Opinion, by Michael Royster
RIO DE JANEIRO, BRAZIL – One of the hallmarks of Brazil’s economic growth in the past dozen years under Lula and Dilma has been the creation of infrastructure. Vast public works require expertise in the construction of roads, dams, canals, pipelines, airports and seaports, refineries and more. In other words, there is no place for small fry in these projects.
There are fewer than a dozen Brazilian construction companies capable of executing public works. They are all privately owned, and are all among the largest (official) contributors to political campaigns. Importantly, all of them easily obtain subsidized financing for these projects from BNDES, the highly politicized government development bank.
Observers of these projects note it’s always the same few companies that wind up getting the plum contracts. Some observers believe these companies have organized a a series of cartels, dedicated to government bids and contracts, so as to exclude potential competitors, at the taxpayers’ expense. These observers also note that no large public works projects are ever completed within budget. One egregious example is the Abreu e Lima refinery, with cost overruns in the billions of dollars.
The Curmudgeon believes, however, that Petrobras is merely the tip of the iceberg. Very soon Eletrobras and the entire power industry in Brazil, still very much under the control of the federal government, will come in for scrutiny. Why? Because all of its huge projects always contract the same construction companies.
What does this mean? It could mean shutting down a very large percentage of the Brazilian economy. Under Brazilian law, companies shown to have engaged in illegal activity are placed on a blacklist. Not only are they prohibited from participating in future bids, but any projects they are working on must be stopped until an investigation is carried out.
This, of course, would be a political disaster for President Dilma. Public works projects have always generated high employment: FDR relied on the Public Works Administration (PWA) to build dams, roads, bridges, power lines, even houses. Dilma’s beloved PAC is merely a “tropicalized” version of FDR’s PWA; he and she ran (successfully) for re-election on the increased numbers of jobs “their” projects had generated.
If, through the investigations, it is shown that contracts such as those to divert the São Francisco River, build hydroelectric plants, or “rescue” the Trans-Amazon highway from the jungle, were obtained by skulduggery, graft and corruption, those contracts (and many more) would be halted. PAC could be stopped in its tracks.
The danger has not gone unnoticed in prominent circles. A media darling trial lawyer has said if his clients go to jail, their companies will have to shut down, and so will Brazil. Vice President Temer (anyone remember him?) has just been trotted out to deny this possibility.
President Dilma has been quoted as saying these investigations will go on, “hurt whomever they may”, and that they will change Brazil completely. She should be careful what she wishes for, because there’s a new code name for the latest phase of investigations: “Último Juízo”, best translated as “Judgment Day” or … the Apocalypse.
Michael Royster, aka THE CURMUDGEON, fetched up on Carioca shores some 37 years ago and still loves them; his favorite spectator sport is politics, viewed from a WASP-like perspective.