Delete the local hiring undermines the country's development

Talk that the domestic industry will only sell if it is competitive is the same as there is no requirement for Local content, because we all know that the Brazil cost prevents our industry can compete with other countries that have interest rates below inflation, which have administered Exchange and low tax incidence.

The federal Government should undertake, in 2017, the 14th round of bidding for exploration blocks of oil and natural gas and one of the various issues that are being set are Local content rules.

The success of the round depends on factors such as: the quality of the offered areas, political stability in the country, the regulatory environment, the bureaucracy, the local taxes, environmental requirements, the tradition in respect to contracts, the constancy of rules, the cost of the country (in this case, BRAZIL COST) and how the Local content requirements, among others.

The Local content requirement, even though only one in the midst of so many other decision factors, has received a special mention, as if it were the major cause of all the problems that occurred with the oil industry in the country. It is also a reminder that the crisis in Brazil is widespread and not just in the oil industry.

Since the first auction of exploration blocks, in 1999, the Local content requirements have been employed as a tool for national development through the insertion of our industry in the market until then monopoly, where there was an "industrial policy" conducted successfully by Petrobras. At that time, Petrobras acquired more than 65 percent of its assets in Brazil demands. Therefore, the Local Content policy was born in the previous Government and, Yes, the FHC Government.

The way of introduction of the requirements of Local content was being modified to the introduction, in 2005, the methodology of using a primer establishing Local content items, which persists to this day.

Although it has flaws, the primer had the merit of allowing the national supply market was visible and have opportunity to participate.

It's up to clarify that investment in an oil field is, roughly, so divided: 50%, services 30% are machinery and equipment, and 20% are materials (plates, tubes, paint etc.). It turns out that most services, by its characteristics, has necessarily to a high level of Local content. Soon, if we consider a global Local content index, for example, 40%, in theory, this percentage can be achieved with 0% of machinery, equipment and materials, which are from the manufacturing industry, which is the one that most adds value and generates more jobs.

Therefore, there is a homogeneity in the participation of the various sectors involved, it is necessary that these segments are considered individually in the process of Local content.

Talk that the domestic industry will only sell if it is competitive is the same as there is no requirement for Local content, because we all know that the Brazil cost prevents our industry can compete with other countries that have interest rates below inflation, which have administered Exchange and low tax incidence. We can cite examples of products which, although they have scale of production in Brazil, are not competitive in price with products from other countries, such as automobiles, clothing, fuels, lubricants (the latter manufactured by Petrobras).

Petrobras and other oil companies are subsidized in their investments, because they are relieved of all taxes, including Import tax. Their suppliers of goods from Brazil don't have any subsidy or protection.

These oil companies, including Petrobras, declare that, without protectionist measures as the special arrangements, which desonera their investments REPETRO and oil industry operations in Brazil would be unworkable. Now, the oil industry is not composed only by the oil companies. The countries where the model is that they are in a bad situation or bankrupt, like Angola, Venezuela, Nigeria, among many others that make up OPEC.

The secret, practiced by the United Kingdom or Norway, is to develop, together with the production of oil, a local industry with adequate facilities, quality required, necessary technology and well-developed, engineering factors that we have in Brazil and now risk being destroyed. Today, to Norway, for example, the industry is more important than the production of oil.

It's up to clarify that it was not the Local content that led to the corruption treated under car wash and, Yes, the methodology of Petrobras ' procurement of complete projects in a few companies, which enabled the formation of "clubs" and poorly planned edicts, incomplete and poorly specified, without regard even the qualification of the candidate companies, many of them without previous experience. The corruption occurred in the hiring mode, in the select the companies and, especially, physical inability to perform a huge volume of works, at the same time without an effective managerial control. In fact, when the President Grace Foster began to introduce some control, the real situation began to surface: enormous delays in projects, mainly in imported, as was the case of 12 drilling rigs, which delayed an average of two years and had no Local content, and the total detachment of initial budgets in unimaginable that percentage more than 500%.

Such facts, and also occurred on a large scale, in enterprises where there was no legal requirement for Local content, as in refineries RNEST and fertilizer plants and is UNDERGOING. Us investments in refineries there was the requirement for Local content, but were the biggest corruption scandals in our history and also the biggest delays with imported products. It is worth saying that the Brazilian machine industry there are approximately 800 companies that directly or indirectly provide for Petrobras and that none of them are involved in scandals.

As has been said, the Global Local content requirement, in practice, represents zero Local content, many materials are from own products, and that will be purchased in Brazil.

Foreign investment are vital to the development of the country and are welcome, provided they do not come in the form of imported goods. Foreign capital has to generate jobs and income here. However, as the majority of funding comes from development banks in the countries of origin, the trend is that everything comes out, leaving very few jobs inevitable in Brazil and low-skill.

Vera Lúcia Rodrigues
y: Vervi Advice
11) 2578-0422



8 thoughts on “Delete the local hiring undermines the country's development

Leave a Reply