U.S. Companies Look To Brazil For New Market Opportunities

"U.S. Companies Look to Brazil for New Market Opportunities1," by Joan M. Bondareff and Ernest W. Chung first appeared in the December 2011 edition of Maritime Reporter. Reprinted with permission from Maritime Reporter. www.maritimereporter.com.

While the U.S. economy may be in the doldrums, smart U.S. companies are looking increasingly to exports to help their bottom lines. A major market for U.S. exports is Brazil. This article examines new market opportunities in the oil and gas, shipbuilding and port infrastructure in Brazil, and identifies certain financing sources available to U.S. companies seeking to participate in these markets.

Brazil's growth in recent years has been amazing. Over the past 5 years, real GDP growth in Brazil has averaged 4.3% annually (as compared to 1.3% annually in the U.S.), reaching 7.5% in 2010.2 This growth will only be enhanced as Brazil prepares to host the final games of the soccer World Cup in 2014 and the Summer Olympics in 2016. Brazil is investing heavily in new infrastructure ahead of the games, with a significant amount of that construction focused in the State of Rio de Janeiro. Rio State forecasts $102 billion in investments from 2011 through 2013, in such areas as oil and gas, energy, shipbuilding, steel production, ports and roads, sports complexes and hotels, and the environment.3 Investment in the State of Rio's oil and energy sectors alone is forecast at $75 billion.4 Brazil is also investing $2.7 billion in a Superport at Açu, to be completed in 2012 and forecast to handle 350 million tons a year.

Opportunities for U.S. Companies in Brazil's Energy and Maritime Markets

The boom in the Brazilian offshore oil and gas market, including a new market in pre-salt oil and gas reserves, is also providing multiple opportunities for U.S. maritime and energy companies. Petrobras, the partially state-owned oil and gas giant, is at the forefront of this growth. The company predicts investments of $108 billion in domestic oil & gas exploration and production by 2014, which will include the acquisition of 53 new drilling units, 504 support ships, 84 production platforms and 30 oil tankers. While Petrobras expects a "good portion of these can be expected to be placed with [Brazilian] companies," there is room for U.S. companies to take advantage of this boom—and many are.

According to a recent study by Booz & Company cited by the Agência Nacional do Petróleo, Gás Natural e Biocombustíveis (ANP), the...