Healthcare Sector To Receive Oil Royalty Funds
BMI View: Brazil's long-term commitment to healthcare will continue to provide significant revenue-generating opportunities for pharmaceutical companies, medical device companies and other healthcare service providers. The oil royalty funds will provide more financial backing for the sector's robust growth.
Brazil's Social Affairs Committee of the Senate has approved the law to create a social fund from the drilling royalties that the Brazilian government receives from oilfields in the pre-salt layer to be invested into education and healthcare. We note that after protests calling for better public services in June 2013, the government announced that it will allocate more resources to public healthcare. In August 2013, the Brazilian congress approved a bill to allocate 75% of drilling royalties from the pre-salt programmes into education and 25% on health. In June 2014, President Dilma Rousseff said that the choice of Petrobras to explore Brazil's pre-salt potential will raise the amount of royalties allocated to health and education to BRL600bn (USD271bn).
We believe that increasing investment in the healthcare sector will continue to be one of President Rousseff's essential tools to head off significant social instability and to win the October 2014 presidential race. Petrobras' strong long-term growth prospects will provide more financial backing for Brazil's robust healthcare sector growth. According to BMI's Oil & Gas team, the state-owned Petrobras has taken a number of steps to improve its position in recent quarters, such as divestment of non-core assets and cost optimisation.
|Healthcare Expenditure Forecast In Brazil|