RIO DE JANEIRO, 12 March (Reuters) – The Brazilian government’s decision to re-impose after a similar measure had already been taken for a period of four months in 2023, brings more uncertainty for oil company investments in Brazil and makes projects less competitive, experts said on Thursday.
The government introduced a temporary tax rate of 12% on oil exports, as part of a series of measures aimed at preventing a spike in fuel prices in Brazil, after prices abroad were boosted by an escalation of conflicts in the Middle East.
The former president of the regulator ANP and former president of Petrobras Bolivia, Décio Oddone, pointed out that Brazil has a historical tradition of respecting contracts and that, by taxing exports in 2023, it sent a bad signal to the market, but that it was temporary. ‘Now this recurrence of having it again?’, he asked.
‘I think it’s bad for interventionism. This is a market that depends on investment, investment that depends on stability and depends on someone deciding to put their money to work in a certain country’, stated Oddone.
‘We should be worried today about how we are going to resume investments in Brazil, how we are going to facilitate exploration here, how we are going to attract investment to maintain production after 2030 and not create difficulties in taxing, creating insecurity for investors.’
The export tax came as a way of capitalizing on the government to carry out a diesel subsidy program, in order to avoid price increases at the pump for consumers.
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According to an assessment by the Ministry of Finance, the estimated impact of the plan on public accounts is R$20 billion in lost revenue from the tax cut and a further R$10 billion in forgone income from the subsidy.
In 2023, the export tax was also related to tax issues in the fuel segment.
‘A series of measures in an attempt to hold the world with one hand’, stated the president of the Brazilian Association of Independent Oil and Gas Producers (ABPIP), Marcio Félix.
‘The current export tax will discourage investment by private companies, whether Brazilian or foreign, and reduces the competitiveness, especially of companies that deal with mature fields or those with marginal economics.’
The Brazilian Institute of Petroleum, Gas and Biofuels (IBP), which represents major oil companies in Brazil, such as Petrobras, Shell and TotalEnergies, said it was still evaluating the possible effects on the sector, but highlighted that its members were not called by the government to discuss the announced measures.
A source from a large company operating in Brazil told Reuters that it made an investment decision in the oil sector when Brazil placed the export tax in 2023, trusting that it would be temporary, and that it was taken by surprise with this new rate.
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‘Although this (new rate) does not translate immediately… into a very radical change of decision, what is happening is that the perception of risk is rising’, said the source, on condition of anonymity.
The experts consulted by Reuters also highlighted that there is uncertainty in the market about where the price of oil will go, which was around US$70 per barrel at the end of February and, since then, has fluctuated sharply, reaching US$120 per barrel. This Thursday, Brent closed at around US$100.
Professor and researcher at the Energy Institute at PUC-Rio, Edmar Almeida, said that the government may have been hasty in taking a decision at a time when there is still no convergence in the market on forecasts for oil prices.
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‘It seems hasty and you show that the government is very nervous about the impact of all this on the electoral issue’, he stated.
He highlighted that the initiative also sends a message to the market that the Brazilian government can create export taxes when it considers oil expensive, creating uncertainty about the level that can be accepted by each administration in the country.
