Global Independent Analytics
Pedro Marin
Pedro Marin

Location: Brazil

Specialization: Latin America, Ukraine, North Korea

Giving Brazil Away: Dilma Compromises on National Treasures to Ease Pressure from Opposition

Will President Dilma Rousseff be able to deal with the challenge the opposition has prepared for her?

Not much long ago, in November, I wrote an article in which I said that the Brazilian President Dilma Rousseff seemed to think it was better to live on her knees than die standing. It’s official now: the President is a coward.

That’s because on February 24 the Senate approved, with Dilma’s support, an amended version of Project of Law 131, written by Brazilan Senator José Serra, which ends the state-owned oil company Petrobras’ role as the chief operator of the pre-salt[i] oil fields – discovered underwater, not far from the coast of Rio de Janeiro, where an immense oil reservoir exists deep underground -  and its obligation to hold at least a 30% share of any exploration. The bill is expected to be voted in the Chamber of Deputies on March 10, and if approved, it will go to the President, who could either sanction or veto it.

According to the current law, approved in 2010, Petrobras is “the company responsible for the conduction and execution, direct or not, of all exploration activities, evaluation, development and production” of the pre-salt oil fields - which have an estimated value of 3 trillion dollars – that is two times Brazil’s GDP.

The original bill proposed by José Serra, who is one of the neoliberal warriors of Brazilian politics, would completely give away huge parts of the pre-salt fields to foreign companies. The approved new amendment, in its turn, states that the National Council of Energy Policies - that is ultimately President Dilma - will have the final decision on which fields will be sold.

Dirt cheap

By putting an end to the law of 2010, the Project of Law Bill 131 may give away the most important oil discovery in the last fifty years to foreign oil companies. In fact, it was revealed by Wikileaks in 2010 that the author of the bill, José Serra, promised Chevron he’d change the pre-salt laws in case he won the Presidency. Serra was the candidate of the right-center Social Democratic Party of Brazil (PSDB) in 2002, and later became the mayor of São Paulo and after this the governor of São Paulo.

The document, sent by the United States’ consulate in Rio, exposes the importance of the pre-salt oil fields for the foreign companies. It regarding the pre-salt fields: “Should Petrobras' chief operator designation remain, IBP's Pradal said it would be impossible to compete in bid rounds against National Oil Companies (NOC), such as China's Sinopec and Russia's Gazprom. According to Pradal, it will come down to who gives the government the most profit. ‘The Chinese can outbid everybody,’ she explained. ‘They can break-even and it will still be attractive to them. They just want the oil.’ Pradal said Chevron would not even bid under such circumstances.”

Still, Serra says his project is good for Brazil, arguing that Petrobras is broken and thus can’t afford to operate the pre-salt oil fields. The fact is that in the current scenario, with a barrel of oil worth 30 dollars, to sell the pre-salt oil fields is to give away Brazil’s richness dirt for cheap. There is no rush to explore this wealth right now, even if Petrobras can’t drill the pre-salt fields at this very moment. To be hasty is against our long-term interests and only works in favour of narrow private interests and a nasty international order -  the country currently has a reserve of over 13 billion barrels of oil. “Those companies won’t invest. The oil companies face difficulties. What they intend to do is to take the technology of deepwater drilling and strategically hold the absolute control over oil supply”, explained Senator Roberto Requião, from the Brazilian Democratic Movement Party (PMDB).

We should note that already 60% of the immense pre-salt Libra oil area was sold to transnationals in 2004: 3 billion USD for a 300 billion USD asset. After winning the auction, the French president of Total, Denis Palluat de Besset, talked about "staying in Brazil for the next 100 years at least." But now it seems that this is past, now we are living Serra’s dream future.

There is a basic problem with the bill: companies seek profits. Thus, of course, they will pay less than the current international prices of oil for the pre-salt oil fields, which means that if the prices hike in the next years, we would have lost a lot of money that we could have used for the people’s interests. Petrobras is one of the biggest companies in the world.  It's the largest treasure of the Brazilian people, representing 13% of the GDP and historically, a strategic asset for our development. Selling pre-salt oil fields is selling the prospect of independence. Serra’s maxim: Fiat pecunia, pereat patria![ii]

Giving away the reign to keep the throne?

Dilma’s alliance with the opposition, which was agreed minutes before the voting began, came as a shock for most of the Workers’ Party members, although there were some speculations about it in various media outlets earlier. “The change of direction by the government this afternoon stunned us and disarmed our struggle, [the government is] giving up the combat for the sake of a horrible deal with PSDB [the right-wing Brazilian Social-Democratic Party] that causes an enormous injury to Brazil”, said Senator Lindbergh Farias, from the Workers’ Party.

It’s unclear why Dilma, through her ministers, formed the alliance. Some senators from the Workers’ Party said she did so because she feared that the original bill proposed by José Serra would be approved - as I said before, the amendment has the advantage of giving Dilma the chance to choose whether or not to sell a field. But it does not change the fundamental trend: to sell or not to sell the oil fields will ultimately depend on Dilma’s popularity - which is already terrible -  and on her capability to stand against the pressure from the opposition and foreign companies. Also, opposition is likely to win the next Presidential elections in 2018.

But even before then, the government has maintained a “give away policy”, especially in what concerns Petrobras and the oil. Petrobras’ new Managing and Business Plan (Plano de Negócios e Gestão - PNG) forecasts the deleveraging of the company to "help shareholders," and the reduction of its own investments into the company: cutting 37% of investment, 15.1 billion USD in 2015-2016 and 42.6 billion USD in 2017-2018 - so the country must wait because we have to enrich some international bankers.

54% of the company shares are now controlled by the private sector; most of it by foreigners (36% of the total), while the larger share is divided between the big dragons of international finance: Citibank, Santander, Bank of New York Mellon, HSBC, J.P. Morgan, Credit Suisse,  Gap, BlackRock and BNP. What does this mean?

It means that Petrobras is directly tied to paying the interests of the 1%, and is becoming even more distant from the Brazilian people. The government wants to give 60% of Petrobras away. First you dismantle ("re-structure"), and then you privatise. Lula, who defended Petrobras in words (and had close relations with the oil workers’ union bureaucracy), further deepened privatization processes in the oil sector. Former President Fernando Henrique Cardoso sold 484 blocs to private enterprises for exploration, but Lula sold 706 blocs, and, therefore, reduced Petrobras’ share of Brazil’s oil exploration years before the bill proposed by Serra (he wasn’t even in the Senate at this time). Fiat pecunia, pereat patria!

Dilma used the fear campaign during the elections, saying that if the opposition were to win, the new government would privatize Petrobras. She was probably right, but she didn't say that her government would carry out some privatization too. In Brazil, there is a full commitment by Serra’s and Cardoso’s Social Democratic Party (PSDB) to the neoliberal agenda, but Dilma is making it much harder to see any differences between PSDB and the Worker’s Party.

For me it looks like Dilma is doing what she did after her election: complying with the opposition to ease the attacks against her. But the fact is that it hasn’t worked by now, nor will work in the future. Dilma forgot that her party’s whole way to power was paved by the pro-working-class reasoning. Unlike Lula, though, Dilma’s unpopular measures look exactly as they are. “Better lose the saddle than the horse” was Dilma’s official maxim in 2015. In 2016, she’s already losing the horse - her throne is useless without her reign.

*With the collaboration of André Drummond Ortega

 


[i] In Portuguese the ter mis Pré-sal, which means: Beneath the salt. In this case, in deep water under the rocks and salt.

[ii] “Let’s make money, let the nation perish”.

 

 

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