Marvelous once again

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RIO DE JANEIRO
Marvelous once again
The city of Carnival has a new vibrancy. Huge new oil fields, the 2014 World Cup, a bid for the 2016 Olympics, major investments in
infrastructure, and leaders committed to fighting crime and boosting education have put the Marvelous City back on the global map.
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Introduction



RIO DE                                                                                                                                                                                One sign of Rio’s new economic self-confi-
                                                                                                                                                                                  dence is the city’s posture toward São Paulo. No
                                                                                                                                                                                  longer is the metropolis of 19.5 million popu-
JANEIRO:                                                                                                                                                                          lation seen as a usurper or a threat. Today, Rio’s
                                                                                                                                                                                  leaders speak of complementarity between their
MARVELOUS                                                                                                                                                                         city and the national economic capital.
                                                                                                                                                                                      “Rio has the capacity, if we do things right,
ONCE AGAIN?                                                                                                                                                                       to be a global city for the whole continent of
                                                                                                                                                                                  South America,” said Mayor Eduardo Paes.
                                                                                                                                                                                  “Of course, some roles cannot be played by
Rio de Janeiro is one of the world’s                                                                                                                                              Rio; São Paulo has been the financial center of
legendary cities. For countless straitlaced                                                                                                                                       the country for the past two decades, and that
adults shivering through Northern                                                                                                                                                 is something that we, as a city, will never regain.
Hemisphere winters, rambunctious                                                                                                                                                  So we do not think about that anymore; instead
Rio — forever partying, a place where                                                                                                                                             we look to the future. The location of Rio, close
escaped bank robbers laugh at the                                                                                                                                                 to São Paulo, means that both cities can be con-
law and life is nonstop Carnival —                                                                                                                                                sidered as one.”
has long beckoned as a distant, slightly                                                                                                                                              At the top of the integration wish-list is a
naughty place of tropical sunshine,                                                                                                                                               high-speed rail link between the two city cen-
sea, and not a little sex.                                                                                                                                                        ters. A recently published study calls for a train
                                                                                                                                                                                  reaching 280 km/hour on the 410 kilometer
                                                                                                                                                                                  journey, at a cost of roughly US$17 billion. It’s
But is Rio really like that? Was it ever? A bit,                                                                                                                                  likely that the federal government will provide
perhaps, particularly in the past. But Rio has                                                                                                                                    up to 50 percent of the funding through some
always been much more. It was Brazil’s seat of                                                                                                                                    form of public-private partnership or conces-
government until the 1960s and remains to this                                                                                                                                    sion. The project cost has almost doubled since
day a rabbit warren of slightly decrepit govern-                                                                                                                                  planning started many years ago, because of the
ment offices and seemingly endless retired pub-                                                                                                                                   decision to put some 90 kilometers of track into
lic employees bronzing on Copacabana Beach.                                                                                                                                       tunnels sloping gently beneath the sheer-sided
But Rio lost its capital clout to Brasília in 1960,                                                                                                                               coastal mountains (Rio is at sea level, while São
the same time at which it was losing its top-dog                                                                                                                                  Paulo lies at about 800 meters). Planners reck-
economic status to the factories and finance                                                                                                                                      on the 93 minute journey would cost US$75
firms of São Paulo.                                                                                                                                                               to US$100 one-way, half the cost of the air
     Did Rio actually decline? Not really. New                                                                                                                                    shuttle, and would attract at least half of the
beach zones were built; a few metro stations                                                                                                                                      approximately 20,000 people who make the
                                                                                                                                                                             01
were added. But through too much of the final                                                                                                                                     intercity journey each day.
decades of the 20th century, Rio seemed to spin                                                                               competition, plus further development if Rio is         If the project sounds ambitious, consider
its wheels uncertainly while the rest of Brazil                                                                               successful in its bid to host the 2016 Summer       this: The government hopes to put it out to ten-
raced ahead.                                                                                                                  Olympics. But there’s so much more going            der by the end of this year and have it running
     Now, though, there’s a new vibrancy and                                                                                  on — the state government reckons that              in time for the 2014 World Cup.
confidence in the city that still calls itself                                                                                investments totaling some US$50 billion are              There is a final reason for Rio’s renewed
“marvelous.” Foreign tourism has returned as                                                                                  under way right now.                                confidence. It’s because Brazil is confident. With
                                                                                                                  03
street crime diminishes, and top quality office                                                                                   In addition to the offshore oil development,    the economy bouncing back fast after a sharp
space is at a premium.                                                                                                        major projects include the upgrading of two         slowdown at the end of 2008, the country is
     As various stories in this special supplement                                                                            petroleum and petrochemical refineries, in          reaping the rewards of recent years of conser-
make clear, Brazil’s second-largest city —                                                                                    part to substantially increase the processing ca-   vative economic planning.
population 6.1 million in the city of Rio; 11.6                                                                               pacity for natural gas piped ashore. Gas                “Brazil can be considered a privileged place
million in the greater metropolitan area — is set                                                                             pipelines are being built to flow the gas inland,   because we are not suffering as badly as other
                                                                                                                  04
to enjoy an accelerating rush of investment. We                                                                               and a liquefied natural gas reception terminal      countries. I’m convinced that when the crisis
                                                           01 Botafogo Bay                       surviving landmarks
report on the enormous potential of the oil                                                                                   is being constructed within Rio’s Guanabara         ends we will be in a stronger position to lead the
                                                           02 Old and new come                   from the colonial era
sector, which is driven by the discovery of huge              together in the city center   04   “Sambodromo” at
                                                                                                                              Bay to backstop local supplies at peak              way to recovery,” said business leader Olavo
new offshore fields. Then there’s the likely               03 Arches of Lapa,                    Carnival                     moments, and to protect against supply inter-       Monteiro de Carvalho, chairman of the
impact of the 2014 World Cup football                         one of the few                05   Rio’s Cathedral              ruption.                                            Monteiro Aranha investment group. ■
                                                      02                                                                 05


2 — RIO DE JANEIRO                                                                                                                                                                                       RIO DE JANEIRO — 3
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Interview



Q&A
Peninsula Press talks
with Eduardo Paes,
mayor of Rio de Janeiro
since Jan. 1, 2009.




                                                                                                                                                                                                                                          Sérgio Cabral Filho is the governor
                                                                                                                                                                                                                         Q&A              of the state of Rio de Janeiro

                                                                                                                                                                                                                                                                              party on Copacabana Beach is fantastic
                                                                                                                                                                                                                         ‘LIVE YOUR                                           with over two million people. We had the
SHOW THE                                                                                                                                                                                                                 PASSION’                                             Rolling Stones playing on Copacabana Beach
                                                                                                                                                                                                                                                                              (in 2006, with over one million fans). And of
WORLD                                                                                                                                                                                                                    AT RIO                                               course we staged wonderful Pan-American
                                                                                                                                                                                                                                                                              Games in 2007. During those Games the
– Rio de Janeiro                                                                                                                                                                                      Copacabana Beach   OLYMPICS!                                            leaders of many kinds of sports told me: ‘I
                                                                                                                                                                                                                                                                              have never seen Pan-American Games like
                                                                                                                                                                                                                                                                              these with so many people on the street, and
For Mayor Eduardo Paes, the 2016                      world’s leading oil companies have their               We are putting a lot of effort into security —    (subway) lines and to introduce a Bus Rapid               We asked governor Cabral, a former                   so much enthusiasm.’ That’s why our
Olympics would represent an important                 Brazilian offices in Rio.                              the other day we had a meeting to study           Transit system.                                           journalist, about the benefits — for                 Olympic campaign slogan is ‘Live Your
opportunity to show his city to the                                                                          public order cases like that of Rudy Giuliani                                                               the city, the country and the Games                  Passion’, because we believe we can offer
world. But it’s just part of Rio’s                    In what other ways will Rio develop?                   in New York. Rio is not yet 100 percent safe,     What other goals do you have for your                     themselves — of holding the Olympics                 Games with a very special atmosphere.
resurgence as a major international                   The second thing — and we have much to do              but just as in most major cities around the       four-year mandate?                                        in Rio:                                                  Another thing is the fantastic synergy be-
center. Paes is driving economic                      in this respect — is to become Brazil’s main           world the goal of total safety is impossible.     I am trying to make the city a champion in el-            First of all, holding the Games in South             tween the (2014) World Cup, for which Rio
development coupled with investment in                telecommunications and transportation hub.             However, we can vastly improve our securi-        ementary education, starting in infancy and               America is a tremendous opportunity to               will be one of the key cities, and two years
transport, policing and education. The                We’re doing OK in telecommunications, but              ty and I do believe that Rio is now gaining       going up to the age of 14. Also, I am trying to           expand the Olympic spirit, to create the             later the Olympic Games. Many countries,
city’s greatest advantage for businessmen             our airport is in poor shape.                          ground. We also have urban problems; the          offer the kind of governance where people will            possibility to practice sport and promote            many cities have hosted the World Cup af-
is the wonderful lifestyle.                               Third, I see Rio as a center for Brazilian         favelas (shanty towns) have grown too fast        notice a real difference in public services. I want       friendship in new countries and new conti-           ter the Olympic Games or the other way
                                                      higher education. Some leading universities and        and the city has expanded without proper          Rio to be the capital of good-quality lifestyles,         nents. The Olympics have been held in                round. We showed the members of the
                                                      research institutes are based here, so Rio is a city   government planning. We are working hard          and I want it to be the most important tourist            Oceania, Asia, Europe and North America              International Olympic Committee (IOC)
Whether or not Rio is chosen for the                  of people with doctorates and masters degrees.         on that. However, now is a special moment         destination in the country. Rio already has this          but never in South America. This is the first        that this synergy is very, very important.
Olympics, how do you see the city developing          And with today’s technological advances, we            for Rio, because it’s the first time in many      vocation, so if we could reduce the great divide          time a South American city has made the              Between the three levels of government we
– in addition to tourism, obviously?                  no longer need to be a place where people are          years that the mayor, the state governor          between rich and poor and if we could get rid             final selection (for the Games).                     are making a lot of investments in infrastruc-
I have been mayor of Rio for only a few               producing goods.                                       and the national president are all working        of the security issue, then Rio would be the                  Next, Brazil is the leader of South America      ture, subways, public trains, new housing
months, but even before that as a local coun-             Fourthly, Rio has the vocation and the will        together for the city.                            most fantastic city to live in.                           and our country has been going through a             and so on, and we are investing in favelas —
cilor and federal congressman I have been             to play an important economic role in the                                                                                                                          fantastic time — our macro-economic funda-           we have changed the lives of these people.
trying to make Rio a city where important             areas of innovation, information technology,           Rio is jammed between mountains and the           What are the advantages for foreign                       mentals are solid, inflation is under control,           Finally there is security, where we have
people make important decisions.                      design, fashion, entertainment and so on.              sea, and that creates major transport             investors?                                                we have huge markets and Lula (President             also invested a lot. I spoke with members of
                                                      Brazil’s two biggest TV networks are based             problems. What are the solutions?                 I love Paris, New York and San Francisco, but             Luiz Inácio Lula da Silva) is an important           the IOC about this, and told them that in
Of course Rio used to be the federal capital ...      here, Globo and Record, and Rio is still the           Well, we are working with a clear vision of       there’s no place like Rio for the quality of life         leader in global geo-politics.                       terms of security we could be ready to host
Right, and there’s still a legacy of that, with the   cultural capital of the country.                       getting the infrastructure that the city needs.   and for doing business. Even the people who                   Also, Rio is the main city in Brazil for host-   the Olympics in a couple of months. We have
headquarters of some major government                                                                        We want urban development to be friendlier,       have to work in the financial district of São             ing big events. More than one million people         the know-how to receive the Olympic fami-
agencies. And it’s a city for big companies.          Rio lost some of its glitter because of reports        more in harmony with the people living            Paulo always end up coming back to Rio. It is             come to Rio every year to enjoy Carnival             ly. But we want more; we want to offer secu-
Petrobras is headquartered here, and all the          of violence ...                                        here. So we are working to extend the metro       simply a very nice place to live and invest. ■            without problem, and the New Year’s Eve              rity for all of our citizens, all of the time. ■

4 — RIO DE JANEIRO                                                                                                                                                                                                                                                                                 RIO DE JANEIRO — 5
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Spotlight on Rio                                                                                                                                                                        Shaping the Olympic Dream
                                                                                                                                                                                        Carlos Arthur Nuzman made his Olympic
                                                                                                                                                                                        debut in Tokyo, in 1964, as a member of
OLYMPIC                                                                                                                                                                                 the Brazilian volleyball team. Now the
                                                                                                                                                                                        67-year-old lawyer and president of the

GOLD                                                                                                                                                                                    Brazilian Olympic Committee is the
                                                                                                                                                                                        driving force behind a roughly US$50
                                                                                                                                                                                        million bid, strongly backed and
“An exceptional Olympic experience”                                                                                                                                                     bankrolled by the federal government,
— that’s what Rio organizers are                                                                                                                                                        to bring the Summer Olympics to South        people, integrate them, and help build        provisional
promising the International Olympic                                                                                                                                                     America for the first time.                  a better world. “We owe the Olympic           capital cost will
Committee in their plans for 2016. The                                                                                                                                                  “The Northern Hemisphere has                 movement to the youth, to bring them          leave a lasting
goal is to make full use of Rio’s                                                                                                                                                       organized the vast majority of the           together. They can come by airplane, by       legacy of better
privileged location near sea and                                                                                                                                                        Olympic games. The Southern                  bus, by car, or by bicycle; it doesn’t        highways, airports, metro
mountains, as well as the city’s natural                                                                                                                                                Hemisphere has hosted only two, both         matter. Sports are the one thing that         systems, and the like. Planned
vocation for tourism. One innovation:                                                                                                                                                   in Australia. But South America is a         can rapidly change the concepts and           investments include planting 24 million
giant Jumbotron screens at public ”live                                                                                                                                                  continent of 400 million people, 180        understanding of young people. Heroes         native trees to help repair decades of
sites” throughout Brazil and at least 15                                                                                                                                                      million of them under the age of       can change the lives of a lot of people,      damage to the Tijuca forest that adorns



                                                                            RIO DE JANEIRO
major locations worldwide.                                                                                                                                                                          18,” Nuzman said,                even though most of them will not             Rio’s postcard coastal mountains, and
                                                                                                                                                                                                         expounding arguments        become Olympians, medalists, or               totally offsetting all carbon emissions.
                                                                                                                                                                                                              he has used to         champions. They will, however, go on          Of course all these things could happen
                                                                                                                                                                                                                propel Rio into      to become doctors, sculptors, or              without the whiplash of a 2016
GOLD REASONS
                                                                            Olympic city                                                                                                                    the final runoff for
                                                                                                                                                                                                      2016 host city against
                                                                                                                                                                                                                                     journalists.”
                                                                                                                                                                                                                                     Like most candidate cities, Rio sees the
                                                                                                                                                                                                                                                                                   deadline. But in the real world, playing
                                                                                                                                                                                                                                                                                   host to the world can force a city to

                                                  1
SOLID FINANCES                                                                                                                                                                                  Chicago, Madrid, and Tokyo on        games as an instrument to bring about         change gear. “Something that would
The games are budgeted at US$3.3                                                                                                                                                          Oct. 2, 2009.                              accelerated development, and its              normally require 50 years to alter can
billion, using 2016 prices. The government                                                                                                                                              He believes strongly in the power of the     leaders are eager to convince Olympic         be changed in these seven years,”
will put up 25 percent of funding, with the rest coming from                                                                                                                            Olympic movement to inspire young            officials that the US$12.8 billion            Nuzman said.
sponsorships, ticket sales, and so on. Stadiums, general infrastructure,
and the like require another US$13.5 billion (95% is capital investment;


                                                                                  3
                                                                                                                                                                                                      A LINK ACROSS TIME
5% for city decoration, security, cultural events, etc.). Many of the big                                                                                                                                                                                                            2014 – AND 2016?
infrastructure projects already figure in public investment plans. The
Olympic Village will become private housing after the games.
                                                                                                                                                                                        5                                                                                            If selected for the 2014 World Cup, Maracanã will become the second
                                                                                                                                                                                                                                                                                     stadium (after Mexico’s Azteca) to host two finals. It received major
                                                                                                                                                                                                                                                                                     upgrading for the 2007 Pan-American games, during which it hosted
                                                                             PACKED VENUES                                                                                                                                                                                           soccer games and the opening and closing ceremonies. If Rio is
                                                                             Brazilians love sports, and                                                                                                                                                                             awarded the 2016 Olympics, that may well happen again. Likely
                                                                             Cariocas — people from Rio city                                                                                                                                                                         upgrades includes extending the roof to fully cover all seats.
                                                                             — are perhaps even more                                                                                                  1940- LEGACY
                                                                             fanatical. People throughout the       GAMES IN ONE PLACE                                                                One of the world’s great soccer venues, Maracanã Stadium was built
                                                                             country are passionate about           A frequent complaint about recent Olympic games is that                           especially for the 1950 World Cup; it was the first and only time the
                                                                             soccer, but Cariocas are ardent        several events have been staged at distant venues, which                          prestigious sporting event has been played in Brazil. With 200,000
                                                                             fans of volleyball, track and field,           undercuts the “all together” atmosphere among                             spectators, the final game of that year’s competition figures in record

                                                                                                                    4
                                                                             swimming, and sailing as well.                   athletes in the Olympic Village. One trump for Rio is                   books as hosting the world’s largest crowd of soccer fans ever.
                                                                             They also love playing by the                    the ability to hold virtually all the events inside the                 Unfortunately, Brazil lost the match 2-1 to Uruguay, resulting in a trauma
                                                                             sea; look for beach volleyball                  city. Only soccer may require additional locations.                      the country has never completely recovered from...
                  BEACHES, LAKES, AND MOUNTAINS                              (now an Olympic sport) and the

  2                Olympics in Rio mean Olympics beside the sea. The
                  city winds along a coastal strip, often less than a
                 mile wide, between ocean and mountains. The older
                                                                             more exotic “foot volley” to
                                                                             be popular at the games. This
                                                                             national devotion to sports
                                                                                                                                                                                        1940                                                   2009

                                                                                                                                                                                                                                                             2009
                                                                                                                                                                                                                                                                                                                               2014


downtown region fronts onto Guanabara Bay, so competitors and                translates into packed stadiums:                                                                                                                                                Renovations to add seating and improve safety have cut capacity to 87,000,
tourists will never be far from either the ocean or tropical greenery.       In 2007, 90,000 people watched                                                                                                                                                  thus costing Maracanã its “biggest in the world” title. The stadium is owned
The Olympic Village lies a couple of miles back from Barra beach,            the opening ceremony of the                                                                                                                                                     by the city of Rio and hired by local soccer clubs, in particular Flamengo and
alongside the Jacarepaguá Lagoon, adjacent to the main events area.          Pan-American games, and                                                                                                                                                         Fluminense. However, Maracanã is also frequently used for entertainment
Organizers estimate that 75 percent of the Olympic athletes will be          20,000 worked at the event                                                                                                                                                      events: Frank Sinatra, Tina Turner, and the Rolling Stones performed at the
housed less than 25 minutes from their competition venues.                   as volunteers.                                                                                                                                                                  stadium, and Pope John Paul II celebrated a mega-mass there.

6 — RIO DE JANEIRO                                                                                                                                                                                                                                                                                                                                           RIO DE JANEIRO — 7
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Black Gold
                                                                                                                                                                                                  EYE ON ELETRONUCLEAR
                                                      THE NEXT OIL BOOM                                                                                                                            Brazil is privileged among major economies in that it
                                                                                                                                                                                                   derives most of its electricity from rivers. Last year 72.5
                                                                                                                                                                                                   percent of the nation’s power came from dams. Less
                                                                                                                                                                                                                                                                 (PWR), both at Angra dos Reis on the coast west of Rio.
                                                                                                                                                                                                                                                                 The first is a 657 megawatt station built by
                                                                                                                                                                                                                                                                 Westinghouse, which came online in 1984. Angra 2 is a
                                                                                                                                                                                                   than 2 percent came from coal-powered stations,               1,300 megawatt station from Siemens-KWU of Germany,
                                                      Brazil in OPEC? Well, that may or may not happen, but what’s pretty certain is that                                                          compared with a global average of 41 percent, in part         which started operations in 2000. And work has
Q&A                                                   the largest country in Latin America, long a major exporter of foodstuffs and
                                                      minerals, will soon join the happy band of nations with lots of oil to spare. One
                                                                                                                                                                                                   because Brazilian coal is scarce and stony. The result,
                                                                                                                                                                                                   happily, is that Brazil has a very clean energy matrix.
                                                                                                                                                                                                                                                                 restarted on Angra 3, another 1,300 megawatt PWR,
                                                                                                                                                                                                                                                                 after building was halted for more than 20 years. It uses
Almir Guilherme Barbassa                              snag, though — Brazil’s oil reserves lie deep under the ocean and will be tricky to                                                          Nevertheless, as the economy grows and the power grid         technology from Areva.                                                            Othon Pinheiro da Silva
                                                      get out.                                                                                                                                     becomes more complex, the need increases for more             “The governmental plan is to build four to eight nuclear                                      President, Eletronuclear
Chief Financial Officer, Petrobras                                                                                                                                                                 thermal generation to backstop the hydro stations for         plants by 2030. After that, the number of nuclear plants
                                                                                                                                                                                                   peak supply in big cities that lie far from the hydro         will grow because the number of (new) hydro plants will     three countries in the world combine these two
Petrobras has just announced a US$174 billion         Think of major oil exporters and the image                                                                                                   dams, and to help out in the dry season. Recently the         diminish,” said Othon Pinheiro da Silva, president of       advantages: the United States, Russia, and Brazil,”
investment program for 2009-2013, which is a          is normally camels, deserts, and the Persian                                                                                                 country has added a few natural gas generators, but           Eletronuclear, a state-run company. He said technology      da Silva said.
55 percent increase on the 2008-2012 plan. Can        Gulf, or perhaps the frozen wastes of Russia’s                                                                                               there’s not enough gas to build many of them. Some            partners for the new stations have not yet been chosen      Despite the renewed interest in nuclear power, Brazil’s
you afford so much during a crisis?                   western Siberia. But look some years ahead                                                                                                   relief is coming from cogeneration in sugarcane and           but mentioned Westinghouse (part of the Toshiba group),     energy matrix will remain predominantly hydro. “We
We thought really hard about this — about             and be prepared to include the often stormy                                                                                                  ethanol, through the burning of cane bagasse, but once        DVR of Russia, and Areva-Mitsubishi as possible options.    don't need a lot of nuclear power,” da Silva said. “But
prices, exchange rates, interest rates, and           waters of the South Atlantic as Brazil gears up                                                                                              again the fuel is limited. Thus, the federal government       While Brazil buys in some reactor technology, it can        one energy source is not better than another. The
equipment costs. Everything is so volatile in the     to join the select ranks of global oil giants. By                                                                                            has decided to resume its nuclear power program.              handle its own fuel needs. “We have a lot of uranium        combination, how to combine all these sources in the
current market and so imprecise that it’s             2020, Brazil could be a top-five producer and                                                                                                Currently Brazil has two pressurized water reactors           and we have fuel-cycle technology. As it stands, only       best interest of society, is the challenge.”
worrying. But Petrobras has discovered a lot of       a major exporter.
oil, and we have a solid portfolio of projects.           The main player is Petrobras, the Brazilian
                                                      oil giant whose shares are traded on both the                                                                                                “The Santos Basin is now one of the                           the government to cancel all further sub-salt                 to pledge to hand over a percentage of oil to the
Is it viable without a big rise in oil prices?        Brazilian and New York stock exchanges, but                                                                                              world’s most important hydrocarbon regions                        exploration license auctions while it ponders                 government, via a new state company to be
                                                                                                             Petrobras P-51, the first semisubmersible production platform build entirely in
Well, we don’t worry about the price today; we        in which the Brazilian government keeps                Brazil: 48,000 tonnes and almost US$1 billion to produce 180,000 BOPD in 1,255    and will be a major source of global supply for                   how to ensure the bonanza goes to Brazilians                  created for this purpose. Winners would be the
are investing now for oil that we will sell in 2014   tight control through a majority of voting-class                                                  m of water, on stream January 2009     decades to come,” Frank Chapman, chief                            rather than multinational oil companies.                      companies offering the highest percentage
and beyond. By then a barrel of oil will certainly    shares. By 2020, according to the latest com-                                                                                            executive officer of Britain’s BG Group, said in                  Suggestions have included a special fund to                   handover. Additionally, according to this latest
cost more. Right now the world is consuming 85        pany projections, Petrobras will be producing       2,000 meters deep, if not more. Finally, put all                                     a statement this May as the Tupi field, Brazil’s                  improve education, reduce poverty, and/or                     proposal under discussion, the government
million barrels of oil per day, but this comes        5.1 million barrels of oil and gas per day in       of this 200 to 300 kilometers out in the ocean,                                      first major sub-salt strike, started test produc-                 invest in infrastructure.                                     would make Petrobras the lead operator in all
from depleting fields. If no new fields are           Brazil — twice as much as it is now. Of that,       which implies an additional challenge for                                            tion. BG is a minority partner of Petrobras in                       Ever since Brazil opened up its petroleum                  new sub-salt prospecting licenses. Any compa-
brought online, then today’s 85 million barrels of    3.9 million barrels would be oil and the rest       helicopters shuttling rig crews.                                                     Tupi, along with Portugal’s GALP Energia.                         sector to foreign companies in 1995, the gov-                 ny, Brazilian or foreign, would be able to bid for
oil per day (BOPD) production would fall to 25 or     natural gas. Allow for the fact that other oil          Petrobras has several foreign minority                                               Brazil’s pre-salt geological formation is a                   ernment has awarded prospecting rights in sim-                a sub-salt license, but the winner would have
30 million BOPD by 2020. So even if demand            giants are also investing in Brazil, and            partners in its deepwater operations, but not                                        strip some 800 kilometers long and up to 200                      ple auctions, with the winner being whoever                   to make a minimum share available for
stabilizes at today’s levels, the world must add      the country’s total 2020 production could be        from any lack of know-how. The company is                                            kilometers wide on the edge of the continental                    offers the highest cash bid. But Lula was quick               Petrobras, which would be responsible for car-
around 50 million BOPD over the next 10 or 12         globally significant. By way of context, current    by far the world’s leading producer in deep                                          shelf. Nobody yet knows just how much oil it                      to compare the sub-salt discovery to “a win-                  rying out prospecting work and developing any
years. And that’s just around the corner for the      top producers Saudi Arabia, Russia, the             waters, which is classified as wells lying under                                     really contains, and one nearby Exxon well                        ning lottery ticket,” and said the old bidding                field discovered. Mines and Energy Minister
oil industry. But be all that as it may, Petrobras    United States, and Iran pumped an average of        at least 300 meters of water. Last year, the                                         recently came up dry. But the Tupi strike has                     system must be revamped for new sub-salt                      Edison Lobão said the new model was still
will still be profitable if prices stay at US$40 or   10.8, 9.9, 7.3, and 4.3 million barrels of oil      company says, it was responsible for 22 per-                                         been confirmed in the range of 5 to 8 billion                     prospecting licenses. With discussions still go-              under discussion. He said Petrobras would
US$45 per barrel.                                     respectively in 2008.                               cent of global deepwater production, with                                            barrels, and total sub-salt strikes so far total 8                ing on, one latest proposal leaked to the Folha               enjoy “a privileged position,” but no decision
                                                          Brazil’s breakthrough came after decades        ExxonMobil, Royal Dutch Shell, and                                                   to 12 billion barrels. This has been sufficient for               de São Paulo newspaper called for companies                   had been made about sole operator status. ■
What are your plans for the U.S. market?              of climbing slowly toward self-sufficiency by       Norway’s StatoilHydro trailing at around 14
It’s important. We have prospecting and               probing farther and farther out into the            percent each. This year Petrobras is produc-
production operations in the Gulf of Mexico; a        ocean. In late 2007, President Luiz Inácio Lula     ing off the Brazilian coast in 2,200 meters of
trading operation, commercial office, and             da Silva proudly announced a huge strike of         water, which is classed as ultra-deep, and next
refinery in Houston; and a representative office      what is called “sub-salt petroleum.” These          year it aims to break 2,500 meters in the Gulf
in New York. But that’s more for financial            deposits are buried beneath a thick layer of        of Mexico. So, despite the formidable techni-
matters. And it’s cheaper to ship oil to the United   gooey salt, which is a nightmare to drill           cal challenges of ultra-deep water prospecting
States from Brazil than from the Middle East.         through because it tends to ooze back into          and production, Petrobras is confident it can
                                                      a normal well-shaft. Compounding the                develop the necessary robotics technology to
                                                      problems: This layer of salt can be up to 2,000     develop the sub-salt fields lying in the Santos
                                                      meters thick; the oil itself can be as far as       and Campos basins off the São Paulo and Rio
                                                      7,000 meters below the seabed; and the sea is       de Janeiro coast.

8 — RIO DE JANEIRO                                                                                                                                                                                                                                                                                                                                          RIO DE JANEIRO — 9
Special Advertising Supplement                                                                                                                                                                                    Special Advertising Supplement


Shipyard Industry



                                                                                                                                                              it sits inside the sheltered Sepetiba Bay. Dating

                                                 FAIR SAILING                                                                                                 from the early 1980s, Itaguaí currently handles
                                                                                                                                                              cargo ships with a deadweight capacity of up
                                                                                                                                                              to 280,000 metric tons, mainly for coal, iron,
                                                 FOR RIO PORTS                                                                                                steel, aluminum, and containers. Ambitious
                                                                                                                                                              plans are under way to make use of the flat
Q&A                                              Market-oriented management, massive investments in logistics, and the happy
                                                 proximity of the burgeoning offshore oil industry are all combining to bring new
                                                                                                                                                              hinterland for a variety of major iron and
                                                                                                                                                              steel projects.
                                                 business – and investment opportunities – to Rio’s four seaports.                                                 The port is currently served by a broad-
Jorge Luiz de Mello                                                                                                                                           gauge (1.60 meter) rail link to the neighboring
President, Rio de Janeiro Docks Company – CDRJ                                                                                                                states of Minas Gerais and São Paulo, both of
                                                 On New Year’s Day in 1502, Portuguese               than a grimy dockside. Existing terminals for            them industrial centers. Right now truck access
                                                 sailors maneuvered their tiny caravel out of        steel products, vehicles, and containers will            via the BR-101 federal highway is less than
Brazil’s foreign trade has been growing          the Atlantic swell and past a giant bare-rock       soon be joined by another for containers,                adequate, because heavy traffic is thrown into
rapidly, up by some 280 percent in 10 years      mountain, becoming the first Europeans to           raising current capacity five-fold, and addition-        the congested North Zone of metropolitan
from US$97 billion in 1999 to US$371 billion     glimpse one of the world’s great natural har-       al dedicated terminals for pulp and paper and            Rio. As a result, the federal government is
in 2008. What does this mean for ports?          bors. Given the date, and their assumption —        for general cargo are under study. Combined              constructing a 100 kilometer, US$380 million
This has been a major challenge, because         wrong, but understandable — that the 380-           with dredging to increase the draft, all this            beltway in a semi-circle around the city. This
more than 90 percent of trade moves              square-kilometer bay must be the mouth of           development promises to significantly raise              new highway will link Itaguaí directly to
through our seaports. So we have had to          a giant river, they called it “Rio de Janeiro.”     annual cargo movement, currently just under              major interstates, avoiding metropolitan
make a giant leap both in our infrastructure         Over the centuries, the city that sprang up     10 million metric tons, and spells opportunities         congestion. ■
and the way ports are managed. In fact, the      there became not just a byword for beaches and      for private investors.
starting point came back in 1993 with the        bohemia but also one of Brazil’s busiest ports.         Three other ports in Rio de Janeiro state
port reform law; before that everything was      In recent years, however, it has lost ground,       are also attracting investment. Niterói, across
run by the government. Now it’s like a           plagued by shallow draught, quays choked            the bay from the city of Rio, has found a new
condominium where port authorities —             amidst city sprawl, retreating industry, and out-   lease on life in supplying services to the
federal or not — handle security,                dated management and labor practices. Now           booming offshore oil industry and now
regulations, and control, while the              there are plans to reverse the tide with a com-     boasts the highest average cargo value of all
terminals themselves inside the ports are        bination of efficient management (see interview     Brazilian ports, some US$3,500 per metric
leased to private operators.                     on the left) and private investment.                ton, according to the Rio de Janeiro Docks
                                                     The growing number of cruise ships that         Company. Angra dos Reis, located some 115
What’s the situation now, in Rio de              bring European, Japanese, North American,           kilometers to the west, is another busy oil
Janeiro?                                         and, increasingly, Latin American tourists into     support station. But for many, the greatest
One major challenge has been changing the        Rio should soon enjoy modern berthing facil-        interest lies in expansion plans for the port of
mentality within the Rio Docks Company           ities that will more resemble an airport lounge     Itaguaí. Roughly 40 kilometers west of Rio,
(which is controlled by the federal
government). Employees had the vision of
public employees — they under-performed
in exchange for being underpaid. We’re
putting in a new market-based career and
salary plan, so now we can demand
efficiency. And people will be promoted on
merit, not on length of service like before.

Any message for foreign investors?
The role of the Rio Docks Company is to
generate business opportunities. Our door
is open for investors who want to grow
together with Rio and Brazil.


                                                                                                                                               Itaguaí Port


10 — RIO DE JANEIRO                                                                                                                                                                                                   RIO DE JANEIRO — 11
Special Advertising Supplement



Infrastruture




BUILDING
THE FUTURE
Several major Brazilian construction companies have outgrown
their original home market to become citizens of the world. In this
profile we look at the firm Construtora OAS, which has diversified
as an investor in infrastructure concessions, residential
developments, and prime office space.
                                                                                                                                                             The João Havelange Olympic Stadium


With Rio de Janeiro getting ready      in 17 countries throughout Latin           While Rio is just one of 12                         through a system of private par-
for the World Cup football compe-      America, the Caribbean, and            cities where matches will be                            ticipation, with the return on
tition in 2014, bidding for the        Africa.                                played, it is likely to figure promi-                   capital coming from a toll,”
2016 Olympics, and emerging as             “I am very concerned about the     nently in the competition, for                          Pinheiro said. “At that time there
the focus of massive investments in    World Cup, which will require          example by hosting the interna-                         was no concessions law and no
Brazil’s new sub-salt offshore oil     major investments in a great vari-     tional media center. And there’s a                      formal structure for public-pri-
fields, companies in all areas are     ety of areas,” said Adelmário          good chance that the final will be                      vate partnerships.”
gearing up to work overtime.           Pinheiro, chief executive officer of   scheduled to be played in the                               The company has helped pre-
However, few sectors are likely to     Construtora OAS, in an interview.      city’s historic Maracanã stadium,                       serve old Rio by renovating the
be as busy as construction. The        “The host cities must have ade-        built for the 1950 World Cup.                           historic Central Post Office, now
world-class sporting events require    quate hotel accommodations,            Construtora OAS has close links                         a cultural center, and part of the
not just new or revamped stadiums      airport terminals need to be up-       to the world of sports in Rio: It                       landmark Copacabana Palace
but a whole host of infrastructure     graded, metro systems expanded,        handled a recent renovation at                          Hotel, while building 21st-cen-
upgrades, ranging from glamorous       and highways improved.” The            Maracanã and built the city’s                           tury business with hypermarkets,
new airport terminals and hotels to    federal government, he added,          newest showcase venue, the João                         office blocks, and an expansion
the less glamorous but equally vital   should create special planning and     Havelange Olympic Stadium, for                          of the Petrobras research center.
new sewage systems.                    licensing rules to streamline envi-    the 2007 Pan-American games.                                Pinheiro said he hopes to
    Construtora OAS is already         ronmental approval procedures              Despite originating in São                          apply the same pioneer posture to
planning to carve out a share of the   and the other myriad bureaucratic      Paulo, Construtora OAS has a                            infrastructure work needed to
action, leveraging its experience as   processes that frequently delay        long history of working in Rio to                       support the sub-salt program.
a leading Brazilian construction       important infrastructure projects in   find new ways to resolve urban                          “We have already made our stud-
company and infrastructure in-         Brazil. “For the World Cup, every-     problems. Perhaps the best exam-                        ies. ... We know exactly what will
vestor that has foreign operations     thing must be ready on time.”          ple of its contributions to the area                    be necessary in terms of housing,
                                                                              is the “Yellow Line” urban ex-                          how many terminals and admin-
                                                                              pressway that slices across the                         istrative buildings, and how
                                                                              city’s North Zone. Construtora                          much the surrounding cities will
                                                                              OAS not only helped build the                           grow. We also know exactly what
                                                                              six-lane divided highway, it also                       points need improving in each
                                                                              participated in it as a business                        airport, and which will grow
                                                                              venture. “This was the first pri-                       more. I just hope our competitors
                                                                              vate project in Brazil undertaken                       don’t read this!” ■

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                                                                                                                  www.peninsula-press.com                 info@peninsula-press.com
                                                                                Editor-in-Chief Stella Klauhs     Editorial Assistant Christopher Dalby   Photography Agência Petrobras
                                                                                Regional Director Rafael Muñoz    Writer Brian Nicholson                  de Notícias, Cesar Duarte, Filipe
                                                                                Project Director Marie Jung       Creative Director Marta Conceição       Dana, Construtora OAS, CDRJ,
                                                                                Research Director Greg Kunstler   Illustrator Henrique Monteiro           Riotur, TurisRio, iStockphoto, SXC



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