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Brazil Oil: Nationalism, Populism Win the Day

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Lula's “New Independence Day” rally goes flat as he adopts a nationalistic and populist tone on the pre-salt oil off Brazil's coast.

BY JOHN FITZPATRICK

SAO PAULO -- On the last day of August, President Luiz Inacio Lula da Silva took part in a long-awaited staged event in Brasilia at which the government formally announced the new model for exploiting the so-called “pre-salt” layer of oil and gas off Brazil´s coast. His speech, in which he described August 31 as Brazil's “New Independence Day,” was made under a giant screen bearing the words “Pre-salt: Asset of the Federal Government; Wealth of the People; and Future of Brazil.”

Despite the build-up and audience of about 3,000, it was a rather flat affair, enlivened only by a handful of protestors from Greenpeace who made a mockery of Lula´s security system by holding up banners and then presenting him with one.

RAMBLING SPEECH

The chairman of the House of Representatives, Michel Temer, gave a rambling opening speech in which he referred to the “post-salt” layer, while the beleaguered chairman of the Senate, Jose Sarney, sat silently uneasy on the podium, presumably scared to speak as he would likely have been heckled.  

The chief of staff and likely PT presidential candidate, Dilma Rousseff, gave a warm-up speech in which she summarized the proposals the government was sending to Congress. These included making the state-controlled company Petrobras the sole operator in the pre-salt areas with a minimum share of 30 percent of the contracted consortium.

The audience included São Paulo governor Jose Serra, Rousseff´s likely opponent, who squirmed in discomfort as Lula made a scathing criticism of the administration of his predecessor, Fernando Henrique Cardoso, which ended Petrobras's monopoly of oil exploration in 1997. Serra was one of Cardoso's most senior ministers at that time.  

Other participants included Sergio Gabrielli, the CEO of Petrobras, who Lula repeatedly referred to as “our little darling.” Luciano Coutinho, the chairman of the national development bank, the BNDES, was also there. Despite the fact that these two will jointly assume responsibility for undertaking and financing the massive task of turning these assets buried up to eight kilometers below the sea into treasure, they nodded to each other and smiled in agreement with their leader's words. 

NATIONALIST AND POPULIST TONE

Lula adopted a nationalistic and populist tone and made it clear that the wealth would remain in Brazilian hands and the bulk would go to the "people." He claimed that the present system under which Petrobras (also “our little darling”) had to compete with other competitors, some of whom were, believe or not, “foreigners” was unfair. The only way to stop these nasty foreign capitalist exploiters was to give Petrobras unrestricted rights to the oil reserves. He also announced that: 1) a new public company called Petro-Sal would be established to handle the shared production contracts and oil and gas sales from the pre-salt area and represent the federal government; and 2) a New Social Fund would be set up to ensure that a substantial part of the resources would be invested in social, educational, science and technology programs and combating poverty.

The speech left more questions than answers, particularly in relation to the government's estimates for the price of oil when it is finally brought to the surface in around 15 years' time. Earlier that day, the government leader in the Senate, Romero Juca, said the government would buy the equivalent of up to US$ 50 billion in Petrobras shares with the cost being met by barrels of oil (at US$10 a barrel). Rousseff repeated this price of US$10 but did not explain how she had arrived at this figure. Even Petrobras had given no figure when it issued a formal material fact notice earlier that day. This blunder pushed Petrobras common shares 4.5 percent lower and dragged the São Paulo stock market index, the Ibovespa, down by 2.1 percent.  

FAST TRACK PRESSURE

The main political row has arisen over Lula's demand that Congress should pass the bill within 90 days under a fast track system. To expect a body like the Brazilian Congress which moves at a glacial pace to meet a deadline like this is to expect miracles. However, miracles sometimes happen and we can be sure Lula will use all his means to get what he wants by making all kind of dodgy backroom deals with his so-called allies in the PMDB to get their support.

Much of this will involve pork barrel agreements under which parties and politicians will get resources and positions and, equally if not more importantly, will get Lula´s backing when they stand in next year´s state governorship and Congressional election. Lula's standing in opinion polls is still enormous and everyone wants his blessing.

Even Serra was rather subdued in his criticism, merely saying that three months was not a lot of time to discuss a project which had taken 20 months to be carried out and he had understood that there was a consensus that the fast track system would not be used.

John Fitzpatrick, a Scottish writer and consultant living in Sao Paulo, runs Celtic Comunicações. This article originally appeared on www.brazilpoliticalcomment.com.br. Republished with permission from the author. Fitzpatrick can be contacted at [email protected]

© John Fitzpatrick 2009 

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