Last week, Mexicans took to the streets to riot, loot, and blockade streets to protest the government’s January 1st announcement they would raise maximum oil prices by 20%. The move is the first of many steps to deregulate Mexico’s energy sector. Dependent on gasoline imports, policymakers expect the decrease in subsidies will attract foreign investment and increase competition against the state-controlled oil company, Pemex. But it appeared the government was unprepared for the widespread contempt.
The Lavo Jato corruption investigations, also known as Operation Car Wash, into Petrobras, Brazil’s oil giant, shocked the energy sector and helped fuel one of the country’s worst recessions. Nonetheless, some analysts are optimistic that the industry can open itself up to foreign investors and domestic competition to once again generate prosperity.
“The energy industry in Brazil is on the verge of its biggest transformation in decades,” wrote Décio Oddone, former CEO of Petrobras, in his latest report for the Atlantic Council—Oil & Gas in Brazil: A New Silver Lining?
“Petrobras has never experienced such a profound transformation. In fact, this is the first time the energy landscape has significantly changed since Brazil became an industrial economy,” he noted in the briefing.
Amid political uncertainty and a deepening recession, economic growth is seen as the “key” to reform and prosperity in Brazil.
“If we fail economic growth, all the other scenarios would be a disaster,” said Ricardo Sennes, a nonresident senior Brazil fellow at the Atlantic Council’s Adrienne Arsht Latin America Center. “Not just disaster in the economic sense, but also political disaster with strong social disorder etc.”
Sennes spoke at an event at the Atlantic Council on June 6. He is the co-author of a new issue brief, “The Path to Power in Brazil,” along with Andrea Murta, an associate director in the Council’s Latin America Center. Sennes was joined in a panel discussion by Ciro Gomes, a former Brazilian presidential candidate, and Mauricio Moura, a pollster with Ideia Inteligencia. Peter Schechter, director of the Council’s Latin America Center, moderated the discussion.