Anastasia O'Grady

Brazilian tycoon Eike Batista rocketed to eighth place this year on the Forbes list of the world's wealthiest individuals, from 61st last year. Now speculation is rampant that he is on his way to the top.

Powering Mr. Batista's soaring fortunes is black gold. His oil and gas company, OGX, won auctioned drilling rights in the shallow-water basin off the coast of the state of Rio de Janeiro, and it estimates its reserves at 6.7 billion barrels.

A self-made Rio billionaire is supposed to be daring, charismatic and visionary, and Mr. Batista does not disappoint. I caught up with him when he was in New York last week for The Wall Street Journal's "Invest in Rio" conference. At a lunch on Wednesday he mesmerized the crowd with his enthusiasm, not only for his own projects in oil development, ports and ship building but also for his country. Despite many mistakes in the past, he said, Brazil has changed and is ready to claim its rightful place among industrialized nations.

That Mr. Batista is a disciplined, risk-taking sensation with plenty of political savvy there is no doubt. But do his new opportunities in oil and gas in Brazil imply a rising tide for the rest of the nation? Count me as a skeptic. Indeed, the more the country's elite talks about its public-private partnerships to reinvent Brazil with its newfound wealth, the more it sounds like the same old Latin corporatism.

It is true that life for Brazilians is worlds better than it was in the early 1990s, when hyperinflation fed national chaos. Credit for taming prices goes to two-term former President Henrique Cardoso, whose government implemented the Real Plan pegging the national currency to the dollar. Even though the peg was abandoned in 1999 Mr. Cardoso held fast to the anti-inflation dream, hiring Arminio Fraga, a successful hedge fund manager, to take over the central bank. Mr. Fraga made bank transparency a priority, and the market now disciplines Brazil in monetary matters. Mr. Cardoso also led the effort to make states fiscally accountable.

President Lula da Silva wins accolades from entrepreneurs like Mr. Batista, but a review of his tenure finds that the best thing he has done as the country's chief executive is nothing. That is to say, he did not undo Mr. Cardoso's monetary and fiscal achievements. Instead he continued to support an anti-inflationary bias by hiring Henrique Meirelles, a former president of Bank of Boston, to replace Mr. Fraga. Yet beyond a bankruptcy-code reform and improvements to insurance legislation, he has done little else.

The school of gradualism argues that Brazil can't be turned around overnight, and thus incremental progress is all that could be expected. The trouble is that ever since Brazil discovered abundant oil off its coast in 2007, it seems to have abandoned even modest reforms.

Consider the challenge of fixing the regulatory and tax structure, which is so stifling that small and medium-sized businesses have had to go underground to survive. Operating in the shadows, they can't take advantage of modern efficiencies that would help them raise productivity. As a result, they are sentenced to lives as the urban equivalent of subsistence farmers.

Mr. Batista argued to me that the size of the underground economy has been reduced in recent years in Brazil. That claim is hard to prove but even if it's true it would appear to be due more to a crackdown by state agents than on reform.

In the World Bank's 2010 "Ease of Doing Business," which measures the tax and regulatory burden imposed by the state, Brazil ranks 129 out of 183 countries, down from 127 in 2009. It is far behind Chile (49), Mexico (51) and China (89). The country gets especially bad grades in the categories of starting a business, paying taxes, employing workers and securing construction permits.

There are other worrying signs. In an interview with Journal reporters the day before last week's conference, Mr. Batista celebrated an increase in protectionism by praising a new "Brazilian content law" for the tankers he builds. "We used to have the second largest ship-building capacity in the world and it was totally scrapped under the liberal view, 'oh, let's buy where it is cheaper,'" he said. "We used to ship mountains of iron ore, mountains of food to the world. It's coming back now because of oil and because of this Brazilian content rule."

This may be good for Mr. Batista. But it's not so good for Brazilians who will pay the price for the capital misallocation.

With the large oil finds off-shore and the government revenues they imply, Brazilian politicians now expect to be rolling in dough. That does not bode well for the possibility of containing their power. Nor does it suggest that long-suffering Brazilian entrepreneurs—notwithstanding Mr. Batista's success as an oil baron—are about to be liberated.