standpoint, the U.S. is a key destination for Brazilian exports. In fact, in 2017 alone, Brazil exported goods worth over $27 billion to the U.S. Similarly, the U.S. was the second main source of imports to Brazil in 2017.
Naturally, prolific trade and investment between the two countries is already leading to job creation in both countries. U.S.-controlled multinational companies employed nearly 655,000 Brazilians in 2015 and generated 131,900 new jobs in Brazil between 2009 and 2015. On the other hand, Brazilian companies in the U.S. employed over 74,000 Americans in 2015. Further, for Brazil, increasing trade with the U.S. also eases the country’s access to other international markets, boosting Brazil’s clout internationally while also broadening the job market and improving the Brazilian economy. In turn, increased trade with Brazil offers the U.S. access to resources that are critical to the American economy, such as oil and gas, mining, and chemicals.
As these initial results suggest, the opportunities on the horizon for a mutually beneficial relationship between the two countries are seemingly limitless. Currently, the U.S. is investing heavily in sectors across the Brazilian economy, focusing especially on mining, finance and insurance – and the U.S. is also especially well positioned to take advantage of unprecedented access and opportunity in one particular sector: oil. In light of that fact that the global demand for oil is rising, potentially reaching 102.3 million barrels per day by 2022, the Brazilian oil and gas industry presents the next great investment opportunity for foreign investors, especially those from the U.S.
Indeed, Brazil’s oil reserves are enormous – the 15th largest in the world, with over 15 billion barrels – and are located mostly offshore in deep waters. Brazilian oil companies are already pushing the boundaries of innovation when it comes to deep water exploration. Petrobras, for example, discovered pre-salt oil reserves – which are entirely unique to Brazil – off the coast of Rio de Janeiro in the Santos Basin in 2006. This initial discovery led the company to find a series of even larger oil reserves containing potentially billions of barrels of light oil. As oil experts will know, pre-salt extraction is more painstaking and complicated than other forms of oil and gas removal. However, investing in exploration and production in the pre-salt regions is becoming absolutely critical as the world’s post-salt reserves dwindle. Since discovering these reserves, Petrobras has actually developed many of the technologies needed to overcome harsh oceanographic conditions and create production infrastructure.
Of course, breaking into a new foreign market is always daunting. To entice foreign investors who are best equipped to efficiently and responsibly drill at these pre-salt reserves, Brazil’s National Petroleum Agency is organizing seven auctions (also known as “bidding rounds”) between 2019 and 2021, during which they’ll auction off areas containing billions of barrels of oil. These bidding rounds are designed to formally and transparently assign blocks from the pre-salt reserves that Petrobras currently has ownership over. During an upcoming bidding round on November 6, for instance, the Brazilian government will auction off the rights to extract the excess of 15 barrels of oil from across four fields called Atapu, Buzios and Itapu e Sépia. The winners will be able to utilize Petrobras’ technical data for pre-salt exploration and extraction in return for reimbursing Petrobras for a portion of its investment costs.
Encouraging bilateral trade and investment between Brazil and the United States is already leading to economic growth for both countries, and – as the data from recent years shows – the opportunities for future mutual prosperity are endless. By continuing to create unique investment opportunities, such as those offered to foreign investors during the upcoming oil auctions, Brazil will be able to court U.S. investors and further solidify its standing as America’s next great international trade partner.
To consult the schedule of bids and more information, please, refer to: http://rodadas.anp.gov.br/en/
Sergio Ricardo Segovia Barbosa, 55, is a retired Rear Admiral in Brazilian Navy. With recognized professional experience in military, managerial and governmental areas, he has worked in Intelligence Analysis, Military Operations, and Logistics. He also worked in Emergency and Risk Management, Maritime Safety, Strategic Planning, Navigation and Maritime Operations. In addition, in the foreign trade area, he was responsible for logistics and international acquisition processes, when he was in charge of the group for ship receiving abroad.
Mr. Segovia has a postgraduate degree in Politics and Strategy from the War College. He is fluent in English and Spanish.
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