By Chris Kraul – Los Angeles Times

 Brazil’s planned reentry into the satellite business next year is more than an effort to join an exclusive club and become a global player. It’s part of a far-reaching defense plan to ward off potential plunderers of its immense natural resources, officials say.

“In the coming era of scarcity, we’re going to have to defend what we’ve got with our claws, our feet and our weapons,” said a consultant to the Defense Ministry who requested anonymity because he was not authorized to speak. “The challenges could come from neighbors, they could come from the U.S., they could come from China — all allies now, but potential competitors in the future.”

Brazil has a lot to protect.

Over the last two years, it has made one of the world’s largest oil discoveries off its Atlantic coast, a find that could propel it into the first rank of oil exporters by 2015. The nation also boasts enormous deposits of gold, uranium and iron ore and is the world’s largest exporter of chicken, soy, sugar and beef.

The value of these resources has skyrocketed along with demand from China, India and other emerging economies.

Brazilian President Luiz Inacio Lula da Silva and his advisors believe that the resources increasingly will be coveted by foreign powers as “global availability” of commodities is reduced by population growth, global warming and over-exploitation, said Thomaz Guedes da Costa, a professor at National Defense University in Washington.

So Brazil is doing more than counting its blessings: It has begun to take measures to expand and modernize its defenses as part of a strategic plan to dissuade foreign usurpers from making a play for its natural riches.

In an interview here in Brazil’s capital, Defense Ministry spokesman Jose Ramos Filho said the military buildup was “defensive, not offensive,” and was meant as a deterrent against nations that in coming decades may lust after Brazil’s resources, even water. Better surveillance, weapons and the means to deploy them will make potential enemies think twice about an attack, he said.

Restarting Brazil’s unmanned space program, which has been on hold since a launchpad disaster killed 21 people in 2003, is an integral part of the plan. A new generation of satellites is planned to help Brazil monitor its agriculture, forests, mineral resources — and territory.

This month, Lula said on a state visit to Ukraine that he hoped to launch a Brazilian satellite aboard a Ukrainian rocket by the end of his term next December. By 2012, Brazil plans to be launching satellites aboard its own rockets, said Himilcon Carvalho, policy director of the Brazilian Space Agency.

Brazil and Ukraine are forming a joint venture to offer launch services at Alcantara in northern Brazil, the site of the 2003 disaster.

Although Brazil has five communication and imaging satellites in space, all were launched by the Chinese or private U.S. launchers, and Brazil wants more control, Carvalho said.

“We want to forecast crops and monitor our coastlines, but also know our territory and gather data from it,” Carvalho said. “Defense is a byproduct. The military is very fond of surveillance and wants to know what’s going on over land and sea.”

A space program and modern weapons are a status marker: the price of membership to the first rank of nations, those that are rule makers, not rule takers, said Guedes da Costa of National Defense University.

“Brazil wants to be a player in world trade, the environment, and have a seat on the U.N. Security Council. For the leadership, that translates into military purchases if you are going to participate at that level,” he said.

The space program is only one element of Brazil’s plan. The country has signed deals to acquire new weaponry, including helicopters and submarines, in technology-sharing arrangements. It will soon choose a vendor for 36 jet fighters it is buying at a cost of $4 billion or more. France’s Dassault is thought to be the front-runner against Boeing and Sweden’s Saab to supply them.

Vanda Felbab-Brown, a defense analyst with the Washington-based Brookings Institution, said Brazil was overdue in replacing arms systems not updated in many cases since the 1980s, when the nation was still ruled by a military dictatorship.

“Military budgets have pretty much stagnated since then, so what’s going on to some extent is a replacing and upgrading of equipment that’s aging, and that’s understandable,” Felbab-Brown said.

The consultant to the Defense Ministry agreed that the need to replace outdated hardware was a big driver of the defense plan. There was little public support for big military purchases until now because the memory of Brazil’s military dictatorship, which ruled from 1964 to 1985, was too fresh.

“Now there’s a recognition that the need to create a modern armed forces is vital,” the consultant said.

But a big, modern military is also part of Brazil’s emerging status as a global power.

“We are now the world’s ninth-largest economy and we will continue to grow,” the consultant said. “So we must have a military status that is commensurate with our economic size and international influence.”

Kraul is a special correspondent.

One of the Petrobras platforms

By Juan ForeroWashington Post Foreign Service

Everything about the shipyard here is colossal — the 4,000-man workforce, the billions sunk into it in capital costs, the half-finished 10-story-high production platforms.

But then, so is the challenge facing Brazil’s state-controlled energy company, Petrobras: developing a group of newly discovered deep-sea oil fields that energy analysts say will catapult this country into the ranks of the world’s petro-powers. The oil pools are 200 miles out in the Atlantic and more than four miles down, under freezing seas, rock and a heavy cap of salt.

Petrobras, which until recently was little known outside oil circles, has launched a five-year, $174 billion project to provide platforms, rigs, support vessels and drilling systems to develop tens of billions of barrels of oil. Energy officials here project that Brazil — still an oil importer five years ago — will in the next decade have one of the world’s biggest oil reserves.

“It’s going to change the role of Brazil in the geopolitics of oil,” Petrobras’s president, José Sergio Gabrielli, said in an interview at the company’s headquarters in Rio de Janeiro. “We are going to become a much bigger producer.”

Petrobras estimates that production in Brazil could reach 3.9 million barrels by 2020, up from more than 2 million a day now. Proven oil reserves would rise from 14.4 billion barrels to more than 30 billion barrels, according to government estimates, putting Brazil in the same league as such major oil exporters as Qatar, Canada, Kazakhstan and Nigeria.

The new discoveries in Brazil’s offshore “pre-salt” region do not mean that the country will become a major exporter of crude, according to Gabrielli. He noted that Brazil’s economy, which is the world’s eighth-largest and is steadily growing, is expected to consume much of Petrobras’s projected production. But, he added, as the country meets its own needs, it will also develop for export refined products such as gasoline, diesel and biofuels.

In an era of drum-tight supply, the discoveries off Brazil’s coast and Petrobras’s growing stature are changing the world’s oil balance, because few regions outside the OPEC countries are expected to generate significant growth in crude production, said Michelle Billig Patron, senior director of political risk for the New York-based Pira Energy Group.

“There is really only Canada and Brazil when you’re talking about a million barrels a day more in growth over the next 10 years,” Patron said. 

A firm hits it big  

The engine of that growth is a multinational that, for much of its 56-year history, was little more than a trading company. It pumped a few thousand barrels a day almost as a side note to its real function, overseeing oil imports. Then in 1974 — a time when oil shocks had alarmed Brazilian officials — came a major discovery: the offshore Campos Basin, east of Rio.

“Petrobras, before Campos, produced 180,000 barrels a day,” said João Carlos de Luca, a former Petrobras executive who is president of the Brazilian Petroleum Institute, which represents foreign oil companies here. “After Campos, it was a company that searched for self-sufficiency in production.”

In its drive to produce, Petrobras became a leader in offshore production. The Rio-based company is now responsible for more than a fifth of the world’s deep-sea operations, more than any other company, Gabrielli said. It operates in 26 countries and drills off the African coast and in the Gulf of Mexico.

With a market capitalization of more than $220 billion, Petrobras is one of the world’s 10 biggest companies. Over the past two years, it has been the most frequently traded foreign company on the New York Stock Exchange, trade data show. Among investors bullish on Petrobras is George Soros, who last year made the oil company the largest single holding in his investment fund, according to Bloomberg.

Still, the company remains firmly under the control of the state, with President Luiz Inácio Lula da Silva calling it a national icon whose fortunes are intertwined with Brazil’s.

Though private investors control nearly 60 percent of Petrobras stock, the Brazilian government has 56 percent of the voting rights. Seven of its nine directors are from the government. The board’s chairwoman is Dilma Rousseff, a Lula confidant who is expected to be the ruling party’s candidate in next year’s presidential elections.

The Lula government is now seeking passage of a law to give Petrobras control over future projects in the newly discovered fields. Foreign companies have explored for oil in Brazil since 1997, but the proposed regulations would limit their ability to make major decisions involving the new oil pools.

Gabrielli said it is logical to make Petrobras the operator, with a mandatory 30 percent stake in each project, because Brazil took the risks to drill for oil in the pre-salt. But he noted that companies such as Exxon Mobil, Britain’s BG Group, Royal Dutch Shell and Spain’s Repsol are investing billions to develop their share of the new projects.

Luca, the president of the association representing foreign companies, said Petrobras may overextend itself. “We could be limiting the development,” he said.

Far out and deep down

The entire pre-salt region is laced with “elephant fields,” pools holding at least a billion barrels of oil each. Tupi, which in 2006 was the first field found, holds up to 8 billion barrels.

Despite the optimism that Petrobras officials display for visitors, they reel off the challenges: shifting salt, 6,500 feet of it, and working fields so far from the coast that they cannot be reached by helicopter.

Much of the new infrastructure needed to develop the pre-salt is being built here at Angra, and at other shipyards dotting the coast. On a recent day, decked out in a bright-orange jumpsuit and helmet, Roberto Moro, a mechanical engineer, strolled amid giant pontoons weighing 6,000 tons each. He explained how they would be latched together, then topped with a 14,000-ton deck the size of a football field.

The final product, a platform called P-56, will cost $1 billion, he said. And Petrobras will need a fleet of them. “Each platform we are building here, like P-56, represents 10 percent of national oil production,” Moro, 46, explained. That is the equivalent of 180,000 barrels.

GM headquarters in São Caetano, Brazil. After bankruptcy and state-promoted recovering in the U.S., the company invests in Brazil

General Motors of Brazil announced today the investment of R$ 2 billion in the country. This is the car company’s first investment in Brazil after the process of restructuring of its headquarters in the U.S., which ended last week.

About 50 percent of the investment will be made with the company’s own resources; the rest will come from state banks. Barisul and BRDE (Regional Bank for Economic Development) are already in the project, and there are negotiations with BNDES – BRDE national version.

Of the total amount of money, R$ 1.4 billion will be invested in the development of vehicles and in the expansion of GM factory in the state of Rio Grande do Sul, which is responsible for the production of Celta and Prisma. From now on the factory will also produce a new family of compact cars: the so-called ‘Project Onix’ will have Brazilian design and engineering.

Employment

The expectative of the company is to generate one thousand direct jobs and up to 7 thousand indirect jobs in Brazil. In 2009, GM will also invest in the technological development of new vehicles in its center in São Caetano (city part of Sao Paulo).

With all those new investments, the company hopes to achieve a national production of one million cars – nowadays, it is between 800 and 900 thousand unities. Jaime Ardila, president of General Motors of Brazil, stated that the vehicles will be destined to both Brazilian and South African market.

Sales

Automobile sales in Brazil soared 21.5 percent in June from May, turning in a record month as a combination of tax breaks, lower prices and improved confidence prompted consumers to flock to showrooms.

“If state banks hadn’t financed clients and if private banks hadn’t turned themselves to the market, it would be hard to keep the sales. There were two important things: tax breaks and credit”, stated Ardila.

Carnival photo on its front page: according to FT, Brazil is a 'chance to celebrate amid the global gloom'

Financial Times published yesterday a special report about Brazil. In its front page, the correspondent in Sao Paulo Jonathan Wheatley stated that Brazil is ‘dancing through the economic crisis’.

The publication starts from a personal focus on the owners of a Brazilian micro-distributor who are investing more in their business in Recife (north-western Brazil), passes through the business fuss around Festival de São João in Caruaru, and then describes the capacity of the Brazilian market to support ‘not only distinct brands but also entire industries’, as flex-fuel cars.

“This is the Brazil that finally, after years of unfulfilled promise, is catching the world’s attention – and sucking in foreign direct investment, while many rivals go without”, says the British newspaper, and it goes beyond, pointing out Brazilian stability and young democracy as catalysts of success for foreign investors.

You can see the entire special report here. 

Cars in stock last year: with tax breaks, Ford registered record sales in June

New automobile sales in Brazil soared 21.5 percent in June from May, turning in a record month as a combination of tax breaks, lower prices and improved confidence prompted consumers to flock to showrooms, the national dealers’ association, Fenabrave, said on Thursday.

Sales of new cars and trucks also surged 17.2 percent from June 2008, totaling 300,174 units. Sales have risen 3 percent in the first six months to an all-time-high of 1.45 million units for the period, the association said.

The numbers highlight the success of President Luiz Inacio Lula da Silva’s tax breaks on vehicles and home appliances to revive industrial production and pull the $2 trillion economy out of recession.

The renewal of the tax breaks, which the government said have proven effective in bolstering the economy, has allowed car dealers to trim prices, attracting new buyers.

Lula this week extended the tax breaks for vehicle sales through December. The government also implemented some breaks for a certain type of motorcycles, provided manufacturers do not resort to layoffs.

Household consumption, which has driven Brazil’s economic boom since 2004, firmed 0.7 percent in the first quarter. Brazil’s economy contracted 0.8 percent in the first quarter of 2009 from the previous quarter.

Fenabrave, betting on resilient consumer demand and easier credit conditions, kept unaltered its 3.13 percent forecast for growth in car and motorcycle sales this year.