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The Potential of Brazilian Energy Market

 3 min read / 

Recently, the world economy was shaken by the vulnerability of the oil market and significant fall in price. It raises the question about the future of oil suppliers and draws attention to the use of alternative energy sources, particularly in emerging markets.

Currently, foreign investors have shown an increasing interest in the energy market in Brazil. Several large investments have been made and General Electric was among the first large international companies that entered Brazilian market in 2009. Expectations continue to be significantly high – GE considers Brazil ‘one of the main wind power markets in the world’ and predicts the 40 percent growth of this industry by 2016. The Chinese company BYD invested $80m in manufacturing solar panels and energy storage systems in Brazil in 2014. China-Latin American relationships also began three years ago and since which Brazil has received $10billion in contributions from Chinese partners. Meanwhile, in 2014 General Electric made an announcement of its continuing cooperation with Brazil and its plan to establish its first Latin American research centre.

Brazil is attractive for foreign investors due to relatively lower energy costs compared to its competitors around the world. In October 2014, Brazil held its first national auction in order to attract more investment in the solar power market and boost the development of the industry. The results were lower energy prices (£54 per MWh in comparison with £127 per MWh a few years ago) and ‘victory’ of long-term contracts with international partners. Even though the size of the market is relatively small, the future of energy and solar power extraction in Brazil is bright.

However, deteriorating optimistic expectations, may be the potential challenge for the Latin market. It is argued that in the future, the size of Brazilian solar market could not face competition from China and Japan. The need for deep knowledge of Brazilian business and legislation specifics also complicates international business relationships. Due to tax policies it is highly costly for small companies to establish their position in Brazil, especially for the first time. Moreover, continuing environmental complications, such as drought, could lead to the reduction in electricity production. According to Margaret Myers, Director of the China-Latin America Program, legal authorities in Brazil must recognize the need for further development of a comprehensive plan and incentives.

Therefore, the question of the future progress of the Brazilian energy is open and partly depends on news from the business world and policies in the oil market through 2015. As global companies like GE have already invested in the solar power market of Brazil, this market has become an attractive place of opportunities and high expectations. It can be suggested that Brazil will continue to supply alternative energy at relatively low prices and will confidently establish its position among its country-competitors. However, this cannot be achieved without support from policymakers and change in local regulations, and lower corporate taxes. New investments in 2015 and long-term contracts with international companies will largely determine the future of this industry.

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