NEW YORK ( TheStreet) -- When it comes to economic development, Wall Street prefers going private to dealing with a government. But that can be a big mistake, as Brazil is now proving.
OGX, a huge energy balloon in Brazil blown up by a man named Eike Batista, has come crashing down and may take a lot of Wall Street money with it.
Big names such as BlackRock (BLK) and Pimco are on the hook for billions of dollars in bonds that now look worthless. Both those companies are on the OGX creditor committee.
What lured Wall Street to OGX was the promise of privately financed oil development. Since the monopoly of state-owned Petrobras (PBR) was broken in 1997, explorers armed with new technology have been finding vast pools of oil off the country's southeast coast. There's now a promise of even more on the northeast coast.Brazil needs U.S. technology to tap the oil. Wall Street wants to protect its investment, but doesn't trust the government. Enter Eike Batista. Batista founded OGX in 2007 to tap the oil. It quickly found a big pool about 50 miles off Rio de Janiero, an area called the Campos Basin. Other companies found more, and there was soon talk of Brazil joining OPEC. OGX' Waimea field was producing at a rate of 12,500 barrels per day early last year, with the promise of more to come.