Home The Washington Diplomat March 2008 Brazil Basks in Newfound Energy, Economic Boom

Brazil Basks in Newfound Energy, Economic Boom


After years of sacrifices, scandals and politicians’ promises of a better future, Brazilians celebrating last month’s annual Carnaval finally had something to samba about: the discovery of a massive underwater oil field that could—within a decade—transform their country into a major petroleum exporter on the order of Nigeria or even Venezuela.

“It’s like the message in a Chinese fortune cookie: ‘Good luck is the result of good planning,’” quips Antonio de Aguiar Patriota, Brazil’s urbane, well-spoken ambassador to the United States.

“Last year, we finally became self-sufficient in energy—quite an accomplishment for a country that 20 or 30 years ago believed it was vulnerable to external market shocks,” the ambassador says. “Our national oil company, Petrobras, which was once entirely state-owned, today consists of mixed capital, it’s listed on the New York Stock Exchange, and it specializes in deep-sea drilling. This is where the real oil bonanza comes from.”

And what a bonanza it is. The new Tupi deepwater oil field, discovered by Petrobras late last year, contains the equivalent of 5 billion to 8 billion barrels of light crude—making it the world’s biggest oil find since a 12-billion-barrel field was announced eight years ago in Kazakhstan.

The discovery has catapulted Brazil’s international status as a potential energy powerhouse. Tupi is so significant that Patriota’s boss, President Luiz Inácio Lula da Silva, recently said it was proof that “God is Brazilian” and promised that within a few years, Brazil would seek membership in the Organization of the Petroleum Exporting Countries (OPEC).

In addition, an enormous natural gas field, dubbed Jupiter, was recently discovered some 20 miles away from Tupi. This new natural gas field could match Tupi in size and further boost Brazil’s energy-wielding influence, although officials caution that more work is needed to establish Jupiter’s exact dimensions.

Brazil is also a major producer of sugar-cane ethanol and hydroelectric power, further adding to its energy cachet. According to the New York Times, “Rapid economic growth and declining oil production in oil-rich nations like Indonesia, Mexico and Iran are crimping how much they can sell abroad, straining the global oil market. In some cases, the governments of these countries subsidize gasoline heavily at home, which tends to encourage wasteful habits. But Brazil, with an economy growing at a healthy clip, sells fuels to its citizens essentially at market rates. And the huge three-decade-old effort to turn sugar cane into ethanol has made Brazil the largest consumer of plant-based biofuels in the world.”

In fact, Brazil sits amid the most abundant farmland in the world, part of which produces the sugar cane for ethanol. The result: Brazil will soon have more gasoline available for export than today, because much of that gasoline is being displaced by ethanol.

“Although we are the two main ethanol producers in the world, you cannot obtain ethanol at the gas pump here [in the United States],” Patriota says, noting that in Brazil, gasoline by law must contain at least 25 percent ethanol, and that every service station must have at least one pump that delivers pure ethanol. “These days, close to 90 of Brazil’s locally produced cars are flex-fuel. And our whole transportation network for ethanol production relies on Petrobras.”

And Lula has vowed that Brazil will not back off its aggressive push to develop biofuels because of the Tupi discovery, although work will ardently continue to extract Tupi’s riches, which lie nearly 200 miles off the coast of Rio de Janeiro state, at a depth of 4.5 miles below the ocean’s surface. Developing the field could cost billion, though with oil hovering around the 0-a-barrel mark, that would be a relative drop in the bucket.

Patriota says Tupi boosts Brazil’s 12.2 billion barrels of proven reserves to 17.2 billion, putting it just ahead of Canada (which has 17.1 billion barrels) and way ahead of Mexico (with 12.9 billion).

The ambassador expects total oil production to reach 2.3 million barrels a day by 2011, up from the current 1.9 million, noting that “with the Tupi discovery, our reserves will increase by 50 percent,” allowing Brazil to become a serious petroleum exporter for the first time in its history.

With 185 million people, Brazil ranks as the world’s fifth largest country both in land mass and population. Its economy is already the largest in South America and the 10th largest on Earth, with annual gross domestic product now exceeding class=”import-text”>2008March.Brazil Economic Boom.txt trillion.

Rio de Janeiro, which until 1961 was Brazil’s capital, is also the headquarters of Petrobras. It’s one of half a dozen cities bidding to host the 2016 Summer Olympics, and it also happens to be the metropolis where Patriota was born and raised.

“I was one of those rare cariocas [Rio natives] who lived in a house, not an apartment building,” says Patriota, who speaks impeccable English in addition to Spanish, French and, of course, his native Portuguese. “I am married to an American so I practice English at home. Also, my father was a diplomat and I lived twice in the United States—first when I was in kindergarten in San Francisco, where my father was consul general, and then as a teenager in New York, where he was posted to Brazil’s U.N. mission.”

Patriota’s siblings also took after their father. The ambassador’s younger brother Guilherme is a minister-counselor at Brazil’s U.N. mission in Geneva, while his sister Lucia Patriota de Moura is a minister at the Brazilian Embassy in Panama, where her husband serves as ambassador. And for the past year, Patriota’s wife, Tânia Cooper Patriota, has worked in Haiti as head of the U.N. Population Fund office in Port-au-Prince.

Patriota himself has served at the Geneva U.N. mission where his brother now works, as well as at the U.N. mission in New York for five years and at Brazilian embassies in Beijing and Caracas. He began his current job in Washington exactly a year ago and heads a staff of more than 100, including 24 diplomats, at the sleek Brazilian Embassy fronting Massachusetts Avenue.

In a recent interview with The Washington Diplomat, Patriota says U.S.-Brazilian relations have dramatically improved after the misunderstandings and rivalries that characterized the first half of the Bush administration.

“2007 was a positive year,” he says. “We had two presidential encounters in March, which really set the agenda for my work here. President Bush came to São Paulo and Lula came to Camp David. In São Paulo, [Bush] signed a memo of understanding to promote cooperation in biofuels.”

He adds: “The Brazil-United States CEO Forum was launched in October in Brasília in the presence of White House Chief Economic Adviser Al Hubbard and Commerce Secretary Carlos Gutiérrez. The U.S. has this only with one other country, India.”

But bilateral relations weren’t always that warm and fuzzy. Lula, who at the age of 12 was shining shoes to support his desperately poor family, helped found the socialist Workers’ Party during the height of Brazil’s military dictatorship. His rise to power—and his friendship with leftist radicals such as Cuba’s Fidel Castro and Venezuela’s Hugo Chávez—initially frightened the Bush administration. But Washington warmed up to Lula after it became clear that the former trade-union activist was not an anti-American demagogue intent on staying in power for the rest of his life.

“I think we can trace this period of increasingly close cooperation back to the second half of 2005,” Patriota explains. “Before that, there had been some friction regarding the agenda for the FTAA [Free Trade Area of the Americas]. It’s not that we’re not in favor of free trade. On the contrary—we just weren’t interested in opening our market for agricultural goods. There was a very ambitious regulatory agenda that came with the FTAA process which would have restricted Brazil in areas such as industrial development and environmental science.”

Bush’s first visit to Brazil came in November 2005, three months after he signed the Dominican Republic-Central America Free Trade Agreement into law. Yet the president’s larger dream of a Free Trade Area of the Americas stretching from Alaska to the southern tip of South America never came to pass—which was just fine with Lula and millions of skeptical Brazilians, as well as Americans, for that matter.

“The interesting thing is that, FTAA or not, trade has been growing very rapidly. After 2005, a new horizon of possibilities emerged,” says the ambassador. “Paradoxically, the truth is that once we overcame the friction between our two very different concepts of free trade, we started witnessing the appearance of new areas of convergence.”

Proof of that is the jump in bilateral trade, which this year will reach billion. In 2006, the latest year for which statistics are available, Brazil attracted .8 billion in foreign direct investment (FDI), with U.S. companies accounting for roughly .4 billion of that.

This year, Brazil’s economy is expected to grow by 4.4 percent, after expanding by just over 5 percent in 2007. This, along with his dramatic success in halving extreme poverty and malnutrition through his Zero Hunger initiative, has helped boost Lula’s popularity ratings.

“If there were elections today, Lula would beat José Serra [leader of the opposition Brazilian Social Democracy Party] by 60 percent to 40 percent,” says Patriota, noting that Lula’s term ends on Jan. 1, 2011.

“We’ve been very fortunate in Brazil to have a leader of the stature of Lula, who is above and beyond a depiction of leftist or rightist—a man of dialogue, who built his career as a negotiator. From the beginning, he negotiated increases in salaries and better working conditions,” says Patriota. “Of course, Lula’s a very pragmatic man, so he wants the Brazilian economy to thrive and attract investment without inflation, to the extent he can combine all these characteristics with an ambitious social agenda.”

Although Lula has enjoyed enormous success battling hunger and poverty—a struggle that might become easier as billions of petrodollars begin flowing from the Tupi oil field—crime and violence have continued unabated. In 2006, Brazil was making headlines not for its energy output, but for clashes between police and prison-based gangs that led to open street shootouts, and today the level of violence remains staggeringly high. More than 50,000 people are murdered every year in Brazil, which now endures one of the world’s highest homicide rates.

The ambassador concedes that this remains a major challenge for the Lula administration. “Curiously, our worst problems with violence and insecurity are in the two largest cities, Rio and São Paulo, which are also the wealthiest cities in Brazil,” he says. “So violence is not necessarily a product of poverty, but of extreme inequality on one hand, and the sensation of hopelessness on the other. It took many years for this situation to develop, and it’s not going to disappear overnight.”

But Lula—Brazil’s first working-class president—seems determined to spread Brazil’s wealth down to the country’s notorious favela slums and usher in social change. Indeed, in a region where leaders tend to be lumped into left-wing and right-wing camps, it’s hard to quantify Lula. There’s little doubt that Brazil’s president comes from a left-of-center background, but his policies are generally friendly toward the United States and he’s a staunch advocate of foreign investment. In fact, the Bush administration views Lula as a key counterweight to the radicalism of Venezuela’s Chávez, who in mid-February threatened to cut off oil shipments to the United States in the wake of a legal dispute with ExxonMobil.

“These categories of leftists and rightists don’t apply so well to what’s happening today in South America. They don’t capture the political dynamics of the moment,” argues Patriota. “These days, democracy is taking root—all governments in South America are democratically elected. There’s a common perception that without dealing with social challenges, our economic growth will not be sustainable, and our democratic development will remain unsatisfactory. Therefore, the state must participate in reducing poverty and combating hunger.”

Patriota declined to express a personal opinion on Chávez, though he suggested that it wouldn’t be fair to compare the “political evolution” of Brazil to that of Venezuela.

“In Venezuela, you had a coup d’etat staged by the opposition in 2002. Members of the opposition behaved less than democratically and then withdrew from the democratic process, so I suppose it’s an encouraging sign that the opposition in Venezuela today is participating again. This demonstrates that democracy works in Venezuela.

“In Brazil, we didn’t have anything like that, since both the Workers’ Party and the Social Democrats—the two main parties in Brazil—emerged from the fight for democracy during the years of military rule. Both of these parties have been in government and opposition, so this has brought a degree of maturity to the Brazilian political system.”

Asked about Chávez and the degree of influence he has on the rest of Latin America, Patriota deflected the question, saying, “The Brazilian government does not become involved in the internal matters of other states. My foreign minister often says we try to balance the principle of non-intervention with non-indifference.”

Yet one policy difference with the United States is hard to overlook: Brazil’s strident opposition to Washington’s 45-year-old trade embargo against Cuba.

For years, Brazil has done business with the Castro regime. Between 2002 and 2006, Brazil’s exports to the Caribbean island increased fivefold, reaching 3.8 billion.

In January, Lula visited Cuba for the second time since taking office, meeting with both Fidel and his successor Raúl Castro and offering more than 0 million in credits for food and infrastructure. The two countries also signed 10 accords dealing with pharmaceuticals, road and hotel repairs, oil exploration and nickel refining. The highly publicized visit was a setback to the Bush administration’s determined efforts to punish the Castro brothers with trade sanctions.

“We believe that isolation is not the way forward. It’s not constructive,” says Patriota. “The U.N. resolution condemning the U.S. embargo [overwhelmingly approved last October by a vote of 184-4] speaks for itself.”

Brazil also strongly opposed the U.S. invasion of Iraq, although “looking more at the contemporary situation today, we commend the Bush administration for their efforts to promote peace between Israel and the Palestinians,” says Patriota, noting that “Brazil was a full participant in the Annapolis summit and were very gratified that we, along with South Africa and India, were invited.”

However, Brazil has not been as happy with the United States on the issue of visas, which remains a major irritant between the two nations. Patriota complained that the United States has only three consulates in all of Brazil—Rio de Janeiro, São Paulo and Recife—forcing Brazilians planning a U.S. trip to travel long distances, sometimes thousands of miles, for a personal interview.

“We observe reciprocity, but even within the broad context of reciprocity, the great majority of Americans—with few exceptions—who apply for visas to Brazil are granted the visa quickly,” Patriota says. “We don’t require previous interviews from the applicants, but the United States does, they take months to grant the visa, and a large proportion of these requests are denied.”

In contrast, Brazil has eight U.S. consulates in addition to the embassy in Washington, and it is planning to open a few more this year. “Brazil is going through a particularly active and creative period in diplomatic activity. Not only are we engaged in the process of deepening Mercosur and promoting South American integration, but we’re also engaged in a number of other initiatives,” the ambassador says. “This year, we’re opening many embassies in Africa, and Brasília has just surpassed Havana as having the largest number of African embassies of any Latin American capital.”

About the Author

Larry Luxner is news editor of The Washington Diplomat.