Raul Gallegos :Brazil's Chevron ban
straddles worst of two worlds
Brazil 's Chevron ( CVX.N ) ban straddles the worst of two worlds. Suspending the U.S. oil giant's local operations, and those of Transocean ( RIG.N ), over a minor spill keeps Latin America's biggest economy aligned with the likes of Argentina and Venezuela. Such meddling won't help Brazil revive flagging growth. At the same time, the prosecutorial zeal involved with the case apes bad practice from the developed world.
The tale is all too familiar for any emerging market investor: a global energy company at loggerheads with a regime struggling to increase oil output and reverse an economic decline. Brasilia already has shown it isn't ready to completely let go of its continental roots, badgering banks to provide more cut-rate lending and forcing national champions like Petrobras ( PETR4.SA )( PBR.N ) to sacrifice efficiency for social policy.
At least this time it can't obviously be pinned on President Dilma Rousseff. Instead, it is Eduardo Santos de Oliveira, the famed activist prosecutor, who aims to paralyze business for Chevron and driller Transocean over last November's accident. He's proving to be an equally disruptive force.
For starters, the 3,000-barrel spill was less than 0.1 percent the size of BP's ( BP.L ) Gulf of Mexico disaster. What's more, Brazilian courts had already dismissed Santos de Oliveira's injunction, noting that he can't supersede the authority of the country's respected oil regulator. The latest decision, however, suggests that the judicial branch of government has plenty of time for Brazil's answer to Eliot Spitzer, whose Wall Street crusades sustained the former New York attorney general's political career ambitions.
Santos de Oliveira is pursuing criminal charges for Chevron executives and an outlandish $11 billion fine, while threatening to idle nearly 10 percent of the country's oil drills. It's hardly the kind of behavior that will help Brazil attract foreign capital or improve a GDP growth rate that is expected to end this year below 3 percent. Instead, it is clinging to the bad conduct associated with developing countries and embracing uglier aspects of advanced ones. Such imitation does nothing to flatter Brazil.
- A Brazilian court on Aug. 1 ordered Chevron and Transocean to suspend all oil production and transport operations in Brazil within 30 days.
- The injunction, issued by the Specialized Bench of Brazil's Second Region Federal Court, was based on a request by the public prosecutor's office following last year's 3,000 barrel oil spill in Chevron's offshore Frade Field northeast of Rio de Janeiro.
- Failure to comply with the injunction carries penalties of up to 500 million reais ($245 million) a day. Chevron said it plans to appeal the ruling.
- Reuters: Brazil court orders suspension of Chevron, Transocean operations [ID:nL2E8J1F3S]
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Raul Gallegos is the Latin America financial columnist for Reuters Breakingviews. Raul has more than a decade of experience covering the region's business, finance and economics. His work has appeared in the Wall Street Journal, the LA Times and Institutional Investor. From 2004 through 2009, Raul was the Venezuela-based oil correspondent for Dow Jones Newswires, and a member of the OPEC coverage team in Vienna. He holds a bachelor's degree in economics from the University of California at Berkeley and a master's degree in International Affairs from Columbia University. He was a 2010 Knight-Bagehot Fellow at the Columbia Business School (firstname.lastname@example.org). Petroleumworld does not necessarily share these views.
Editor's Note: This commentary was originally published by Reuters Breaking Views Blog , on Aug 02, 2012 . Petroleumworld reprint this article in the interest of our readers.
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Petroleumworld News 08/07/2012
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