brazil reduces oil production plans

[GRG55]

Re: brazil reduces oil production plans

Surprised?

From 11-09-07:
http://www.itulip.com/forums/showthr...19470#poststop


And this from 02-18-08:
http://www.itulip.com/forums/showthr...27909#poststop

So what are the Brazilians up to now?

• Petrobras alone can't possibly raise or borrow the huge sums needed to develop Brazil's offshore oil resources;
• Although Petrobras is one of the more competent NOCs [national oil company] it does not have access to all the knowledge and data needed to efficiently develop the ultra-deep Santos basin;
• Petrobras needs the select few IOCs that can supplement its capabilities in the ultra-deepwater...and it probably needs some of their cash too;
• What is going on now is just more posturing...and not very sophisticated posturing either :p
• Expectations [raised in part by some of the ridiculous discovery claims coming from Brazil itself] that Brazil would "fill the gap" with large increases in oil exports were always misplaced. There was never any logic behind the idea that Brazil would export raw crude and not maximize the domestic industrial benefits from its own energy. Brazil is not a totally corrupt, completely hopeless fourth world nation like Nigeria...but humans the world over seem unable to avoid the corrupting influence of petroleum, and that potential for personal gain for a select few influencial and well connected individuals might be a motive to maximize exports. Regardless of how fast Brazil, or the rest of the world, would like to see production increases, Tupi and the other Santos Basin fields will take two to three decades to develop fully.

The important issue imo is whether Brazil will develop its resource at a sensible pace, using appropriate external resources, and maximize the benefits for themselves...or will the politicians and leaders fall under the spell of "potentially vast riches" and follow the same well worn path of so many other nations that were in the same position.

Crumbling BRICS?
Same old, same old...


Brazil's Political Crisis Puts the Entire Economy on Hold

August 17, 2015 — 6:00 PM MDT

In Brazil, General Motors Co. has been halting factories and laying off thousands. Latam Airlines, the region’s biggest, is cutting flights. And the world’s third-largest planemaker, Embraer SA, is delaying its biggest new aircraft.

In the midst of its deepest economic and political crisis in a generation, Brazil is contending with a business climate so punishing that major projects across numerous sectors are being frozen or shrunk, while small businesses slash prices and shift focus...

...Even luncheonettes are hurting.

Carambola’s, a juice and sandwich shop in Sao Paulo’s financial district, saw a 30 percent drop during lunch starting a couple of months ago. The corner store fired two employees, and closes earlier as customers stop coming in after-hours...

...Opposition lawmakers and many in the public are calling for the resignation of President Dilma Rousseff, whose popularity has sunk to a record low.

The senate and lower house presidents are being investigated in an alleged kickback scheme that funneled money from state-run Petrobras, the world’s most indebted oil company, to political parties in the biggest corruption scandal in history.

On top of that, the economy is forecast to contract 2.01 percent this year, inflation is above the central bank’s target and unemployment is at a five-year high. Brazil’s real is the worst-performing major currency in the world this year...

[ProdigyofZen]

Re: brazil reduces oil production plans

I expect there to be a bond & currency crisis in Brazil.

[Southernguy]

Re: brazil reduces oil production plans

So do I.

[jk]

Re: brazil reduces oil production plans

it's looking more and more like 1997. overinvestment in em's from abroad, the collapse, repatriation of hot money by the foreign investors, currency crisis....

[GRG55]

Re: brazil reduces oil production plans

it's looking more and more like 1997. overinvestment in em's from abroad, the collapse, repatriation of hot money by the foreign investors, currency crisis....

I believe in some ways it's worse than '97. However, the international coordination and cooperation to deal with it this time appears to be light years ahead of the late 1990s.

During this cycle a great many of the EMs assumed the hot money needed them more than they needed the hot money. Brazil is but one example as the early posts on this thread tried to illustrate. But this corrupting pattern was repeated in many other resource dependent EMs, Kazakhstan & Kyrgyzstan being two I had the opportunity to witness up close earlier this decade. Chinese hot money, a much bigger factor than in the 1990s competing with the capital from more traditional sources, proved an extraordinarily potent fertilizer for the increasingly sophisticated officially sanctioned corruption damn near everywhere.

The longer the boom went on the worse the corruption became, and external financial support (capital inflows) from traditional sources for many of these economies started to dry up years ago as the restrictions and losses on foreign investment mounted. The Chinese, unhampered by such niceties as the FCPA, play by different rules, and so does Chinese money. Predictably, these economies were in trouble long before the recent currency dislocations. Their "lender of last resort" became China, which in the past year or two has lent some significant sums to the largest of the basket cases including Venezuela, Brazil and Russia.

As China's own internal economic challenges mount it seems to be seeking to maintain its needed leadership role, but share the funding responsibilities with others. The New Development (aka BRICS) Bank, the AIIB and the remarkably rapid formalization of cross-linkages with the ADB and the Washington Institutions (IMF & World Bank) suggest perhaps the coordinated ability to deal with the fallout from this latest currency crisis may (may!) be more effective than the hamfisted IMF-led efforts in the wake of 1997. That's only my supposition, however. What will be interesting to watch is that the official new money, including the Chinese share of those funds, will come with a lot of strings attached that the recipients are unaccustomed to.

Regardless, it seems certain that the "rising middle class" in much of greater Asia and Latin America is suffering a major setback as the purchasing power of their considerable savings is wiped out with the widespread collapse of their local currencies. I am watching to see if the currencies of the Persian Gulf oil exporting Arab monarchies are forced to reset their US$ pegs, as many citizens in those nations will see a drop in their purchasing power and standard of living in that event. The ability of EMs to shift from their export dependent mercantile economic model would appear to be significantly impaired, and that might result in some serious global trade tensions in the years to come.

[don]

Re: brazil reduces oil production plans

it seems certain that the "rising middle class" in much of greater Asia and Latin America is suffering a major setback as the purchasing power of their considerable savings is wiped out

luckily here the middle class sails on undisturbed . . .

Nearly seven million Americans have gone at least a year without making a payment on their federal student loans, a staggering level of default that highlights how student debt continues to burden households despite an improving labor market.

As of July, 6.9 million Americans with student loans hadn’t sent a payment to the government in at least 360 days, quarterly data from the Education Department showed this week. That was up 6%, or 400,000 borrowers, from a year earlier.

The figures translate into about 17% of all borrowers with federal loans being severely delinquent—and that share would be even higher if borrowers currently in school were excluded. Additionally, millions of other borrowers who haven’t hit the 360-day threshold that the government defines as a default are months behind on their payments.

Each new crop of students is experiencing the same problems” with repaying, said Mark Kantrowitz, a higher-education expert and publisher of the information website Edvisors.com. “The entire situation isn’t getting better.”

The development carries big implications for borrowers, taxpayers and the economy. Economists have warned of student-debt defaults damaging borrowers’ credit standing, which would hurt their ability to borrow for things like cars and homes. That in turn would hamper the economy, which relies heavily on consumer purchases for economic activity. Delinquencies also drain government revenues, which are used to make future loans.

Wall Street Journal

[GRG55]

Re: brazil reduces oil production plans

luckily here the middle class sails on undisturbed . . .

Nearly seven million Americans have gone at least a year without making a payment on their federal student loans, a staggering level of default that highlights how student debt continues to burden households despite an improving labor market.

As of July, 6.9 million Americans with student loans hadn’t sent a payment to the government in at least 360 days, quarterly data from the Education Department showed this week. That was up 6%, or 400,000 borrowers, from a year earlier.

The figures translate into about 17% of all borrowers with federal loans being severely delinquent—and that share would be even higher if borrowers currently in school were excluded. Additionally, millions of other borrowers who haven’t hit the 360-day threshold that the government defines as a default are months behind on their payments.

Each new crop of students is experiencing the same problems” with repaying, said Mark Kantrowitz, a higher-education expert and publisher of the information website Edvisors.com. “The entire situation isn’t getting better.”

The development carries big implications for borrowers, taxpayers and the economy. Economists have warned of student-debt defaults damaging borrowers’ credit standing, which would hurt their ability to borrow for things like cars and homes. That in turn would hamper the economy, which relies heavily on consumer purchases for economic activity. Delinquencies also drain government revenues, which are used to make future loans.

Wall Street Journal

Maybe we've reached a point where people don't think they have to repay it. After all, unlike a car or a home, it's pretty difficult for the lender to repossess the education...

[jk]

Re: brazil reduces oil production plans

Chinese hot money, a much bigger factor than in the 1990s competing with the capital from more traditional sources, proved an extraordinarily potent fertilizer for the increasingly sophisticated officially sanctioned corruption damn near everywhere.

The longer the boom went on the worse the corruption became, and external financial support (capital inflows) from traditional sources for many of these economies started to dry up years ago as the restrictions and losses on foreign investment mounted. The Chinese, unhampered by such niceties as the FCPA, play by different rules, and so does Chinese money. Predictably, these economies were in trouble long before the recent currency dislocations. Their "lender of last resort" became China, which in the past year or two has lent some significant sums to the largest of the basket cases including Venezuela, Brazil and Russia.

As China's own internal economic challenges mount it seems to be seeking to maintain its needed leadership role, but share the funding responsibilities with others. The New Development (aka BRICS) Bank, the AIIB and the remarkably rapid formalization of cross-linkages with the ADB and the Washington Institutions (IMF & World Bank) suggest perhaps the coordinated ability to deal with the fallout from this latest currency crisis may (may!) be more effective than the hamfisted IMF-led efforts in the wake of 1997. That's only my supposition, however. What will be interesting to watch is that the official new money, including the Chinese share of those funds, will come with a lot of strings attached that the recipients are unaccustomed to.

if china is indeed the lead creditor, those strings may give china significantly [further] increased influence in the developing world at the same time that its domestic problems are exacerbated. the bailed out debtors may have to increase their chinese-sourced imports, as well as hand over bigger pieces of their own domestic resources.

alternately, the u.s. may be forced to play rescuer [at least for e.g. brazil, but not for russia] precisely to avoid that scenario. u.s. banks have always been good at "covenant light" lending.

[GRG55]

Re: brazil reduces oil production plans

if china is indeed the lead creditor, those strings may give china significantly [further] increased influence in the developing world at the same time that its domestic problems are exacerbated. the bailed out debtors may have to increase their chinese-sourced imports, as well as hand over bigger pieces of their own domestic resources.

alternately, the u.s. may be forced to play rescuer [at least for e.g. brazil, but not for russia] precisely to avoid that scenario. u.s. banks have always been good at "covenant light" lending.

It is certainly an entirely new dynamic. Of course the USA has the exorbitant privilege, and China lacks unlimited ability to print (although it certainly seems to have done a fine job of that in the past 8 years, so the limits of "limited" have not yet been reached it would seem).

[don]

Re: brazil reduces oil production plans

Maybe we've reached a point where people don't think they have to repay it.

Maybe we've reached a point where people can't pay it. (though the maybe was passed some time ago. In our debt-driven economy, our hall of mirrors are our own reflection of the Chinese ghost cities.)

[shiny!]

Re: brazil reduces oil production plans

Maybe we've reached a point where people don't think they have to repay it. After all, unlike a car or a home, it's pretty difficult for the lender to repossess the education...

But the lender can and will garnish the borrower's social security. There is no bankruptcy forgiveness for student loans.

It isn't only 20-somethings graduating with enormous debt they can't pay off. Thanks to layoffs and long-term unemployment caused by the AFC, there are a lot of middle-aged people who took out student loans to go back to school. They needed the money to support them selves and their families. These people should be saving for retirement but instead they'll be paying off student loans or having their SS garnished into their 70's and beyond.

In 1995 my late husband took out a loan from the US Dept of Education to get his master's degree in Special Ed. His crappy salary couldn't cover the loan payments. He kept getting it deferred with reduced payments, but by the time he died in 2011 at age 61 he had barely touched the principle. Had he lived long enough to retire they would have garnished his SS.

One of his co-workers (a low-paid behavioral health tech and a good friend in her 50's) is in student loan debt up to her eyeballs getting a master's degree in counseling. Divorced, with mortgage and car payments, she often doesn't have money for her doctor co-pay when she's sick. She's working so hard for a better career but I don't know how she's going to pay it all off and retire with anything in the next 15-20 years.

Bernie Sanders' interest in this issue makes him a very compelling candidate for a lot of people.

[ProdigyofZen]

Re: brazil reduces oil production plans

luckily here the middle class sails on undisturbed . . .

Nearly seven million Americans have gone at least a year without making a payment on their federal student loans, a staggering level of default that highlights how student debt continues to burden households despite an improving labor market.

As of July, 6.9 million Americans with student loans hadn’t sent a payment to the government in at least 360 days, quarterly data from the Education Department showed this week. That was up 6%, or 400,000 borrowers, from a year earlier.

The figures translate into about 17% of all borrowers with federal loans being severely delinquent—and that share would be even higher if borrowers currently in school were excluded. Additionally, millions of other borrowers who haven’t hit the 360-day threshold that the government defines as a default are months behind on their payments.

Each new crop of students is experiencing the same problems” with repaying, said Mark Kantrowitz, a higher-education expert and publisher of the information website Edvisors.com. “The entire situation isn’t getting better.”

The development carries big implications for borrowers, taxpayers and the economy. Economists have warned of student-debt defaults damaging borrowers’ credit standing, which would hurt their ability to borrow for things like cars and homes. That in turn would hamper the economy, which relies heavily on consumer purchases for economic activity. Delinquencies also drain government revenues, which are used to make future loans.

Wall Street Journal

I had lunch with a young lady (27) today. She received an Anthropology degree from a university in Topeka, Kansas that she basically can't use. She used her student loan money to pay for her car, laptop, vacations and various other things.

The problem is the government cannot cut student loan debt.

The reason: Student loan debt is one of the few channels the government has used to create continuous credit growth as the crisis engulfed the ABS issuance market.

[ProdigyofZen]

Re: brazil reduces oil production plans

if china is indeed the lead creditor, those strings may give china significantly [further] increased influence in the developing world at the same time that its domestic problems are exacerbated. the bailed out debtors may have to increase their chinese-sourced imports, as well as hand over bigger pieces of their own domestic resources.

alternately, the u.s. may be forced to play rescuer [at least for e.g. brazil, but not for russia] precisely to avoid that scenario. u.s. banks have always been good at "covenant light" lending.

China does not have the capital to continue to bailout these EMs they have helped over the years.

It's over. Period.

The sea is receding and the fish are gasping for air. For you see, the fish do not know they are in water until they aren't.

[GRG55]

Re: brazil reduces oil production plans

China does not have the capital to continue to bailout these EMs they have helped over the years.

It's over. Period.

The sea is receding and the fish are gasping for air. For you see, the fish do not know they are in water until they aren't.

I believe you may well be absolutely correct PoZ.

It's been years in the making, but not difficult to see its inevitability. Can the PBOC make another Hail Mao save? Possible, but would not appear probable. The Yellow BRIC road is a dead end.

The amount of nonsensical commentary out there is highly amusing. Especially the continuing pieces about the Chinese instigated death of the Dollar...

I expect the Chinese Dragon to retreat back within its borders and China to become somewhat more insular as it works through the consequences of the world's biggest credit bubble and the world's greatest example of mis-allocated, wasted capital. Once again we are witness to the iron law that whatever is cheap is not respected - labour, money, anything...

[jk]

Re: brazil reduces oil production plans

I expect the Chinese Dragon to retreat back within its borders and China to become somewhat more insular as it works through the consequences of the world's biggest credit bubble and the world's greatest example of mis-allocated, wasted capital.

why not a military build up instead?