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IFC axes investment in oil, gas and coal Brazil’s energy sector faces pressure as IFC axes investment

IFC axes investment in oil, gas and coal Brazil’s energy sector faces pressure as IFC axes investment

2022-10-29

 

In a sharp turn that is pushing Brazil’s energy sector back toward crisis mode, the International Finance Corporation (IFC) has terminated its involvement in the country’s oil and gas sector.

The IFC made the decision to blacklist Brazilian companies in the sector, which it claimed were pursuing “irrational and unsustainable” growth rates.

This comes after the World Bank last month cut its growth forecast for Latin America’s fifth-largest economy. It called on the government to accelerate its economic reforms.

For IFC, which has invested heavily in the country in the past, this highlights the need to regain control of its decision-making in the sector. Read more:

IFC axes investment in oil, gas and coal

In a sharp turn that is pushing Brazil’s energy sector back toward crisis mode, the International Finance Corporation (IFC) has terminated its involvement in the country’s oil and gas sector. The IFC made the decision to blacklist Brazilian companies in the sector, which it claimed were pursuing “irrational and unsustainable” growth rates. This comes after the World Bank last month cut its growth forecast for Latin America’s fifth-largest economy. It called on the government to accelerate its economic reforms.

For IFC, which has invested heavily in the country in the past, this highlights the need to regain control of its decision-making in the sector. Read more:

Boosting electricity and water access

In addition to its investment in Brazilian oil and gas, the IFC has several energy loan programs available to global banks, including one that provides financing to developing countries to develop their own energy resources.

Brazil has made rapid progress in recent years in implementing constitutional reforms that allow the building of hydropower and wind power plants. The country also plans to build a large-scale, large- displacement natural gas power plant.

Boosting electricity and water access will help Brazil meet growing energy demand and reduce its reliance on foreign energy sources.

Brazil’s energy sector

Brazil’s energy sector is facing mounting pressure from three quarters of U.S. energy companies who want to avoid being shut out of Brazil’s lucrative energy market in the event of a crisis. Brazil is the largest oil-producing country in the world and has a diversified energy sector that includes oil, natural gas, electricity, and water.

 
 

In May, Brazil became the first country in South America to implement a carbon tax, which will increase each year until it reaches $23 per ton in 2020. The increase in the tax on carbon is part of a package of measures supported by the government to combat climate change.

The good news

Investing in clean energy can be very beneficial to a country’s economy. Brazil, which has an estimated $600 billion in infrastructure needs, should be prioritized for investment in renewable energy. Brazil has made great strides in the past decade toward achieving this goal.

To date, more than 60% of the country’s electricity has been generated from renewable energy sources. Hydropower, wind power, and biomass are being rapidly replaced with solar panels and electric vehicles.

The bad news

Despite this, Brazil still suffers from substantial energy shortfalls. It is currently the eleventh-largest oil exporter in the world. The country also has one of the most gas-exploitation industries in the world. The government holds the power to impose tariffs on importing countries that produce or consume gas.

The long-term outlook

Despite the setbacks in the oil and gas sector, the Brazilian economy is projected to expand by almost 7% in 2019 and 2020. The expansion is partly due to improved performance in the mining and manufacturing sectors.

However, investment in the energy sector is expected to slump by about 30% in the coming years. This decline is partly due to the uncertainty caused by the current oil and gas blackouts.

Bottom line

Brazil’s energy sector is facing mounting pressure from three quarters of U.S. energy companies who want to avoid being shut out of Brazil’s lucrative energy market in the event of a crisis. Brazil is the largest oil-producing country in the world and has a diversified energy sector that includes oil, natural gas, electricity, and water.

In May, Brazil became the first country in South America to implement a carbon tax, which will increase each year until it reaches $23 per ton in 2020. The increase in the tax on carbon is part of a package of measures supported by the government to combat climate change.

Brazil’s energy sector is facing mounting pressure from three quarters of U.S. energy companies who want to avoid being shut out of Brazil’s lucrative energy market in the event of a crisis. Brazil is the largest oil-producing country in the world and has a diversified energy sector that includes oil, natural gas, electricity, and water. In May, Brazil became the first country in South America to implement a carbon tax, which will increase each year until it reaches $23 per ton in 2020. The increase in the tax on carbon is part of a package of measures supported by the government to combat climate change. Despite the setbacks in the oil and gas sector, the Brazilian economy is projected to expand by almost 7% in 2019 and 2020. The expansion is partly due to improved performance in the mining and manufacturing sectors. However, investment in the energy sector is expected to slump by about 30% in the coming years. This decline is partly due to the uncertainty caused by the current oil and gas blackouts.

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