16 - Local Content and Sustainable Development in Brazil

Summary

This chapter examines the applicable laws surrounding Brazil’s local content (LC) requirements along with the efficacy of such LC requirements. In doing so, this chapter first examines the history of LC rules through different stages of petroleum production in Brazil, mainly by examining various bid rounds. While not every bid round saw different local content, each round can be grouped into periods, which show a pendular behavior (from less to more stringent regulation). Further, from this background, an analysis of successes and failures of these local content policies is given, including the effects on sustainable development in Brazil.

As with any other country, LC rules in Brazil are a powerful tool to bolster the local economy. Brazil teaches positive and negative lessons concerning local content policies. Positive lessons include an efficient certified system to increase compliance and reduce governmental administration procedures. This increased the development of certain sectors, such as the naval and related industries. Negative lessons include unrealistic parameters and pervasive incentives to bid unrealistic local content terms. Another negative example might be the lack of distinction from small to large projects. Overall, Brazilian local content is devolved but still needs improvements and a strategic long-term plan to better achieve sustainable development goals.