Word: brazil
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Dates: during 1990-1999
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...Michael Lindell, director of global-stock strategy for GT Asset Management, is bullish on the whole region. He expects a continued recovery from the 1994 peso crisis and believes the region is just starting a two- or three-year up-cycle, which will be fueled by corporate cost cutting. Brazil's Petrobras, an oil company, should be one beneficiary. He also likes paper-goods manufacturer Kimberly-Clark de Mexico and land developer IRSA in Argentina...
When it was founded 44 years ago, Petrobras, Brazil's state-controlled oil company, was a vital symbol of national pride. "The oil is ours" was an oft-repeated slogan. Politicians embraced Petrobras as an indispensable, state-owned bastion against foreign ownership and domination. But now foreigners and locals alike can profit from Petrobras' dominance in one of the emerging world's most dynamic markets...
Petrobras, the world's 17th largest oil company, produces natural gas and petrochemicals as well as fertilizers. It earned $639 million last year. It dominates the market in Brazil, supplying 52% of domestic petroleum requirements. For years, as a state-owned monopoly, it was inefficiently run. But in 1995, a constitutional change liberalized the exploration, production and development of oil. The government was subsequently allowed to sell off more than 30% of Petrobras' common shares. Result: since 1995 the price of Petrobras stock has more than trebled, powered by higher operating cash flows...
...future could be even brighter. Only 30% of Brazil's proven oil reserves are developed, and Petrobras has first call on much of the rest. The volume of those reserves is expected to grow substantially as the company explores the vast Amazon Basin and oil pools off the Atlantic coast. Petrobras has become a leader in drilling deepwater, offshore wells in the so-called Campos Basin off the coast of Rio de Janeiro. Now the company is looking into joint ventures with 56 potential foreign partners, including Exxon, Shell and British Gas, which would allow expanded exploration around the country...
Renno's talents will be tested as he faces the looming share sell-off. Nationalism runs high in Brazil, and many citizens oppose any auction of national patrimony. Government oversight is another perennial issue. Many important decisions about Petrobras are made not at corporate headquarters in Rio de Janeiro but at government ministries in Brasilia. In the past this has led to overstaffing and inefficiencies that could hinder the pace of future growth. "There has to be a change of mentality from being big to being more profitable," notes Ana Siqueira, an energy analyst with Icatu, a Rio de Janeiro...