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.

Strong Growth
Healthcare Expenditure Forecast In Brazil

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.

We note that the Brazilian government has a long-term commitment to improve the nation's health. Since 1988, when Brazil's new constitution defined healthcare as a social right for all Brazilians and a responsibility for the state, the country's healthcare system has undergone significant changes. At 9.5% of GDP, with USD1,024 per capita annual healthcare spending, the Brazilian healthcare sector has surpassed many developing countries in terms of healthcare standards and service coverage. Brazil's SUS survived the market-liberalising reforms of the 1990s as a centrally administered universal system funded through direct taxation. The scheme has a pharmaceuticals procurement budget of around USD1.5bn. The Ministry of Health has reported that public drug expenditure increased by nearly 300% in local terms between 2003 and 2010.

Strong Growth
Healthcare Expenditure Forecast In Brazil

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Related sectors of this article: Pharmaceuticals & Healthcare, Healthcare
Geography: Brazil
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