Brazil uncovered a substantial amount of “black gold” in 2010.

In its backyard it has discovered that three of its offshore oilfields (Libra, Tupi and Iracema) hold oil and gas reserves in excess of 23 billion barrels of oil equiva-lent (bboe). The country reported record oil production in November (2.089 million barrels per day). I expect Brazil to emerge as the premier destination for energy exploration in the world, given its ample off-shore re-serves and the government’s tendency to balance the need for state ownership of energy assets with investor-friendly policies.

So, will the country be able to fund its infrastructure development by generating higher tax re-ceipts from the increased exports of oil through the state-owned Petroleo Brasileiro SA (NYSE:PBR)?

Given that “PetroBras” accounts for over 12% of Brazil’s benchmark equity (BOVESPA) index, a stellar operating performance from the company will most likely also have a positive rub-off on the overall stock markets over the medium-term.

Top performers in our coverage universe over the last week were:

• Petroleo Brasileiro S.A. (NYSE:PBR) +9.6%
• Petrobras Energia Participaciones S.A. (NYSE:PZE) +9.1%
• Gafisa S.A.(NYSE:GFA) +5.3%
• CPFL Energia S.A. (NYSE:CPL) +4.7%
• Braskem (NYSE:BAK) +4.1%