The slow recovery of the Brazilian economy has forced the government to rely on oil to raise money to fill its ailing public accounts, which have been running a deficit for years and have led to successive cuts by the government due to a lack of money.
The Minister of Mines and Energy, Bento Albuquerque, recently admitted to the press that the government hopes to collect one trillion reais (about 250.000 billion dollars) by granting exploration concessions for four blocks of oil in the pre-salt zone, which are part of the major auction to be held in October.
The resources that the Brazilian government has will come from royalties, compensation paid by oil companies for exploring oil, and taxes, and will be distributed among the federal government, regional governments and municipalities.
The distribution of royalties will soon be decided by the Supreme Court of Brazil, as non-producing states, faced with a lack of income caused by the serious economic crisis that the country has experienced in recent years, have asked for more money, something that producing states are opposed to.
Currently, most of the money Brazil collects in the pre-salt zone goes to the federal government's coffers, but due to the poor financial situation faced by many states and municipalities, Economy Minister Paulo Guedes has already stated that he intends to distribute royalties more generously and share up to 70 percent of the value obtained.
The pre-salt zone is located in deep waters of the Atlantic Ocean, under an extensive layer of salt that can reach 2.000 meters thick, which makes exploration difficult. Brazil has enormous reserves in the pre-salt that, when explored, should make the South American country one of the world's largest oil producers.
The Brazilian government will hold a major auction in the pre-salt zone on October 28, for which it has guaranteed at least 106.000 billion reals (about 26.500 billion dollars), which will be the money that the companies that win the bids will pay as bonuses. This money will also be shared with the states and municipalities.
After that, exploration of the auctioned blocks will begin, and with it, royalties will flow into Brazilian coffers. According to the rules, already disclosed, the government will keep part of the oil produced, to try to sell it later.
Albuquerque admitted that the government is in a hurry to carry out the tender, because according to him, "every year that we stop holding an auction, according to conservative figures, there are 6.000 billion dollars lost in investments, in platforms, in opportunities" and admitted that competition in the international market is strong.
"New fields will soon appear. Mexico and Guyana are already appearing. Everything is ready here. Every year that a tender is not held, jobs are not created, and rigs are not hired," he explained.
To divide oil resources among states and municipalities, the federal government will have to propose an amendment to the Constitution, since the spending cap, which limits federal expenditure, currently prevents transfers to regional governments.
Another concern, at a time of economic turmoil, will be knowing where the Brazilian government distributes the money obtained from the tender.
"There is a discussion, which has been going on for a long time, about where the money goes. This is a fiscal issue," Albuquerque admitted.
Source: Xinhua
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