Opinion, by Michael Royster

RIO DE JANEIRO – As this Article is being published, the State of Rio de Janeiro government is fomenting a protest march, scheduled for 2PM, Wednesday, March 16th, starting at Candelária and ending at Cinelândia (as they all do) with a rally where politicos perorate. All state government workers have been granted a “ponto facultativo”, meaning they won’t be docked any pay if they don’t punch the time clock on their way to the rally.

The Curmudgeon, aka Michael Royster.

The motivation for this protest is that last week the Federal House of Deputies passed its version of a Constitutional Amendment that would completely revamp the way wealth from Brazil’s offshore riches, both pre-salt and post-salt, are distributed among the several states.

Current law grants the lion’s share to the Federal Government, a small part of which percolates down to the 27 States. After the lion has got his share, of course, the other predators get their turn, and current law has granted an oligopoly to those States lucky enough to have shorelines. One of the biggest carnivores is Rio de Janeiro, which has spent oodles of money already earned from offshore oil production, and has committed to spend googoloodles more it has not yet earned.

The House’s version of the Constitutional Amendment would change all this, and would mandate sweeping changes in the distribution of largesse. Basically, all 27 states would get to share in the royalties received from offshore oil exploration, in proportion to their population, not their proximity to the briny deep.

The Amendment’s supporters claim they are motivated by fairness and legality. Under the Federal Constitution, not only does all land past the shoreline belong to the Federal Government, but so do all underground resources, wherever located. Therefore, the production of resources from under Federal Lands should be distributed among the 27 separate components of the Federation equitably.

Those opposed claim that true equity mandates a far greater share to the maritime states, because they are most heavily impacted by offshore prospection. Oil can wash up on their shores, physical infrastructure and social services must be expanded to keep pace with the exponential growth of coastal boom towns such as Macaé.

The Curmudgeon has a bone to pick with both sides, because he knows the controversy only arose after immense quantities of oil and gas were found lying underneath layers of salt. Brazil needs to adopt policies that will avoid squandering these windfall riches, while encouraging speedier development into a first world country. In that sense, residents of all 27 States deserve more participation than they have so far received, and the Amendment does promote greater sharing.

However, the Amendment also retroactively changes the existing rules for traditional oil production, both on- and offshore, which is not right. These rules have worked well and have encouraged production growth at a pace steady enough to maintain Brazil’s self-sufficiency in petroleum, and to permit the Federal and State Governments to promise to cover the infrastructure costs of the 2016 Summer Olympics. If the Amendment passes in its present form, that will not happen.


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