NCPA - National Center for Policy Analysis

WHY BRAZIL ISN'T ASHAMED TO EXPLOIT ITS OIL

June 17, 2008

In the United States, oil exploration and development has been all but shut down, except in the Gulf of Mexico.  However, in Brazil, there is no appetite for stopping offshore oil projects, according to Petrobras CEO José Sergio Gabrielli.  What accounts for the differences in attitudes toward oil development in these countries, asks columnist Mary Anastasia O'Grady of the Wall Street Journal?

O'Grady has an interesting theory that fits the pattern of resource development all over the Western Hemisphere.  Her theory comes down to this: When the government has the property right, restrictions on development tend to be low.  But when the private sector is the owner, environmental concerns blossom.

Consider:

  • The Brazilian government has a 58 percent controlling stake in Petrobras's voting shares and 32percent of its total shares, which means that some of the profits go straight to the government's bottom line, giving the politicians more money to spend on bribing their constituents.
  • In the United States, American politicians do not benefit from a successful oil industry, since corporate profits go to shareholders, pensioners and employees; therefore Congress has a much greater incentive to respond to the concentrated power of the special interest group known as the "greens."

There are plenty of other examples, says O'Grady:

  • In Mexico, the state-owned oil monopoly, Pemex, has a history as a notorious polluter yet is seemingly exempt from political pressure to clean up its act.
  • Bolivia, Venezuela and Cuba all boast aggressive, state-owned mining operations, yet neither the nongovernmental enviro-movement nor the political class utters a peep to object.
  • In El Salvador, a private mining company has spent years attempting to reopen to El Dorado mine, but have repeatedly been rebuffed by the left-wing, anti-private sector FMLN political party; since the government isn't the owner, a private mine doesn't inspire politicians in San Salvador the way Petrobras inspires Brasilia, says O'Grady.

Source: Mary Anastasia O'Grady, "Why Brazil Isn't Ashamed to Exploit Its Oil," the Wall Street Journal, June 16, 2008.

For text:

http://online.wsj.com/article/SB121357636070876033.html 

 

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