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Lend $10 Billion To Drill... Brazil? *merged*

Discussion in 'Political Zone' started by Doomsday101, Aug 19, 2009.

  1. Doomsday101

    Doomsday101 Well-Known Member

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    Energy: We didn't hear the administration crow about it, but Brazil is about to get $10 billion from U.S. taxpayers to develop its offshore oil reserves. It's not a bad idea, but something's still wrong with the big picture.

    Given how many ratholes our government could pour its money down — wind farms, switch grass — it's good to learn some cash is going toward something productive.

    Last week, Spain's news wire reported that the U.S. Eximbank is raising its stake in Brazil's rich offshore oil fields to as much as $10 billion, from an initial $2 billion.

    We'll admit that, on first blush, spending such money overseas when we've got plenty at home sounds a little questionable. But the investment has both practical and strategic benefits for our energy security.

    First, the U.S. money is a loan, and Brazil has excellent credit with an investment-grade BBB sovereign rating and a record of responsible borrowing. Whatever we loan the Brazilians will be paid back on time and with interest.

    Second, the cash will encourage Brazil's state oil company, Petrobras, to contract with American businesses. And we aren't just talking about oil companies, but software, steel, research, environmental impact and engineering concerns, to name a few others.

    Third, drilling new offshore discoveries in Brazil's Tupi field is an epic project in its own right. Cutting through 10 miles of ultrahard salt amid wild temperature fluctuations to extract as much as 40 billion barrels of oil, maybe more, is a grand project.

    It will create technological breakthroughs not seen since the space program, and qualifies as a great engineering feat. Along with the 1,712-mile natural gas pipeline to be constructed from Alaska to the lower 48, it ought to stir America's imagination to continue to break new frontiers.

    When the strategic factors are brought into place, the benefits become very obvious. Four stand out.

    First, the project will counteract a $10 billion Chinese investment that would otherwise make China the biggest investment player in Brazilian oil. Last March, the Chinese national oil company also offered the Brazilians $10 billion on the same project, which all told will require $30 billion in capital.

    Now, it won't be just China calling the shots. And besides, our technology and way of operating are superior.

    Second, it will put more oil on the global market, ensuring that energy crises and soaring crude prices won't keep whipsawing the world economy. Oil is fungible in a global market, and it doesn't matter who buys Brazil's oil. With more supply, prices should go down.

    Third, the project will bring the U.S. and Brazil closer — a foreign policy goal. But there are also personalities here that are pretty fortuitous for ensuring success. The Obama administration has named Tom Shannon, former assistant secretary of state for western hemisphere affairs, as U.S. ambassador to Brazil. On policy, Shannon is a heavyweight and will ensure that U.S.-Brazil relations advance.

    Fourth, new oil on the market will break the back of the region's leading troublemaker, Hugo Chavez. Venezuela sits on 100 million barrels of oil, and Chavez intends to rule for a long time. Developing Brazil's energy will give the socialist autocrat the one thing he fears — competition.

    Venezuela is now America's No. 2 oil supplier (having passed up Mexico and Saudi Arabia), providing us with 1 million barrels a day. If we could buy from Brazil instead, he may be history.

    Having said all this, the question remains: Why must we go so far and spend so much taxpayer money to drill oil when we could unleash our private sector to do it here for free ?

    Eximbank officials are serving America's interests by developing Brazil. But our Congress, which refuses to encourage offshore drilling, and our Interior Department, which is pulling permits for inland development, are not.

    At the center of it is energy security. If lending money to Brazil for oil is a good idea, isn't freeing our own companies to develop America's vast reserves an even better one? But failing that, this promising venture 170 miles off the Brazilian coast will have to do.
  2. ABQCOWBOY

    ABQCOWBOY Moderator Staff Member

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    Go-go Cheney Haliburton!

    :laugh2:
  3. JBond

    JBond Well-Known Member

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    How much of our money is being used for the same purposes here in the states for our benefit?
  4. Yeagermeister

    Yeagermeister Active Member

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    My thoughts exactly. Why can't we spend that here?
  5. Doomsday101

    Doomsday101 Well-Known Member

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    Drill baby drill in the USA.
  6. DIAF

    DIAF DivaLover159

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    The article does a good job of outlining that. We aren't just going to give them this money with no benefit to us.
  7. theogt

    theogt Surrealist Zone Supporter

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    It's the U.S. Eximbank. As in Export-Import. It's set up to loan money for things like this and has been around for years and loans billions of dollars annually. How is this news?

    And it most certainly does loan money to U.S. based exporters.

    Edit: You can see via this link how much per state is loaned to US exporters:

    https://webappsprod01.exim.gov/apps/usmap/usmap.nsf
  8. JBond

    JBond Well-Known Member

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    So we borrow the money from the Chinese to loan to Brazil? Are we turning a profit on that type of transaction? Why not go straight to the source and cut us out? Or am I being to simplistic? I would love a answer because on the surface it does not seem to make much sense.
  9. theogt

    theogt Surrealist Zone Supporter

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    We borrow money at the cheapest rate in the entire world.

    Then we lend it out at much higher rates. Yes, we make a profit on this type of transaction. Not to mention the added benefit of spurring economic growth.
  10. ABQCOWBOY

    ABQCOWBOY Moderator Staff Member

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    Do we make profit or do the lenders make profit?
  11. Doomsday101

    Doomsday101 Well-Known Member

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    I just wished they showed as much enthusiasm in drilling here in the US than to fight it tooth and nail yet put 10 billion in the hands of Brazil to do exactly what we should be doing here.
  12. ABQCOWBOY

    ABQCOWBOY Moderator Staff Member

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    Makes you wonder doesn't it?
  13. Doomsday101

    Doomsday101 Well-Known Member

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    Hell they spend their time demonizing the US oil industry and turn around and do this? I'm not upset that they are making an investment in Brazil I'm more hacked at the attitude they show here at home with our own.
  14. theogt

    theogt Surrealist Zone Supporter

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    I don't understand the question. The lender is the U.S. Eximbank. It's a government agency.
  15. ABQCOWBOY

    ABQCOWBOY Moderator Staff Member

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    I understand but the Tax Payers are the ones who have, essentially fronted money the Government has borrowed against. If they turn around and lend money against that, it doesn't mean that the Tax Payer will see any of those profits. However, we are still on the hook for the payment of the borrowed money through levied taxes.
  16. theogt

    theogt Surrealist Zone Supporter

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    Borrowing money provides money that you don't already have. Thus, if the U.S. borrows money and lends that money it is using money that did not come from taxpayers.

    If the question is, do taxpayers make a "profit" off the government, that's an impossible question to answer given the inability for anyone to decisively define the terms and the parameters of the debate.

    Regardless of either of these points, I believe the use of "we" in this thread has been used to refer to both the U.S. government and its taxpayers.
  17. masomenos

    masomenos Less is more

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    So it's like if I borrowed $100 from you, with a promise to pay back $120. Then I turned around and lent $100 to ABQ, with a promise of him paying back $150. After he pays me back, I pay you back in full and just have an extra $30 to play around with.

    Is that right, that's essentially what the government does?
  18. theogt

    theogt Surrealist Zone Supporter

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    Yes, that's exactly how banks work. U.S. Eximbank.
  19. masomenos

    masomenos Less is more

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    Hmm, makes sense.
  20. kmp77

    kmp77 Active Member

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    Use everyone elses oil first...then when its gone, we have our own oil and can charge $$$$$$! Is that the plan?

    But back to the age old question, what are we going to do once oil is gone from this planet?

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