Mike DeLucchi's Blog

A record setting stock of $70 billion has been taken up, as of September 24th by Petrobra, despite the large amount of doubt posed by investors regarding this decision. “Of that total, almost $43 billion-worth of the shares will be taken up by the government in return for giving Petrobras the right to develop 5 billion barrels of reserves” (The Economist). The issue derived from the shares is significant, as Petrobra is looking to utilize the capital to exploit newfound oilfields off Brazil’s coast. Petrobra is looking to increase its output to 5.4 billion barrels a day by the year 2020. If this were to occur, the brazilian government will look to use its incoming revenue to contribute in transforming Brazil in to a developed country. This would include the funding to supply education, welfare, and infrastructure. Although, with all the money being outputted towards this massive $224 billion project, investors are becoming skeptical in purchasing shares, as there is a widespread beleif that Petrobra will be facing a large debt in the near future. However, Petrobra believes there are still a greater number of oilfields left to be discovered off shore. Which, is why I believe the most logical decision would be to continue its drilling, while attempting to sell more shares to private investors. Thus, the government cannot invest in a greater amount of stocks, and Petrobra can be its own sole operator. Also, with the continuation of Petrobra’s operations, the brazilian economy will benefit with respect to the growth of its ship-building and oil service enterprizes.

Full article: http://www.economist.com/blogs/americasview/2010/09/petrobrass_record_share_issue

A new, turbocharged german economy is prospering, largely due to the exports in the automobile industry. “Figures released on August 13th showed that the German economy grew by 2.2% (an annualised rate of close to 9%) in the three months to the end of June” (The Economist). Along with the new middle classes emerging from fast-industrializing countries, comes a need for a car with renowned performance and reliability. Germany is the prime candidate to supply these vehicles, and a country like China is the perfect customer for these cars. This is has enabled the sales of Mercedes Benz to triple this past July, and double in India. Also, the sudden surge of business has resulted in newfound job requisites. Prior to the automobile industry crisis, Germany’s unemployment level was rising. To keep employees, firms had to use a short-time working scheme and flexible hour system. However, the need for jobs has required the firms to draw back employees to full time work far earlier than they had hoped. In turn, this has led to a higher unemployment rate than it was previous to the crisis. In my opinion, Germany must continue to increase its focus on Asia and India, which will open up jobs requiring specialization in a model that fits their needs. Hopefully for Germany, this will lead to more spending at home, which will in turn, have a positive effect on the GDP.

See the full article here: http://www.economist.com/blogs/freeexchange/2010/08/europes_economies