Oil finds saw Brazil’s national petroleum agency ANP reduce new exploration concessions.
While Brazilian officials had touted the country’s resilience to the global financial meltdown, they got a disturbing wake-up call in October as the São Paulo Stock Exchange (Bovespa) experienced widespread panic. The exchange’s circuit breakers were activated several times, as prices plunged to new lows. Bovespa, Latin America’s largest exchange, automatically halts trading for 30 minutes whenever it registers changes of more than 10 percentage points. If the index drops 10% after trading resumes, activity is suspended for another hour.
Bovespa introduced circuit breakers in the 1990s, but these were triggered for the first time in a decade after the US House of Representatives initially rejected president George Bush’s financial sector rescue plan. Though recognizing the current global crisis is “perhaps the worst since 1929,” finance minister Guido Mantega says that the international credit crunch has unleashed a liquidity problem but that Brazil has no solvency concerns. The country has more than $206 billion in reserves and plans to use $2.3 billion to finance exports in a bid to support growth and boost liquidity.
The Brazilian economy is showing signs of weakness, however, with the trade surplus dropping from $3.5 billion in September 2007 to $2.8 billion a year later. Industrial production rose by a meager 2% year-on-year in August, its weakest rate in five months and a hefty plunge from July’s 8.8% expansion. A central bank survey shows economists expect 2009 GDP growth of 3.5%, from a previous 3.55% forecast, with 4.85% inflation. The government has a 4.5% inflation target.
The ANP national petroleum agency cut the number of oil exploration and concession blocks to be auctioned on December 18 to 130 from an initial proposed offering of 162 blocks. ANP officials did not provide a reason for the move, but analysts speculate the government may be limiting new concessions in the region where recent finds could total 8 billion barrels. A government committee is studying new oil legislation to reflect the new finds.