DEPENDENCY ON THE INCOMES FROM OIL AND GAS IN THE MUNICIPALITIES OF THE STATE OF RIO DE JANEIRO

Abstract

This chapter analyzes the importance of the income generated from oil and gas industries to municipalities in the state of Rio de Janeiro and the consequences of this dependency. The importance of the taxes, royalties and other revenues generated by this industry to the municipal budgets show a great exposure to an extremely volatile situation derived from the dependency of finite resources whose price is defined by the flotation of international markets. The effort of demonstrating the dependency of these municipalities to these taxes and royalties aims to flag the risks of having such a profile of income that is prone to variation, not only as a consequence of the fluctuation in the production or of the international price, it also has to do with changes in the legislation that rules on the matter of the distribution of the royalties and taxes among the federative entities. It is safe to say that the dependency in these terms strengthens the unpredictability of local government’s budgets and, consequentially, weakens long-term policy elaboration and execution. The main conclusion of this text is that this instable scenario is aggravated by the expectation of incremental investment in the oil and gas exploitation in pre-sal fields in the Santos Bay (SP) due to the expectation of higher productivity of these fields. In the possibility of confirming this scenario, the municipalities that confront the sea-area of the Campos Bay production fields will keep on being affected in their budget and in the diffuse investments, employment and income that the industry brings with it.