A Foreigner'€™s Perspective on Labor in the Brazilian Oil & Gas Industry

By Aaron Ball
Due to the breakneck speed at which the pre-salt discoveries have fueled growth in Brazil, most companies, Brazilian and foreign alike, know it is difficult to procure all of the skilled labor required for operations.

The lack of qualified employees owes in part to the historically deficient Brazilian public education system. This system produces few candidates qualified to become petroleum engineers, geologists, geophysics, technicians, etc. As a result, many companies are obliged to create their own training centers to educate employees. Petrobras, for example, established an eleven-month-long training program for newly hired engineers to strengthen their knowledge before releasing them into the field.

Another solution is outsourcing through the importation of foreign employees. According to the Brazilian Labor Ministry, the number of authorized foreign workers rose 30% in 2010 alone. This number, however, does not mean the skilled labor shortage will be solved anytime soon since demand far exceeds even this dramatic growth. The reason for this is that Brazilian work visas can be a challenge to obtain and procuring permanent visas requires even more lengthy and expensive immigration procedures.

The burden for an "importer" of foreign labor does not end with the visa process. Foreign workers need to pass through an acculturation program and require relocation support which is extremely burdensome to the hiring company. This, together with the higher salaries paid to skilled oil and gas workers, substantially increases payroll and general operating costs.

The fun does not stop there.

Many foreign companies who have experienced light labor regulation in other Latin American countries are often surprised by the relatively onerous and inflexible Brazilian labor laws and the influence of powerful labor unions. The current, protectionist labor laws are derived from the "corporatist" labor code of the fascist government of Benito Mussolini. In fact, the Brazilian labor code is so pro-employee that a collective bargaining agreement may prevail over both the Labor Code and the Constitution if it is more beneficial to the employee. It should be no surprise then, that employee termination is also extremely difficult, with expensive severance provisions common.

To say Brazilian unions are powerful is a gross understatement. In Brazil, workers automatically "join" a union, defined by the region the worker works in, and his field of work. A worker, by law, must pay dues to that union (one day’s salary per year). In Brazil there are around 18,000 labor unions, all deeply rooted in their respective sectors, with guaranteed dues to fund their operations and enormous political influence.

This clash of labor culture may make life difficult for foreign companies doing business in Brazil. Those who fail to put this critical element into the mix when developing a plan to enter the Brazilian market, place the success of their entire venture at risk.