With the seventh-largest economy in the world, Brazil’s sheer size makes it a natural heavyweight in its region. Historically, Brazil has maintained a policy of multilateralism and non-intervention in other states’ affairs, enabling it to maintain good diplomatic relationships with other countries.1 Thanks to recent discoveries of large, deepwater pre-salt oil deposits off Brazil’s coast, the country also stands to become one of the world’s largest oil producers if it can attract the necessary foreign investment and technology needed to fully exploit its offshore resources.
State-controlled Petroleo Brasileiro (Petrobras) is the dominant player in Brazil’s oil sector and holds prominent positions in the country’s upstream, midstream and downstream activities. The company had a monopoly on oil-related activities in Brazil until 1997, when the government opened the country’s energy sector to competition. Royal Dutch Shell became the first foreign crude oil producer in the country, later joined by major international oil companies such as Chevron, Repsol, BP, Anadarko, Statoil and Sinopec.2 Still, Petrobras remains the largest company operating in Brazil’s energy sector, though the company’s mounting financial losses have spurred movement within the Brazilian government to reform energy regulations with the hope of attracting greater foreign investment in the country’s pre-salt formations.
More than 90% of Brazil’s oil is produced offshore in very deep water and mostly consists heavy grades. Petrobras has discovered between 8 billion and 17 billion barrels of heavy crude oil under a thick salt layer in the seabed, at depths of 3,000-4,500 miles (1,500 miles of water followed by 1,500-3,000 miles through the seabed). New offshore technologies have enabled Petrobras to start developing these ultra-deep oil fields, which could transform Brazil into a major oil producer by doubling its production to more than 4 million barrels per day by 2020.3
Brazil has aspirations to become a global leader by serving as a bridge between “the West and the rest” in international institutions, such as the United Nations, the G-20, the International Monetary Fund and the World Trade Organization. It also plays a large regional role via South American multilateral institutions such as Mercosur.
Brazil’s energy trade patterns have shifted significantly in recent years. Between 2012 and 2013, Brazilian oil exports to the United States fell by 30% and China became the largest market for Brazilian crude.4 This trend might cause some to worry that the United States will lose influence with the South American power, and that China’s sway on the continent will grow. However, there are many reasons to expect otherwise. First and foremost, Brazil’s economy is highly diversified; oil revenue makes up only 1.4% of the country’s GDP and does not contribute heavily to the government’s spending budget. In other words, oil is not as vital a resource to Brazil as it is in economies that rely almost exclusively on the energy sector, and it is therefore unlikely to play a large role in Brazil’s foreign policy considerations. Second, Brazil prides itself on its independent foreign policy and its role as an alternative actor to the great powers in the international arena. While Brazil may not always act according to U.S. foreign policy interests, there is no reason to believe it will begin gravitating more heavily toward China with increased oil trade.