The Political Economy of local content policy: The Brazilian Oil Industry in the 21st century

Abstract

This study used a Political Economy framework to analyze the political dynamics underlying the design of Local Content Policies (LCPs) and the interaction between technical and political factors in shaping policy guidelines in Brazil from 2003 to 2017. Using a case study, we drew up in-depth interviews, document analysis, and quantitative data to understand the roles of diverse stakeholders in the LCP design process. LCPs are commonly implemented by resource-rich countries to stimulate economic development. The Brazilian oil and gas industry has significantly increased in the early twenty-first century following significant hydrocarbon reserves found in the Continental Shelf. Consequently, LCPs were introduced to maximize the economic benefits of hydrocarbon exploration. However, corruption scandals and corporate bankruptcies negatively affected these policies. Our analysis showed that LCPs faced design failures and inconsistencies over time due to the dominance of vested interests over fundamental technical considerations. Furthermore, ideological shifts within the government intensified policy instability. This study contributes to the discussion on industrial policy design by highlighting the complexities and challenges that undermine the effective implementation of LCP objectives.