The Brazil Example

In global ranking, Brazil and Nigeria are grouped as Third World countries. But indices of recent economic developments in the two countries indicate that Brazil has left Nigeria far behind, prompting the argument that if Brazil must continue to be ranked as a Third World country, Nigeria with its numerous failings must be demoted to ‘Sixth  World’

In Rio de Janeiro, a Nigerian reporter who travelled to cover the UN conference on sustainable development tagged Rio+20 wittily shared his experience of power outage in the South American country. While in the shower, the light in his apartment went off. He screamed N-E-P-A! in an apparent expression of his disappointment with the power outage, something common in his home country.

But the journalist was mistaken. NEPA, the popular acronym for the old name of the Power Holding Company of Nigeria, was not responsible for the power cut; it definitely couldn’t have been. Incessant power outage is only possible in Nigeria and not Brazil. Yet, the power surge the reporter witnessed in Brazil was not in any way a mark of inefficiency by the country’s energy providers, but a protective measure to ensure the reporter was not electrocuted in the shower.

The reporter had ignorantly activated the electric heater on the shower and remained in the water barefooted longer than expected. As a safety measure, power supply to the apartment was disconnected. When he complained of the power outage to the management of the apartment, he discovered only his apartment was affected.
Indeed, Brazil, unlike Nigeria, has for some years now taken effective steps to tackle the problem of power outage. It rarely happens and when it does, it is often in the rural areas. Brazil has the largest electricity market in South America, with a power consumption level that is more than double the combined consumption of Argentina, Bolivia, Chile and Uruguay. Its installed capacity is comparable to that of Italy and the United Kingdom, although with a much larger transmission network. The country has the largest capacity for water storage in the world, being highly dependent on hydroelectricity generation capacity, which meets over 80 per cent of its electricity demand. This reduces the country’s generation costs, relative to countries with more diverse supply mixes.

Nigeria’s maximum output of 4,400 megawatts is adjudged grossly inadequate for a nation of 167m people. Brazil, with a population of 194m, generates about 135,000mw. In terms of per capita power capacity measured in watts/person, Nigeria’s record is anything but inspiring. It is 29 w/person. Compare this with Brazil’s 490watts/person or America’s 2,900w/person or India’s 110w/person. Even neighbouring Ghana has a superior record because it has 1,800mw for its 21m people, which amounts to 85 w/person. Obviously, per capita power capacity is an indicator of a country’s economic performance.

The power sector in Brazil was essentially in government’s hands until the early 1990s. The sector had seen remarkable development in the 1970s but by the late 1980s, the state-ownership model was on the verge of collapse. This delicate situation was the result of heavily subsidised tariffs and a revenue shortfall in the sector of about $35bn, which led to delay in the construction of about 15 large hydro plants due to lack of funds for investment. The first reforms introduced in the power sector were aimed to allow the participation of private capital and improve its economic situation. This and subsequent efforts substantially addressed the power problem in the country, which currently harnesses power from a mix of hydroelectricity, gas, oil, biomass, nuclear, coal and wind.

Brazil’s obvious success is not only in the area of power production, transmission and distribution. The oil sector in Brazil is also a success story. Signposted by Petrobras, a semi-public Brazilian multinational energy corporation headquartered in Rio de Janeiro, it is the largest company in the Southern hemisphere by market capitalisation and the largest in Latin America measured by 2011 revenues. While the company, founded in 1953, ceased to be Brazil’s legal monopolist in the oil industry in 1997, it remains a significant oil producer, with output of more than 2 million barrels (320,000 m3) of oil equivalent per day, as well as a major distributor of oil products. The company also owns oil refineries and oil tankers. It is a world leader in development of advanced technology from deep-water and ultra-deep water oil production. In September 2010, Petrobras conducted the largest share sale in history, when $72.8bn worth of shares in the company were sold on the BM&F Bovespa stock exchange. Upon the sale, Petrobras immediately became the fourth-largest company in the world measured by market capitalisation.

According to Norman Gall, director of the Fernand Braudel Institute of World Economics in São Paulo, “Petrobras is engaged in by far the biggest industrial undertaking in Brazil’s history.” Mr. Gall said Petrobras’ annual spending, estimated at more than $45bn through 2020, might surpass National Aeronautic and Space Administration’s (NASA’s) budget in the 1960s — when it was preparing to send a man to the moon. Compared to its equivalent in Nigeria, the NNPC, the story has been different. The operations of NNPC are punctuated with tales of lack of transparency and inability to refine crude product locally, resulting in persistent fuel scarcity, subsidy scams, mismanagement and questions related to the solvency.
Oil revenues are efficiently channelled into development of infrastructure in Brazil, as evident in the rapid transformation of the country. Brazil boasts of an effective and well organised transport system, a booming automobile industry, which produces a good percentage of the country’s automobile needs. There are about 2,500 airports in Brazil, including landing fields – the second largest number in the world, after the United States. Sao Paulo-Guarulhos International Airport, near São Paulo, is the largest and busiest airport, handling the vast majority of popular and commercial traffic of the country and connecting the city with virtually all major cities across the world.

The case in Nigeria has been a far cry from this. The NNPC official website claims that: “With a maximum crude oil production capacity of 2.5 million barrels per day, Nigeria ranks as Africa’s largest producer of oil and the sixth largest in the world. Nigeria is also said to have a greater potential for gas than oil.” The gas production in 2000 was approximately 1,681.66 billion scf; 1,3715 billion scf was associated gas and the rest 310.16 billion was non-associated gas. This, however, has not found any visible expression in the development of the country. Nigerian and foreign analysts blame the failings in the sector on brazen corruption of its leaders.

Unlike Nigeria, Brazil has been able to harness its strengths for its economic advancement. The country’s economy has taken a leap in global ranking and even overtaken the United Kingdom as the sixth-biggest economy in the world despite the global economic slowdown. As contained in the global listing of countries based on their nominal gross domestic product, GDP, the market value of all final goods and services from the various countries in 2011, Brazil was rated 6th in the world by the trio of theWorld Bank, International Monetary Fund, and the CIA World Factbook. The National Institute of Economic and Social Research, NIESR, confirmed the rating. The Brazilian economy is now worth $2.5tn (£1.6tn). The latest rating placed Brazil ahead of UK, Italy, Canada and Russia and only behind the US, China, Japan, Germany and France ranked in that order. In the estimate, while Nigeria was only able to gross $238bn, Brazil’s GDP was estimated at $2.5tr. In terms of budget expenditure for the same year, the CIA World Factbook placed Nigeria’s estimated expenditure at $32.7bn, placing it as the 62nd on the global ranking, as against Brazil’s $931bn and 8th position. With substantial oil and gas reserves continuing to be discovered off Brazil’s coast in recent years, the country is now the ninth largest oil producer, and the government wishes to ultimately enter the top five.

Interestingly, however, as at 1981, Brazil paraded a GNP of $250bn, $2,000 per capita and 1 per cent real growth. This was against Nigeria’s $93bn, $1,087 per capita and 7.8 per cent growth rate for the preceding year.
In the last 10 years, Brazil consolidated its role as an agricultural superpower, discovered massive oil reserves in the Atlantic, paid its debts to the International Monetary Fund and developed a more assertive diplomacy. It also saw the rise of a new middle class, whose purchasing power has been fuelling Brazil’s continuous economic growth. A combination of economic success and government measures to distribute income has helped lift millions out of poverty, although Brazil remains a very unequal country. There has also been low unemployment combined with wage increases and a boom in credit.(Desmond Utomwen/who was in Brazil )