Brazil crisis: Energy investors need not panic, says ex-govt advisor

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Thursday, May 18, 2017

Brazil's energy sector reforms are not threatened by the prospect of impeachment proceedings against President Michel Temer, a former government advisor has told BNamericas.

Opposition politicians called for snap elections on Thursday while protesters marched in major cities after O Globo newspaper said Temer was recorded discussing bribes to silence jailed former lower house speaker Eduardo Cunha.

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Adriano Pires, a former superintendent for the government's oil regulator ANP, said the news was "terrible" but cautioned against early panic among investors.

"It's obviously bad news, especially given the fact that Brazil appears to be on the road to economic recovery," Pires said in a telephone interview. "But it's too early to say how it's going to impact investments.

"Today is the day after the bomb exploded. We're still in the heat of the moment. We have to be calm before jumping to conclusions about what could happen next."

Cunha, who led the impeachment process against Temer's predecessor Dilma Rousseff, was sentenced to 15 years in jail in March for corruption, money laundering and tax evasion.

His arrest formed part of the sprawling Lava Jato probe into corruption at state run oil company Petrobras, which has led to prison terms for scores of politicians and company executives.

Since taking office on a permanent basis last August, Temer has announced a raft of new concessions and privatizations in the electric power, oil and gas and infrastructure sectors.

The government has also lifted restrictions on foreign and private oil companies in the country's vaunted pre-salt fields and relaxed local content rules for exploration and production contracts.

Temer's administration is hoping that an influx of private capital will kick start Brazil's recession-hit economy and reduce a gaping fiscal deficit.

According to Pires, there is no danger that pro-market changes implemented by the government could be reversed in the event of an impeachment.

"I think that would never happen. What has been put in place will remain," Pires said. "What could happen is that certain policies don't progress further, like further rule changes for local content or [pre-salt] preferences."

The mining and energy ministry has announced plans for two pre-salt licensing auctions this year in addition to the 14th concession round.

Among major oil companies expected to bid for new oil and gas areas are ExxonMobil, Royal Dutch Shell, Total and Statoil.