Lima-de-Oliveira, R., 2019. “Corruption and local content development: Assessing the impact of the Petrobras’ scandal on recent policy changes in Brazil.” The Extractive Industries and Societies (2019).
Renato Lima de Oliveira | ASB Faculty | Research Paper
Discpline: Political Science; Public Policy
Since the 2000s, the Brazilian government relied heavily on local content (LC) as a policy instrument in the oil and gas sector to facilitate industrial development and job creation. Through quantitative targets set in oil exploration and production contracts and direct government procurement by the state-owned company Petrobras, Brazilian policymakers have sought to tie the growth of the oil industry to the strengthening of the local supply chain. However, investigations into a corruption scandal involving Petrobras, suppliers and politicians revealed that these contracts frequently involved kickbacks. The LC policy has been questioned in the country and many initiatives have consequently been dismantled or significantly scaled back. This paper discusses Brazil’s LC policy in light of the corruption scandal and the country’s productive challenges. It conducts a process-tracing of policy changes drawing from various sources including interviews, information contained in the financial reports and court documents, such as the plea bargain statements of contractors and Petrobras’ executives. It also highlights how the more institutionalized, transparent, and multi-stakeholder policy survived: the LC contractual obligations in bidding rounds. However, the more openly political LC policies did not. The findings underscore the importance of industrial policy design for the sustainability of LC initiatives.