BRAZIL: Nationalism Wins

After ten months of debate, Brazil’s Chamber of Deputies passed President Getulio Vargas’ oil bill last week. If the Senate, as expected, approves it without significant changes. Brazil will join Mexico and Iran as a land of nationalized oil.

Reflecting the extreme nationalism now dominant in the country, the bill sets up the Brazilian Petroleum Corp. (Petrobrás) as a government monopoly operating under the supervision of the National Petroleum Council. Petrobrás will have the sole right to explore, exploit, refine and distribute the country’s oil. The five U.S. and British companies now importing and distributing oil and byproducts may continue to do so. But aside from that, foreigners are out. The government will hold 51% or more of the monopoly’s $500 million stock; no foreigners and no Brazilian married to a foreigner under a joint-property agreement may hold so much as one share in Petrobrás.

Unlike the Mexican and Iranian oil revolutions, the Brazilian measure will involve no major seizure of existing private plants. There is no real oil-processing industry to expropriate. Brazil produces a bare 1.5% of the oil it needs, all from wells already owned by the government. It has only small refineries. When Brazil’s Communists and nationalists shout, “The oil is ours!”, they are shouting almost entirely about oil that is underground. And without the risk capital and know-how of the foreign oil companies, that is where it is likely to remain.

Under the new plan, Brazilians will not only continue to pay more than $200 million a year of precious foreign currencies for oil products, but will start paying new taxes on the imported oil. Some of the income from the new levies will be used for Petrobrás’ oil explorations. But part will also go for construction of new roads. The most that opponents of the new law would say was that in a few years, after the present emotional tide recedes, a new and workable law can be passed.