1 Most industrialised countries are currently experiencing accelerating economic growth, while the emerging markets economies, including Brazil, are rebounding. As we get closer to the US Presidential elections, and the US Federal Reserve’s course of action becomes more apparent, the economic fundamentals of the world economy should become clearer, hopefully confirming the prospects for a sustained expansion. From a financial perspective, we think this could lead investors to review their investment portfolios and reconsider their perceptions of Brazil and Petrobras risk. As a result, we expect financing in the international capital markets to become more attractive for us in the second half of this year.
Consequently our financing strategy is to wait for greater economic and financial stability before tapping the international capital markets.
2 In this market environment, Petrobras equity prices are strongly influenced by the Brazilian country risk, hence the all-in cost of hybrid instruments have to be carefully assessed when deciding whether or not to issue such instruments.
3 As a developing nation with an inexpensive but productive labour force, Brazil is generally a beneficiary of offshoring. At Petrobras, we are in fact increasing the Brazilian content of our capital spending, particularly with respect to production platforms and ships. We feel that, in the long run, it is cost effective to expand the capacity of Brazilian industry to supply our needs.
