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Brazilian State Companies Invest US$ 14.5 Billion, a 6% Growth

Petrobras headquarter in Rio de Janeiro, Brazil Brazil's state-owned or controlled companies were sailing on calm waters in the first eight months this year while the United States crisis was spreading across the world. Up until August 2008, these companies invested (in construction work and equipment purchases) around 28.5 billion reais (US$ 14.5 billion), the highest figure in the last 13 years.

The Petrobras Group alone, a state-controlled firm, which is comprised of 20 companies, disbursed 25.3 billion reais (US$ 12.9 billion) up until the fourth two-month period this year, i.e., 89% of total of investment by state  companies in 2008. Of the investment made by public organizations, approximately 89% consisted of their own funds.

In comparison with the same period of 2007, investment grew 6% in actual terms. In the historical series since 1995, the year of 1998 was the second best, as investment by state companies, from January to August, reached 28 billion reais (US$ 14.3 billion), in constant values updated using the General Price Index-Internal Availability (IGP-DI) for 2008.

The information, disclosed in the Diário Oficial (Federal Official Gazette), includes the investment schedule of 67 federal state-owned companies, 58 of which operate in the productive sector, and 9 in the financial sector.

Of the productive sector companies, 16 belong to the Eletrobrás Group, 20 to the Petrobras Group, and the remaining 22 are grouped under other organizations. The 2008 budget that was passed includes allotments for execution of construction work or services in 371 projects and 275 activities.

Of the 67 companies listed, 14 performed above the overall average of 45.4%, in the first eight months of 2008, in terms of rate of fulfillment of their respective annual budgets. The organizations include electric sector company Furnas, which applied 56.6% of the funds allocated, Petrobras (50.8%), Eletrosul (49.2%) and Eletroacre (48.6%), both in the electric sector, the latter having invested mainly in expansion of the urban power grid in the state of Acre.

The Ministry of Mines and Energy received the highest volume of funds for investment by state-owned companies. Out of a budget of 62.9 billion reais (US$ 32.1 billion) forecasted for 2008, 56.1 billion reais (US$ 28.6 billion) were allotted to the Ministry. Second in the list is the Ministry of Finance, with 3.1 billion reais (US$ 1.5 billion) forecasted for this year.

Some financial organizations, such as state-owned banking institutions Bank of Brazil and Federal Savings Bank are linked to the Ministry of Finance. The Ministry of Defense, to which the Brazilian Airport Infrastructure Company (Infraero) is linked, ranks third with 2.2 billion reais (US$ 1.1 billion).

Despite the record-high achieved between January and August this year, though, the figure still represents only 45.4% of budget funds allocated for investment by organizations in 2008. It is worth noting, though, that the forecasted grant is 13% higher than the final grant passed for state-owned investment in 2007, and 52% higher than the amount disbursed in all of last year (in updated values).

The resolution published today in the Federal Official Gazette underscores that execution of the budget for state-owned investment does not grow at a steady rate, contrary to what takes place with the Union's General Budget, usually better executed in second halves.

According to the resolution, the schedule of the state companies has its own dynamics, and is influenced by the company's strategic management policy, the date of approval of the current budget, the administrative and legal procedures involved in the implementation of each action, as well as other climate- and environment-related variables.

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