Presenter’s Name – Partha Tripathi, Subodh Pandey, Bipin Chandra, Shantanu Sen, Bibhu Mahapatra, Avik SinhaMarch 2012Polit...
Political Risk Analysis Report- Brazil-Oil SectorTable of contentsEconomic FactorPolitical FactorSocietal FactorMajor Hist...
Political Risk Analysis Report- Brazil-Oil Sector-Economic FactorsEconomic Factors GDP Growth per capita growing at 6.6%...
Political Risk Analysis Report-Brazil-Oil Sector-Economic FactorsEconomic Factors-Ranking in Doing Business Report Start...
Political Risk Analysis Report- Brazil-Oil SectorTable of contentsEconomic FactorPolitical FactorSocietal FactorMajor Hist...
Political Risk Analysis Report-Brazil-Oil Sector-Political FactorsPolitical Factor Brazil’s labour minister resigns earl...
Political Risk Analysis Report- Brazil-Oil SectorTable of contentsEconomic FactorPolitical FactorSocietal FactorMajor Hist...
Political Risk Analysis Report-Brazil-Oil Sector-Societal FactorsSocietal Factors Urbanization – Urbanisation :87% o...
Political Risk Analysis Report- Brazil-Oil SectorTable of contentsEconomic FactorPolitical FactorSocietal FactorMajor Hist...
Political Risk Analysis Report- Brazil-Oil Sector-Major Historical IncidentsMajor Historical De-Stabilizing Incidents Ma...
Political Risk Analysis Report-Brazil-Oil Sector-Major Historical IncidentsMajor Historical De-Stabilizing Incidents Maj...
Political Risk Analysis Report- Brazil-Oil SectorTable of contentsEconomic FactorPolitical FactorSocietal FactorMajor Hist...
Political Risk Analysis Report-Brazil-Oil Sector-Major Historical IncidentsRating By External Agencies Short Term Politi...
Political Risk Analysis Report- Brazil-Oil SectorTable of contentsEconomic FactorPolitical FactorSocietal FactorMajor Hist...
Political Risk Analysis Report-Brazil-Oil Sector-AssessmentAssessment Strength Factors Expropriation : Less Risk of E...
Political Risk Analysis Report- Brazil-Oil Sector-AssessmentAssessment Weakness Factors Taxation concerns : High an...
Please contact pt.partha.tripathi@gmail.com for more information27 July 2012 ...
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Political risk analysis of oil sector of Brazil

Political risk analysis of Oil Sector of Brazil
Published on: Mar 4, 2016
Published in: Business      Economy & Finance      
Source: www.slideshare.net


Transcripts - Political risk analysis of oil sector of Brazil

  • 1. Presenter’s Name – Partha Tripathi, Subodh Pandey, Bipin Chandra, Shantanu Sen, Bibhu Mahapatra, Avik SinhaMarch 2012Political Risk Analysis of Oil Sector in Brazil
  • 2. Political Risk Analysis Report- Brazil-Oil SectorTable of contentsEconomic FactorPolitical FactorSocietal FactorMajor Historical de-stabilizing IncidentsRating by external agenciesAssessment
  • 3. Political Risk Analysis Report- Brazil-Oil Sector-Economic FactorsEconomic Factors GDP Growth per capita growing at 6.6% However Brazil economy is expected to grow at 3% in 2011 as compared to record growth of 7.5% in 2010. Inflation rate rose to 6.64% in November 2011 though down from 6.9% in October 2011. This is higher than the official target level of 4.5% ± 2.0% Industry sector contracted by 0.9% with manufacturing falling by 1.4%, services falling by 0.3%, and agricultural growing at 3.2%. China is largest Trading partner, The stock market is dominated by Petrobras and vale is highly sensitive to developments in Chinese Economy. USD/BRL rose by 3.26% Brazil has adopted Free floating currency regime in 1999. Brazilian Currency has fallen to 1.8634 in Dec 2011 since a record high of 1.53 against USD. Brazilian Real is still considered as overvalued currency. High Interest attracts Foreign Flow combined with subdued demand of Brazilian goods from Europe, causes the BRL to appreciate making the exports more uncompetitive. However Government is targeting to keep BRL/USD with 1.7-1.9. Unemployment rate remain on higher side 5.8%Source: World bank data, Brazilian government report
  • 4. Political Risk Analysis Report-Brazil-Oil Sector-Economic FactorsEconomic Factors-Ranking in Doing Business Report Starting a Business : 120 Increase in Rank by 5 – No of Procedures: 13 – Time taken: 119 days – Cost (% of Per Capita) : 5.4% Getting Credit: 98 Decrease in Rank by 2 – Strength of Legal Rights Index(0-10) : 3, higher score means Better – Depth of Credit Information: 5 – Public Registry coverage (% of Adults) : 36.1 – Private Registry coverage (% of Adults) : 61.5 Protecting investors : 79 Decrease in Rank 4 points – Extent of disclosure(0-10): 6 – Extent of Director Liability index(0-10): 7 – Ease of shareholders suit Index(0-10): 3 – Strength of Investor protection Index(0-10): 5.3 Enforcing Contracts : 118 no change in Ranking – Time (Days) : 731 – Cost(% of Per Capita): 16.5% – Procedures: 45Source: World bank Doing Business Report year 2012
  • 5. Political Risk Analysis Report- Brazil-Oil SectorTable of contentsEconomic FactorPolitical FactorSocietal FactorMajor Historical de-stabilizing IncidentsRating by external agenciesAssessment
  • 6. Political Risk Analysis Report-Brazil-Oil Sector-Political FactorsPolitical Factor Brazil’s labour minister resigns early December amid accusations of corruption. A total of seven ministers resigned from the cabinet during 2011. President Rousseff’s tough stance on corruption brings her record approval ratings. The large number of political parties present in the Congress makes troublesome coalitions a natural feature of Brazilian politics. Tension between the ruling Workers’ Party and its main coalition partner PMDB threaten to halt several of the president’s proposed reforms. A proposed reform of Brazil’s oil laws would alter the distribution of oil royalties in favor of non-producing states. The state of Rio de Janeiro is vehemently opposed to the bill, claiming it would disrupt the preparations for the 2014 FIFA World Cup and 2016 Olympics. The first auction of pre-salt oil blocks awaits the approval of the oil reform. Brazil’s environmental agency fines Chevron 60 million BRL, $32 million, over a leak from the Frade oil field in early November. Federal prosecutors announce a 20 billion BRL, $10.5 billion, lawsuit while seeking to suspend the operations of both Chevron and rig operator Transocean. The 11th-round oil auction is expected to occur in Q2 2012, after bureaucratic hold-ups causing delays. The round will feature blocks along Brazil’s equatorial margin. The first auction of pre-salt blocks will introduce a production sharing system to replace the current concession system. Under the new framework, Petrobras will be the only qualified operator of oil fields deemed strategic by the government.
  • 7. Political Risk Analysis Report- Brazil-Oil SectorTable of contentsEconomic FactorPolitical FactorSocietal FactorMajor Historical de-stabilizing IncidentsRating by external agenciesAssessment
  • 8. Political Risk Analysis Report-Brazil-Oil Sector-Societal FactorsSocietal Factors Urbanization – Urbanisation :87% of total population – Rate of Urbanisation: 1.1% annual rate of change Race and Ethnic tension – It has predominantly white 53.7%, Mulatto (Mixed Black and white) 38.5% – There is high incidence of mixed race marriages thus causing less racial/ ethnic tension Religious fundamentalism – Roman Catholic 73.6%, Protestant 15.4% – Constitution provides Religious freedom and Constitution is secular – There is no religious fundamentalism incidents in last 20 years Corruption – Corruption perception index by Transparency International is 3.8 – Companies operating in Brazil have to deal with a wide range of regulatory agencies due to the federal structure of the political system, which may increase the likelihood of demands for bribes by public officials – Public procurement corruption is generally an area of dispute. The World Bank & IFCs Enterprise Surveys 2009 find that only very few companies expect to bribe to secure government contracts, multiple corruption scandals have emerged over the years, involving politicians and bureaucrats taking kickbacks from companies in exchange for awarding public contracts – The Brazilian tax system is complex and reportedly prone to corruption. It is reported that tax collectors frequently ask for bribes to relax assessments and inspections, to refrain from pursuing acts of tax fraud or to give advice on the legal possibilities of reducing tax obligationSource: CIA world handbook and Transparency International
  • 9. Political Risk Analysis Report- Brazil-Oil SectorTable of contentsEconomic FactorPolitical FactorSocietal FactorMajor Historical de-stabilizing IncidentsRating by external agenciesAssessment
  • 10. Political Risk Analysis Report- Brazil-Oil Sector-Major Historical IncidentsMajor Historical De-Stabilizing Incidents Major economic incidents resulting in destabilization in the last 20-25 years – 1979: Major oil shock nearly doubled the price of imported oil. – 1980: Rise in worlds interest rate increased BOP problems – 1981: Real GDP declined by 4.4% – 1982: Mexican debt crisis ended brazil’s access to international financial market – 1987: Moratorium on foreign debt service – 1992: Stabilisation plan introduced to stabilise inflation and interest rate. – 1994 second phase of stabilisation plan introduced – 1994 new currency introduced with fixed pegging with US dollars – 1998 Brazil receives 41.5 Billion USD IMF led international financial support. – 1999 Brazilian Real removed fixed pegging with USD. – 2004 GDP growth started at 5.7% – High GDP growth rate period started at 7.5% in 2010
  • 11. Political Risk Analysis Report-Brazil-Oil Sector-Major Historical IncidentsMajor Historical De-Stabilizing Incidents Major Political Incidents resulting in destabilization in the last 20-25 years – 1964 : Military dictatorship governing started – 1968-73 : Political imprisonment, deaths, deportation occurred – 1973: Official censorship started – 1985: Civilian rule started following election of President Tancredo Neves – 1994: President Collor impeached – 2005: Lulla government suffered a serious blow with several accusation of corruption and misuse of authority. Major Terrorism Incidents resulting in the last 20-25 years – In 1969 US Ambassador to Brazil Clarles Burke kidnapped by Marxist revolutionary group MR-8 – There has been no major terrorist incident in past many years. Major Politically motivated incidents resulting in withdrawal/delay in Foreign investment in the 10 years – None reported in past many years
  • 12. Political Risk Analysis Report- Brazil-Oil SectorTable of contentsEconomic FactorPolitical FactorSocietal FactorMajor Historical de-stabilizing IncidentsRating by external agenciesAssessment
  • 13. Political Risk Analysis Report-Brazil-Oil Sector-Major Historical IncidentsRating By External Agencies Short Term Political risk By ONDD : 2.5 Medium to long Term Risk By ONDD: 3.5 Special transaction Risk by ONDD: 2.5
  • 14. Political Risk Analysis Report- Brazil-Oil SectorTable of contentsEconomic FactorPolitical FactorSocietal FactorMajor Historical de-stabilizing IncidentsRating by external agenciesAssessment
  • 15. Political Risk Analysis Report-Brazil-Oil Sector-AssessmentAssessment Strength Factors Expropriation : Less Risk of Expropriation Terrorism : Practically zero terrorism incidents Selective intervention : None Reported very less risk Restriction cross border Transfer of resources : There is normal tariff barrier for cross border trade Non Neutrality of legal environment : Neutral Legal Environment Regulation with different impact on foreigners : Nothing substantial Cross fire problems : None reported very less risk.
  • 16. Political Risk Analysis Report- Brazil-Oil Sector-AssessmentAssessment Weakness Factors Taxation concerns : High and complex taxation system resulting in higher compliance cost Investment Restriction : 2% percent tax on FDI to restrict the flow. Operating restriction : Some reporting requirement in Toll manufacturing and contract manufacturing
  • 17. Please contact pt.partha.tripathi@gmail.com for more information27 July 2012 17

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