Opinion, by Michael Royster

RIO DE JANEIRO, BRAZIL – Brazil’s most sacred cow is Petrobras. When calved in 1953, its birthright included a monopoly over the exploration, production, development, refining and distribution of oil and gas. It lost that monopoly in 1995, but it has never lost its monopolist mentality.

The Curmudgeon, aka Michael Royster.
The Curmudgeon, aka Michael Royster.

Worse yet, during his term as President, Lula treated Petrobras as his own personal political fiefdom. There are three egregious examples of this, all involving refineries in Brazil’s Northeast. All have in common that their names indicate their political provenance.

The first example is Refinery “Abreu e Lima” in Pernambuco. Abreu e Lima was a Pernambucano who fought alongside Simon Bolivar, and is a Venezuelan national hero. Lula and his buddy Chavez cooked up a deal to build a refinery jointly. The original budget was a paltry US$2.5 billion, of which Chavez would supposedly cough up US$1 billion. Perhaps presciently, Chavez bailed out.

Examples two and three are Refineries “Premium I” and “Premium II” in the states of Maranhão and Ceará. “Premium” is the Latin word for reward or prize, and both of these refineries were granted as rewards to political bosses who had governed the two states for decades and (more importantly) had delivered overwhelming majorities to Lula in his election campaigns.

US$20 billion later, Abreu e Lima will enter Phase 1, four years behind schedule. Premium I and Premium II together cost Petrobras over US$1 billion, but never got off the drawing boards. Yesterday, Abreu e Lima Phase 2 and both “Premium” projects were unceremoniously deep sixed. No “premium” for guessing why.

A common Brazilian phrase goes “a vaca foi pro brejo” which translates as “the cow went into the swamp”, meaning “abandon all hope, ye who enter” (pace Dante Alighieri). Brazil’s most sacred cow is definitely mired deep in the swamp. Only Dilma believes it can find its way onto solid ground.

The Curmudgeon plans to emit more short(ish) Smidgens opportunely. Stay tuned.


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