The political economy of local content requirements in the oil sector from Lula to Temer

Abstract

The oil sector has vast experience with local content requirements, particularly in Norway. In Brazil this policy gained force during the Lula administration, but suffered during Rousseff’s administration, especially at the end of her first term. An attempt to rethink some aspects of this policy in 2015 come too late and under Temer’s government it lost all importance. The objective of this article is to analyze the relative political ease with which this occurred taking into consideration two factors. First the perfect storm which struck Petrobras from mid-2014 and in 2015 causing a sharp fall in oil prices and the impact of Lava-Jato, among other factors. Second, the difficulties, which were attributed to this policy, criticized as being part of the problem and not of the solution for Brazil´s development challenges. Based on analyses of governmental measures and the positioning of relevant stakeholders we learn that local content policy has been sacrificed in order to attract international operators.

Keywords:
Local content requirements; Oil and Gas; Temer administration; Pre-Salt; Brazil