It Now Makes Sense -- Brazil-Chevron -- Solyndra-Chinese Tariffs -- Absolutely Nothing To Do With the Bakken

Updates

March 28, 2012: now Brazilian unions have civil suit against Chevron, Transocean. My hunch is that this is the beginning of the end of the love affair with Brazilian off-shore oil. If nothing else, this certainly slows things down considering the glut of oil in the western hemisphere. 

The union representing oil workers in Brazil has filed a civil lawsuit against U.S. oil major Chevron Corp. and rig operator Transocean Ltd. for the companies' roles in a November oil spill, asking the government to revoke Chevron's offshore concession contract.

"[Chevron] has demonstrated that it is not technically prepared to produce oil in deep waters, especially in an environmentally sensitive area," Joao Antonio de Moraes, coordinator of the Federacao Unica dos Petroleiros union, told Dow Jones Newswires in a telephone interview Wednesday. FUP is an umbrella union comprised of 13 separate oil-industry unions across Brazil.

Original Post

This is a rambling note about Brazil; nothing to do with the Bakken.  The Brazil-Chevron story had me puzzled, but now it starts to make sense.  From latest hard-copy issue of BloombergBusinessweek:

Two numbers sent a jolt through the government of Brazilian President Dilma Rousseff in March. The first was the GDP figure for 2011: 2.7 percent last year vs 7.5 percent in 2010.

That sorry statistic made Brazil the laggard among BRICS nations (Brazil, Russia, India, China, and South Africa).

The second number hurt, too: January industrial output contracted 3.4 percent from a year earlier.

Rousseff's strategy -- to leverage Brazil's strength to build up a world-class manufacturing power -- is threatened.

Rousseff's impulse is to protect Brazilian industry. In that respect she hasn't strayed far from her days as a graduate student studying developmental economics with some of Brazil's most left-wing professors. Many of Brazil's companies from the textiles, shoe, electronics, and other industries are urging her on, as she's imposed tariffs on shoes, chemicals, texticles, and even Barbie dolls.

Under pressure form automakers, which saw imports jump 30 percent last year, the government renegotiated a trade deal in March that cps car imports from Mexico for three years.

The article is accompanied by a photo of a "railway under construction." Interestingly enough, during an Air Force visit to Brazil 20+ years ago, we learned why railroads are not a good fit for Brazil. The article does not mention the railroad story, but it's obviously a government jobs scheme. It will make no economic sense.  There may be a niche for rail in Brazil, and it might be needed to support manufacturing in some areas of the country, but something tells me it will be Brazil's Solyndra.

So, with budget problems and a leftist as president, the Brazil-Chevron dots have been connected. 

Earlier this week, I also posted a story suggesting that development of Brazil's off-shore oil industry is going to be more difficult than anticipated, which I suggested was good news for the Bakken. My hunch is that Brazil runs the risk of retracing the Mexican model.

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Speaking of Solyndra, which the President once called the wave of the future, and now says it was not his program at all, but the fault of Congress, here's an update. The president said he would impose tariffs on Chinese solar panels shipped to the states. He did. Again, purely symbolic. The tariffs are a whopping 4.73 percent. No typo. Decimal point in the right spot. Less than 5 percent tariff. Talk-on-the-street is that Chinese solar panels are at least 10% cheaper than those made elsewhere. -- BloombergBusinessweek, April 1, 2012, page 26.