Brazil puts expats on notice with Chevron charges

Reuters News
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Posted: Mar 27, 2012 3:28 PM
Brazil puts expats on notice with Chevron charges

By Jeffrey Jones and Jeb Blount

CALGARY/RIO DE JANEIRO (Reuters) - Brazilian criminal charges against energy industry employees over an oil spill have made foreign workers leery of new legal risks, but so far concerns seem to be outweighed by the lure of good-paying jobs and a famously laid-back lifestyle.

The big question among expatriates is whether last week's charges against Chevron Corp, Transocean and 17 of their staff are political grandstanding in a country actively seeking foreign expertise to help develop its newfound oil riches, or a real risk of doing hard time.

"This prosecution is strange. I think people, more than anything, were surprised they've taken it, or appear to want to take it, to this extent. It's really politically driven from what I can see in talking to some of my Brazilian friends," said Tom Rothfels, a Canadian who recently returned to Toronto from a five-month stint in Brazil working with a helicopter company that serves the offshore oil industry.

"But Brazil has always had a bit of an anti-foreigner current underlying much of what they do," he said.

Despite any new risks, Rothfels said he would not hesitate to go back as, like many, he is attracted to the rich culture of Rio de Janeiro, and an ethic that he said stresses hard work, but "at a certain point, it's 'Let's go to the beach.'"

In the past five years, tens of thousands of workers from around the world have flocked to the South American land of samba, in the midst of a boom with the discovery of 50 billion barrels of crude in a deepwater geological zone known as the subsalt. Another 50 billion could be in the offing.

The charges stem from a 3,000-barrel leak in the Frade field in the Campos Basin, 120 km (75 miles) off the coast of Rio de Janeiro state, in November. Chevron and Transocean have disputed the charges. The executives were ordered to turn in their passports and some could face prison sentences of 31 years.

BOOM ATTRACTS THOUSANDS

The legal action comes despite government moves to speed up approval for visas as a way to get more skilled foreign professionals into the country.

The influx is already well under way. According to Brazil's Ministry of Labor and Employment, 70,524 people immigrated to the country in 2011, up 26 percent from 2010. In that time, permits to work on ships and platforms rose 17 percent to 17,738.

A high-ranking official from Brazil's trade ministry said he did not believe foreign investors will be scared away.

"On the contrary, because a country that has clear and straightforward rules is a better place to invest," the official said. "We are always talking about sustainable development and then, when a company like Chevron is involved in an oil spill like this, are we not going to hold them accountable?"

The U.S. oil major has spent more than $2 billion developing Frade, Brazil's largest foreign-operated field. It owns a 52 percent stake with the rest held by Brazil's Petrobras and a Japanese group led by Inpex and Sojitz.

On Monday evening at Shenanigan's Irish Pub, a hangout for expats in Ipanema, two blocks from the famous Brazilian beach, those Reuters spoke to said they doubted the prosecutor's move will keep foreigners away and cool the boom.

"Yes, Chevron may have made errors, but they are being singled out. More serious problems at Petrobras go unpunished," said one North American well-drilling engineer with three decades of experience, and over a decade in Brazil, who did not want to be identified.

"Still, people will continue working here. It's a great place despite its foolishness," he said as an NHL game between the Winnipeg Jets and Ottawa Senators played on the pub's TV.

Said a Scandinavian oil executive: "Brazil is mixed up. Will that deter workers? Probably not, but that is based on the assumption that Brazil will uphold its tradition of not punishing people, not on the fact that the charges are ridiculous."

Certainly, legal risks have increased for foreign companies, said Scott Hosking, chief financial officer at Karoon Gas, a small Australian explorer that has started drilling in the Santos Basin, which lies south of the Campos.

"While they are stopping employees from leaving the country, it definitely does make it slightly more shaky ground for anyone who comes and works for Karoon," he said.

"At the end of the day, we're all watching pretty closely."

WORLD'S GAZE TURNS TO BRAZIL

One foreign investor said he thought public anger over the spill in the aftermath of BP's Macondo disaster in the Gulf of Mexico in 2010 had forced the prosecutor to act. It appears Brazil wants to project the image it is a developed country with strict environmental controls, especially with the World Cup coming to the country in 2014 and Olympic Games two years later, said Kevin Weiss, chief executive of California-based Byogy Renewables.

Byogy has signed a feedstock deal with a sugar cane ethanol producer and is negotiating a fuel supply agreement with Azul, the Brazilian airline.

"You're going to see the government come out with new regulations to make them look good, and they're going to have to punish Chevron to some degree to satisfy the public concern that they're getting away with something," Weiss said from Sao Paolo. "Other than that particular scenario, I don't see that trickling to any other business."

James Woodward is a Canadian English teacher who has lived in Brazil for a decade. He told Reuters through Expat Blog that surrendering passports is normal when a big legal matter arises. He expects no change to how Brazil views foreigners.

"Living here is not easy by any stretch of the imagination," said Woodward, whose wife's family hails from the oil-industry center Macae. "Brazil is one of the most bureaucratic nations I have ever heard of and many of the rules and regulations simply don't make any sense whatsoever. One just has to accept the Brazilian way of doing things and exercise lots of patience."

(Reporting by Jeffrey Jones in Calgary and Jeb Blount in Rio de Janeiro; Additional reporting by Ana Flor in Brasilia, Rebekah Kebede in Perth and Braden Reddall in San Francisco; Editing by Claudia Parsons and Eric Walsh)