This paper aims at discussing the role Brazilian Pension Funds as a whole and Petros in particular should play in financing upstream and downstream projects in the Oil & Gas industry and in the energy sector in Brazil.
The point raised above has its origin in the broader changes and breakthroughs that have been implemented by the Brazilian government through the 90's both in the institutional and in the regulatory framework related to the provision of public utilities as well as in the ownership structure regarding state-owned enterprises (SOE's).
As largely known, fiscal and indebtedness constraints that prevailed in the early 90's have continuously prevented the Brazilian state to carry on its historic role as the main player in financing large amounts of capital expenditure flows in the country.
The lack of governmental funds has put on hold outstanding blocks of investments planned to be undertaken both in manufacturing SOE's (i.e., steelworks, petrochemicals, aeronautics, mining) and in economic infraestructure provision (i.e., highway and railroad transportation, water & sanitation, energy, telecommunications).
The regulatory changes that are being addressed were carried out with a focus on restoring a favorable economic and legal environment so that delayed investment decisions in strategic sectors could be taken accordingly, based on market-oriented funding mechanisms and improved capital structures.
Law 8.031, dated March, 1990, which established the Brazilian National Privatization Program (PND), substituted by Law 9.491, dated September, 1997, and further regulated by the Decree 2.594, dated May, 1998, in addition to the enactment of Law 8.987 in February, 1995 (Concessions Law for the ruling of public services) are bound to be understood as outstanding achievements in that respect.
It should be obvious that these laws set forth the regulatory milestones that have mostly accounted for the recovery in investment figures relative to the aforementioned sectors, based on a private funding-return rationale, from then on. 1.Petros is a non-profit private organization, established in 1970 as the pension fund for the employees of Brazil's state-owned oil company, Petrobras. It is a multi sponsored Plan and it has 23 sponsors currently (17 are private companies and 6 are state-owned). Petros is the second largest pension fund in Brazil (US$ 6.0 billions in assets) and has more than 90 thousand participants.
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Enactment of Law 9.478, in August, 1997, strongly added to the foregoing regulation with a view to resuming strategic capital expenditures, long
