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Brazil: Petroleum, elections and poverty matters

On Friday 15th of May, the Brazilian Congress launched an investigation into the giant state-run oil company Petrobras. The initiative was started by government leaders of the opposition PSDB party. They set up what Brazilians call a Parliamentary Inquiry Commission (CPI is the abbreviation in Portuguese) to scrutinize supposed irregularities in the company.

Meanwhile, on the same Friday, Brazilian President Lula da Silva left for a nine-day tour of Saudi Arabia, Turkey, India and China (the latter the biggest Brazilian oil business partner,  which is going to lend 10 billion dollars to Brazil) to hold negotiations to attract investment in Petrobras, focused in particular on a specific project: the  “pre-salt”.

Some bloggers do agree with the Senators, who set up the inquiry. They argue that the company has not been properly run. However, there are others who only see it as a political issue and even more as an attempt to damage the company’s image in the long-term and thus, gain popular approval for the privatization of the whole of Petrobras.

In Casa do Noca [pt], Lukas reminds us that the same PSDB party tried to privatize Petrobras and to slowly change the nation’s identification with the company, even changing its name to Petobrax, as he writes in his post with the heading: “Petrobrax vem aí?” “Is Petrobrax coming?”

É um absurdo total a criação da CPI da Petrobras. Não acreditava que tivessem essa audácia globalizante. Mas a reflexão e a memória sempre ajudam. E lembrei: esse PSDB que trabalhou e aprovou a CPI é o mesmo PSDB que DOOU o patrimônio do Brasil.
E não é só isso. Esse PSDB, (…)é o mesmo que criou a Lei 9.478, que truncou a administração da Petrobras e deu enormes prejuizos à empresa. Mas ainda existe salvação para o INTERESSE NACIONAL.
Fora a tentativa de criação da Petrobrax feita pela administração profissional tucana (…)
Propiciou a terceirização irresponsável na empresa, para ganhos de alguns e multiplicação de acidentes de trabalho, com múltiplas mortes e agressões ao meio ambiente, culminando até com afundamento de plataforma.

It is totally absurd creating the Petrobras CPI. I did not believe that they would have that audacity. But recollection and memory always help. And I remember: this is the PSDB that created and approved the CPI, it is the same PSDB that GAVE Brazilian patrimony to others.
And there is more. This PSDB […] is the same one that created Law 9.478 [the Petroleum Law in 1997], which inconvenienced the Petrobras administration and resulted in huge losses for the company. But, it is still salvation for the NATIONAL INTEREST.
And not to mention the professional Toucan [the bird which symbolizes the PSDB party] administration’s past attempt to create Petrobrax. […]
They allowed irresponsible outsourcing in the company, for the benefit of some but the multiplication of work accidents, with many deaths and damage to the environment, even leading to the sinking of a petroleum platform.
André Alemão comments on the fact that Petrobras, which was created as a 100% state-owned company under the Monopoly Law by former Brazilian President Getúlio Vargas in 1953, has, since 1997, been following new rules created by former President Fernando Henrique Cardoso, of the PSDB party. Cardoso set out the Petroleum Law, which opened Petrobras up to private companies, and decreased state-owned shares by 55%. Lula and his government are about to launch a “regulatory milestone” which is going to establish rules for petroleum exploration in the area of pre-salt. He writes on the Evaldo Lima blog [pt], that there is no need for a CPI investigation, because the Petrobras president, Sergio Gabrielli had already said that he would be willing to present himself before the Congress for a public audience to clarify any concerns over the company.

Fica claro e evidente que não há nenhum interesse por parte da oposição em investigar a Petrobras, pois se assim fosse poderia ter esperado até a audiência pública, no entanto aproveitaram a ausência de praticamente todos os Senadores para instalar a CPI.. Trata-se de uma atitude completamente anti-Republicana. Defendemos sim que seja investigado a fundo todas as denúncias de irregularidades, porém não podemos aceitar que se arme um teatro, um palanque político-eleitoral que possa desestabilizar a Petrobras.(…)

Na verdade, pensando bem, para quem já tentou privatizar e destruir esta empresa pública, talvez há de tratar de opção ideológica destruí-la. Ademais, não interesse o quanto Brasil possa quebrar, tem gente que sonharia em governar sob os escombros deste País em construção.

“It is clear and obvious that there is no interest on the part of the opposition to investigate Petrobras, because if there were, they could have waited until the public audience, but, they took advantage of the absence of almost all Senators in the Congress to create the CPI. It is a completely anti-Republican attitude. We do support the idea that all accusations of irregularities are thoroughly investigated. Nevertheless, we cannot accept this being done as a media spectacular, on the political-election stage, which can destabilize Petrobras. […]
In fact, thinking again, for those whom have already tried to privatize and to destroy this government-owned company, perhaps destroying it is an ideological option. It does not matter how much Brazil can be broken, there are always some people who would love to govern under the havoc of this country under construction.
Senators Sérgio Guerra and Tasso Jereissati, with PSDB Senate Leader, Arthur Virgílio. Photo: Fabio Rodrigues Pozzebom/ABr

Senators Sérgio Guerra and Tasso Jereissati, with PSDB Senate Leader, Arthur Virgílio. Photo: Fabio Rodrigues Pozzebom/ABr

In Claudio Henrique’s [pt] opinion this CPI comes at the wrong time and it is going to harm the company:

Para a Petrobras o baque é ainda maior. Se não bastasse a crise, a estatal ainda passa por momentos de descobertas e investimentos mais ambiciosos, pois a natureza tem sido generosa com a matéria-prima no País. Uma investigação destas proporções pode afugentar investidores e até mesmo adiar obras estratégicas para o poder Executivo, tais como o PAC.
Mas o epicentro de todos os passos são as eleições de 2010. A tática dos tucanos e seguidores é enfraquecer Lula e seu legado, minando assim quaisquer chances de alavancar a possível candidatura apoiada pelo governo petista (lê-se Dilma Rousseff ). Prova-se tal argumento ao ver o desempenho da oposição durante os anos em que se posicionou contra as políticas do Planalto, marcada pela indiferença e até mesmo fraqueza. Mas esta conquista de uma inicial CPI pode mudar a história até o pleito.

For Petrobras the impact is even bigger. As if the worldwide economic crisis were not enough, the state-owned organization is experiencing a period of discovery and making more ambitious investments, nature has been generous with raw materials in the country.  Investigation on this scale can drive investors off and even postpone strategic work for the executive branch, such as  the Growth Acceleration Program (PAC). 

But, the main point of all of these steps [taken by opposition leaders] is the 2010 elections. The Toucans and their followers’ tactic is to weaken Lula and his legacy, and so undermine the potential chance of a boost to the candidature of a person supported by the PT government (to be read as Dilma Rousseff). In support of such an argument, we see the opposition leaders’ effort throughout the years in which they have taken sides against the Planalto (official work place of Brazilian President) policies, highlighted by indifference and weakness.

As the Journalist Alon Feuerwerker [pt] does not fail to point out on his blog it is an attempt by the opposition to break the power that Petrobras has over Lulas’ government and its ability to influence the next election.

Ora, nada como uma CPI para neutralizar, ou pelo menos constranger, os movimentos eleitorais da empresa ao longo do processo sucessório do ano que vem. Qualquer candidato gostaria de ter com ele o poder de fogo da Petrobras. Em que aspectos? Por exemplo, junto aos fornecedores da empresa. Não sendo possível tê-la com você, então que se limite a ação dela a favor do adversário.

Well, nothing better than a CPI to stop, or at least contract, the election movements towards the succession process next year. Any candidate would like to have the power that Petrobras has behind them. In which aspects? For example, having the support of the suppliers. Or, if it is not possible to have their support, then to limit their support for the opponent.
From Plunk Plak Zum, published with permission

"Maintenance". From Plunk Plak Zum, published with permission

According to the Congress website [pt], the accusations against the company administration are: fraudulent evidence in bids for petroleum exploration; overpricing in refinery construction; misuse of money from petroleum royalties; misuse of marketing projects budgets; and most discussed, the use of accounting procedures that allow the company to save money in tax payments – the press has published the figure of R$ 4.3 billion (US$1.9 billion), but the company has said that it was R$1.14 billion (US$ 550 million). The company changed to accounting that operates an exchange rate variation taxation system at the end of 2008 with retroactive effect. However, this change should have been made before the beginning of the tax year (April).

A CPI porá em confronto Petrobras e Receita Federal, onde serão apurados possíveis jogos fiscais que renderam à estatal compensações (…)
O entusiasmo com os bons resultados que a Petrobras vem demonstrando não podem encobrir possíveis problemas administrativos e fiscais que possam haver, nem barrar a investigação desses indícios. Se for preciso parar tudo para enxugar a máquina, que parem. Isso é uma decisão mais segura. Afinal, com problemas nada pode andar direito nesse país. Como ex-metalúrgico Lula deveria lembrar-se disso.

“The CPI is going to confront Petrobras and Federal Revenue, when it is going to verify possible tax operations, which are worth compensation [of R$ 4 billion (US$ 1.9 billion) to the state-owned company] […]
The enthusiasm for the good results that Petrobras has given cannot veil possible administrative and tax problems, nor stop an investigation into them. If it is necessary to stop everything to reset the machine, so be it. This is a safer choice. After all, with problems, nothing can be right in this country. As a metal worker, Lula should remember this.”

Toinho Passira [pt] points out a series of problems in the company:

A caixa preta da maior empresa brasileira, quando aberta exalará um mau cheiro insuportável de desmando, corrupção, uso de dinheiro público para eleições, custos publicitários superfaturados e desnecessários, má gestão do governo nos negócios da empresa, e roubo puro e simples, como o fez o Victor Martins irmão do Ministro Franklin Martin, que não deve ser o único.

The black box of the biggest Brazilian company when opened will stink of misleading, corruption, public money used to support elections, overpriced advertising campaigns, mismanagement by the government of the company business and stealing plain and simple, as did Victor Martins [one of the directors of the National Petroleum Agency] the brother of the Press Secretary Franklin Martins, who might not be the only one.
In January of 2009, the first oil platform 100% made in Brazil went on stream in Rio de Janeiro coast. According to the Government it will be capable of producing 180,000 barrels of oil and 6 million cubic meters of natural gas per day, when operating in its full capacity.Photo: Petrobras/ABr

In January of 2009, the first 100% Brazilian made oil platform went on stream of the Rio de Janeiro coast. According to the Government it will be capable of producing 180,000 barrels of oil and 6 million cubic meters of natural gas per day, when operating to its full capacity.Photo: Petrobras/ABr

For Luiz Carlos Azenha the real issue is, in fact, another point.

O problema, portanto, não é se a Petrobras deve ou não ser investigada. É como fazê-lo. Já existem todas as instâncias necessárias à investigação da Petrobras, tanto da parte do governo, quanto da oposição, quanto da sociedade. A empresa pode ser investigada pelo Ministério Público, pelo Tribunal de Contas, pela Polícia Federal e nas diversas comissões do Parlamento. Não há dúvida: a Petrobras deve satisfações ao Congresso, pode e deve ser denunciada na tribuna e precisa responder a todos os questionamentos que recebe.
(…)
Em tese, uma CPI não deveria assustar ninguém. Mas não falamos em tese. Falamos no Brasil. E falamos a partir de exemplos concretos: qual foi a utilidade das CPIs recentes, além de gerar uma enxurrada de manchetes, 95% das quais baseadas em fofocas, meias-verdades, distorções e mentiras? Tomemos como exemplo a CPI das Escutas Telefônicas Clandestinas. Qual foi a serventia, além de torrar dinheiro público com a defesa dos interesses do banqueiro Daniel Dantas?

Thus the problem is not whether or not Petrobras should be investigated. It is how to do it. There are already sufficient forums to investigate Petrobras, from government opposition as well as social institutions. The company can be investigated by Public Ministry, Federal Court of Auditors and Federal Police and by many Parliamentary commissions. There is no doubt: Petrobras matters concern the Congress, can be and should be denounced in court and the company has to deal with any criticism that it receives. […] In theory, one CPI shouldn’t scare anyone too much. But, let’s not talk in theory. Let’s talk the Brazilian way. And let’s talk from concrete examples: what has been the helpfulness of recent CPIs, if not to create overwhelming headlines, of which 95% is based on gossip, half-truths, distortions of facts and lies? Let’s take as an example the Illegal Telephone Bugging. What did it help achieve, apart from burning public money in defence of banker Daniel Dantas?

Wealth for all?

Azenha has also linked from his blog to the video produced by the Clarín newspaper, in which a specialist discusses why Brazil can walk towards oil self-sufficiency while Argentina cannot. Brazil's neighbor privatized its no longer stated-owned oil company in the '90s, during Carlos Menem's government. Worth a visit for readers of Spanish.

In September last year, the first symbolic extraction of petrol from the pre-salt layer in the Jubarte field, off the Espirito Santo State coast, took place. On 1st May 2009, the Lula government participated in another major event in the pre-salt layer located in the Tupi field, Santos Basin. There are great expectations about those recent discoveries of petroleum. For many, it will be the best chance for Brazil to solve its main problem. On 12th of May 2009, visiting Cubatão City – where the first refinery of Brazil was created, Lula da Silva said that pre-salt wealth is going to eradicate poverty in Brazil and be the main investment source of education in the country. Popular entities have also created a group discussion about pre-salt wealth issues, and they have even set up a petition, as we can see published on the Notícias da América Latina e Caribe website [pt]:

O abaixo-assinado deverá reunir 1,3 milhões de assinaturas para ser referendado como projeto de iniciativa popular. As entidades acreditam, no entanto, que o resultado principal deve ser a instalação de um debate na sociedade sobre a questão do petróleo no Brasil.(…)
As entidades ainda exigem medidas como o fim da exportação do petróleo cru, com investimento na indústria petroquímica; a mensuração do tamanho da riqueza do pré-sal; e um fundo social soberano de investimento voltado para as necessidades do povo brasileiro (educação, saúde, reforma agrária, trabalho e renda, etc); e redução do uso do petróleo e avanço nas pesquisas de nova matriz energética.

“The petition should gather 1.3 million signatures in order to be sanctioned as a popular initiative project.  Although the entities believe that the main result should be the creation of a discussion about petroleum issues in Brazilian society (…)
The entities also claim measures such as the end of crude oil exportation, leading to investments in the petrochemical industry; the assessment of pre-salt wealth; and the creation of an independent social fund targeting the Brazilian people’s necessities (education, health, agrarian reform, work and revenue, etc.), the reduction in petroleum use and progress with new energy matrix research.”
View of Rocinha Slum: the largest in the country. Photo: Alicia Nijdam/Creative Commons

View of Rocinha Slum: the largest in the country. Photo: Alicia Nijdam/Creative Commons

Even though the pre-salt petroleum hasn’t been exploited yet, so far, the “country of the future” has managed to change, a little,  its shameful social inequality index. Analyzing data released last year by the Applied Economic Research Institute (IPEA), Professor Marcelus Fonseca [pt] reminds us that there are some commitments on the national agenda, although whether the nation will be able to meet them in the short term is uncertain.

“A conclusao e de que o enorme grau de desigualdade na distribuicao de renda constitui-se como o principal determinante de pobreza no pais. As politicas de combate a pobreza adotadas pelo Governo ainda nao sao eficazes. Se mantiver o ritmo atual, o Brasil so deve cumprir em 2019 o compromisso de reduzir a pobreza pela metade, e nao em 2015, prazo fixado pela Cupula do Milenio das Nacoes Unidas”

The conclusion is that the huge degree of inequality when it comes to income distribution is the main determinant of the poverty in the country. The policies to fight poverty adopted by the Government have not yet been effective. At the current rate, only by 2019 will Brazil fulfill the duty to halve poverty, and not by 2015, the deadline set by the Millennium Summit of United Nations”.

Disclosing material from Campinas University (UNICAMP), Manuel Alves Fiho publishes an article on the Portal Eco Debate website, where he has interviewed Professor Waldir Quadros [pt]. According to Quadros:

“A estrutura social brasileira experimentou uma fase de melhoria entre os anos de 2004 e 2008. Nesse período, um número significativo de pessoas trocou a condição de miséria pela de pobreza ou deixou a situação de pobreza para se inserir na baixa classe média. (…) Não é possível dizer, como defendem alguns, que o Brasil transformou-se em um país de classe media.”

“The Brazilian social structure experienced a stage of improvement between the years of 2004 and 2008. At that stage, a significant number of people moved from [living in] miserable conditions into poverty or left the condition of poverty to become part of the low middle class […] It is not possible to state, like some people do, that Brazil has become a middle class country”.
he vast dry zone in Northeastern Brazil, which is not in the urban center, but it also has problems of concentration of income. Photo: Maria Hsu/Creative Commons

The vast dry zone in Northeastern Brazil, which is not in the urban center, but also has problems of wealth distribution. Photo: Maria Hsu/Creative Commons

As per Quadros’ conclusion, it is undeniable that the country, in one way or another, has tried to promote equality. Nevertheless, using logic to put the pieces of this puzzle together, the question is: will this money reach everybody? Or, how far is the economic plan connected to the social problems? Yet the Plano Real, a set of measures taken to stabilize the Brazilian economy in early 1994, has given stability to the currency ever since, has halted inflation and has opened the gates of social improvement, the way to achieve a better distribution of wealth is the question that Brazil most needs to consider. Dafne Melo [pt] raises some questions:

Lúcia Stumpf, presidente da União Nacional dos Estudantes (UNE), avalia que as medidas tomadas por Lula para conter a crise são “insuficientes” e não tocam na grande contradição do governo que é sua política macroeconômica, com a manutenção de altos juros e alto superávit primário (pagamento dos juros da divida). 
Essas medidas, avalia, estão centradas apenas em setores da elite econômica, sem que nada tenha sido pensado para o conjunto da classe trabalhadora.

“Lucia Stumpf, president of the National Students Union (NSE), assesses that the measures taken by Lula to contain the crises are “insufficient” and don’t touch on the big contradiction of the government – its macro economic policy of keeping both high interest rates and the high primary surplus (payment of interest rates on debt). These measures, she highlights, only concern the sectors of the economic elite, without any thought for the working class”.

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