Rio de Janeiro, by far the largest producer of oil and gas in the country, still does not have a sovereign fund with any accumulated value, despite having benefited from huge amounts in royalties and special participation
Sovereign funds from Espírito Santo and even from Maricá leave Rio de Janeiro behind: the Fundo Soberano de Maricá (FSM) was created in 2017 as a savings account to guarantee local development in the post-petroleum economy. In August 2020, it had already reached more than R$400 million in accumulated funds.[1]. In the same context, we can mention the Sovereign Fund of the state of Espírito Santo, which reached more than R$400 million this year, and the state is the third largest producer of oil and gas in Brazil.[2]
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Niterói created the Revenue Equalization Fund in 2019, and deposited more than R$100 million this year, but following the mindset of politicians that this type of savings is to be used to promote current management, the fund provides several ways to use it funds annually.[3]
Brazil's sovereign wealth fund has poor transparency and very little information is available
Brazil's sovereign fund, called Fundo Social, created in 2010, has poor transparency and very little information officially available, and has suffered, since its creation, from numerous attempts to empty the fund before it even accumulates resources. From 2015 to 2019 alone, the Social Fund received around BRL 48,7 billion from part of the bonuses, royalties and other sources incident on extracted oil.[4] However, the balance of the Social Fund in 2019 was only R$16,9 billion, which shows the great difficulty Brazil has in creating and maintaining a savings fund for the future, without consuming and spending resources in the present.[5]
In contrast, the Norwegian Sovereign Fund, the largest in the world, with a balance of more than US$1 trillion in 2020, works as one would expect such a fund to work, accumulating resources from activities that generate oil wealth, during the years in which this activity still generates wealth, for an eventual time when these resources, naturally exhaustible, will decrease or cease.[6]
Rio de Janeiro, the largest oil and gas producer in Brazil, still does not have a sovereign wealth fund with any accumulated value
The state of Rio de Janeiro, by far the largest producer of oil and gas in the country, still does not have a sovereign fund with any accumulated value, despite having benefited from enormous amounts in royalties and special participation, as the largest producer of oil and gas for many years. There were more than R$13,5 billion in royalties and special participation received by the state of Rio de Janeiro in 2019 alone [7], and incalculable billions in the last ten years, but not even a penny went into savings to safeguard the future of the state , even knowing that oil riches are temporary. The State of Rio de Janeiro was a true grasshopper, instead of an ant, as in Aesop's fable.
Currently, in times of pandemic and enormous difficulties in the budget of the union, states and municipalities, sovereign funds cannot be expected to accumulate many resources, but certainly if they had been established and supplied properly since the time of the creation of the Fundo Social do Pre- Sal (2010), today we would have accumulated resources that could help Brazil and its federative entities to face the current crisis with more tranquility.
by – Cleveland M. Jones
About Cleveland M. Jones
Prof. Cleveland M. Jones, DSc
Technical Director and Partner – Fronteira Energia Ltda. (Border Brazil)
Associate Consultant – CEGeo
Researcher at INOG – National Institute of Oil and Gas/CNPq
Member, Geosciences Advisory Board – NXT Energy Solutions
President, Brazilian Environmentalist Academy of Letters – ABAL
Member, Brazilian Society for the Progress of Science
Chico Mendes Award, Petrópolis City Council, 2019
References
[1] The Day. Sovereign Fund of Maricá exceeds R$ 400 million. Online 26 Aug 2020. Available at https://odia.ig.com.br/rio-de-janeiro/o-dia-niteroi/2020/08/5977443-fundo-soberano-de-marica-ultrapassa-os-r –400-million.html
[2] TN Petroleum. ES Sovereign Fund reaches BRL 420 million, BRL 10 million of which in profit. Online Apr 9, 2021. Available at https://tnpetroleo.com.br/noticia/fundo-soberano-do-es-atinge-r-420-milhoes-sendo-r-10-milhoes-em-lucro/
[3] G1. Niterói creates royalty savings and deposits R$ 102 million. Online March 28, 2019. Available at https://g1.globo.com/rj/rio-de-janeiro/noticia/2019/03/28/niteroi-cria-poupanca-de-royalties-e-deposita-r-102 -millions.ghtml
[4] Brazil in fact. Amid the pandemic, the Senate approves a project that withdraws billions from education and health. Online 21 Aug 2020. Available at https://www.brasildefatorj.com.br/2020/08/21/em-meio-a-pandemia-senado-aprova-projeto-que-retira-bilhoes-da-educacao-e -health
[5] The Globe. Sharing the Pre-salt Social Fund with states and municipalities will be for next year. Online May 9, 2019. Available at https://oglobo.globo.com/economia/partilha-do-fundo-social-do-pre-sal-com-estados-municipios-ficara-para-proximo-ano-23653497
[6] Infomoney. The world's largest sovereign wealth fund is preparing to withdraw US$ 37 billion. Online Sep 12, 2020. Available at https://www.infomoney.com.br/mercados/maior-fundo-soberano-do-mundo-se-prepara-para-saque-de-us-37-bilhoes/
[7] ANP. Consolidated government holdings. Online 12 Mar 2020. Available at http://www.anp.gov.br/royalties-e-outras-participacoes/participacoes-governamentais-consolidadas
