By Fernando J. Cardim de Carvalho
RIO DE JANEIRO, Dec 30 2015 (IPS)

As 2015 approaches its end, Brazilians live a period of extraordinary uncertainty. The recession seems to get worse by the day. Inflation is high and shows unexpected resistance to tight monetary policies applied by the Central Bank. The sluggish international economy has largely neutralized incentive and the strong devaluation of the domestic currency could represent a reality to exporters and to producers who compete with now more expensive imports. After an initial resistance, employment levels began to fall.

Fernando J. Cardim de Carvalho

Any subset of that list of events would be enough to generate widespread instability. All of them put together created a hitherto unheard of situation of political and economic crisis of which one has to make extraordinary efforts to see any way out.

Impeachment procedures against the president did not come out of the blue. The revelation of the Petrobras scandal has brewed rumors and suspicions, if not against the president herself, certainly against many of those who surround, or have surrounded, her (she is a former minister of energy in Lula’s government and a former chairman of the administration council of Petrobras.) So far, however, no accusations or evidence emerged against Rousseff. In fact, she does not even seem to be a major target of investigators, who seem to be zeroing in on Lula (and his immediate family.) The piece of accusation justifying the opening of impeachment proceedings relies on the use of accounting artifices to violate the constraints on public expenditure imposed by the Fiscal Responsibility Act, which a majority of opinion makers seem to consider too weak a case to sustain an impeachment. What makes the whole process more menacing is in fact her acute political fragility. Rousseff is universally seen as Lula’s creation, but never really relinquished his power over the party and the coalition it led.

Soon after Rousseff was reelected in November 2014, she announced a radical change of orientation in her administration’s economic policies. Austerity policies, cutting expenditures and raising taxes, seemed to be unavoidable in the face of the increased federal expenditure made to ensure her victory in the presidential elections.

The incumbent president repeatedly stated during the campaign that she rejected those policies, only to announce their implementation a few days after the result of the popular vote became known. Despite the apparent support of Lula, the change in orientation was badly received by the official Workers Party (PT), which grudgingly announced support for her, but conditioning it to a change in macroeconomic policies.

The party seemed to ignore the fact that during 2014, the increase in fiscal deficits failed to have any expansionary impact on the economy, which did not grow at all. The perception that the president had no political support of her own, however, stimulated her adversaries to aggressively advance proposals for her impeachment, based on whatever reason one could find, or the annulment of the election itself, or if nothing else worked, to force her to resign. With an aggressive opposition and unable to count on a supporting political base, the government was paralyzed for the whole year.

No relevant austerity measure has obtained Congress’ approval. Despite the effort of leftist parties to blame the pro-austerity Finance Minister Joaquim Levy for the contraction of the economy, it is impossible to ignore the fact that the failed attempts to get the proposed policies approved by Congress just made explicit the lack of political power that characterized Rousseff’s position. The impasse created by the inexistence of an effective government in the face of an aggressive opposition led decision-makers to postpone any but the most immediate decisions. Investment has fallen, workers have been fired in increasing numbers, consumption has been negatively impacted, etc.

The political crisis has transformed an expected recession into something that threatens to become a major depression, both in depth and duration. The situation is made more difficult by the difficulty to visualize any sustainable solution for the crises in the mediate horizon, let alone the coming months. If the impeachment process prospers, one could expect for sure increased political instability as a result, on the one hand, of attempts by PT and the social movements that are close to it to react somehow, and, on the other, by the fact that there is no organized opposition ready to take the place of the current administration. If the impeachment initiative is defeated, the problem remains that the president does not have any vision or power and it is overwhelmingly difficult to imagine how she could recover enough initiative to last the three remaining years of her term in office.

Paraphrasing the late historian Eric Hobsbawn, who observed that the Twentieth Century had been very short (beginning in 1914 and ending in 1991), 2015 may be a long year for Brazilians. The incompressible minimal duration of an impeachment process will take it to 2016, when the social situation may be more tense than it is now, with high inflation and increasing unemployment. If a national agreement of some sort, be it in terms of allowing Rousseff’s government to work or by removing it altogether, is not reached to avoid the worse, 2015 can last even longer. The country may dive into an unknown abyss of a combination of economic, political and social crises of which it is hard to see how, when and in what conditions it will recover.

(End)

Excerpt:

Brazilian President Dilma Rousseff next to advisers with worried faces, after addressing the media, shortly after the announcement of the impeachment trial. Credit: Lula Marques/ Agência PT

By Mario Osava
RIO DE JANEIRO, Dec 3 2015 (IPS)

The aim to impeach President Dilma Rousseff is no longer merely a threat that was poisoning politics in Brazil. Now it may be a traumatic battle, but in the light of day.

On Wednesday, Dec. 2 the speaker of the lower house, Eduardo Cunha, gave the go-ahead to impeachment proceedings to remove Rousseff from office. The motion was introduced by three jurists, including Helio Bicudo, a co-founder of the governing Workers Party (PT), and Miguel Reale Junior, a former justice minister.

Cunha announced his decision shortly after it came out that the PT would vote against him in the lower house ethics council, which is investigating the money he has in Swiss bank accounts, presumably the product of graft and embezzlement in the state oil company, Petrobras – a scandal that has already affected 170 politicians and businesspersons.“The game has changed, there is another chess board now, with some light shining, after months of uncertainty. An impeachment process triggers radical positions not only in Congress, but in society at large. But the hope is that the game will be more transparent, with all the cards out on the table.” -- Fernando Lattman-Weltman

This confirms what the media has been commenting on, but which has not been publicly acknowledged by those involved: that there was a tacit agreement between the presidency and Cunha, which previously stood in the way of legal proceedings that could lead to the removal of Rousseff and Cunha.

Behind the “embrace” between the president and the speaker, both of whom faced the threat of legal action, was Cunha’s opposition to the government, even though he is a member of the Brazilian Democratic Movement Party, the PT’s chief ally in the governing coalition.

The PT has three seats in the 21-member ethics council. Its votes are considered decisive in the case of Cunha, who as speaker of the lower house has the authority to accept or dismiss requests for impeachment of the president.

The three PT members on the council opted to align themselves with the leadership of their party and with public opinion, which is overwhelmingly opposed to Cunha, resisting the pressure from the presidency, which is more concerned about keeping the president in office and cobbling together enough votes to push through the legislative measures needed to help the economy recover from the current crisis.

“The game has changed, there is another chess board now, with some light shining, after months of uncertainty,” said Fernando Lattman-Weltman, a professor of political science at the Rio de Janeiro State University.

“An impeachment process triggers radical positions not only in Congress, but in society at large,” he told IPS. “But the hope is that the game will be more transparent, with all the cards out on the table.”

The analyst said “Cunha is finished, he won’t survive any longer now that he played his last card; he relinquished the weapon of blackmail” – the impeachment of Rousseff that he had been delaying.

The speaker of the lower house, controversial since he was named in February, has been accused of violating “parliamentary decorum” by lying in March when he testified in the committee investigating the Petrobras corruption scandal, claiming he did not have bank accounts abroad.

But the Swiss attorney general’s office refuted his claim several months later, and sent documents about his accounts to prosecutors in Brazil.

Eduardo Cunha, speaker of the lower house of Congress in Brazil, announcing his decision to allow the impeachment trial to go ahead against President Dilma Rousseff. Credit: Alex Ferreira/Cámara de Diputados

Cunha had already been accused of taking bribes from companies that were rewarded lucrative Petrobras contracts, in the testimony given by four people facing prosecution in the scandal, who decided to cooperate with the justice system, revealing what they knew in order to reduce their possible sentences.

This means it is unlikely that he will hold on to his seat in Congress. He will lose it if the ethics council rules that he violated parliamentary decorum and if a majority of the 513 lawmakers in the lower house vote in favour of that accusation.

But his downfall would take several months.

Moreover, he and dozens of other legislators under investigation could go to prison, but only with authorisation by the Supreme Court – the only legal body that can decide whether members of the executive and legislative branches should be tried.

The impeachment trial against Rousseff is more uncertain, according to Lattman-Weltman. The most likely outcome is that the president “will manage to overcome the challenge, after a tough battle with the opposition, and depending on how society reacts.”

The removal of a president in Brazil requires a two-thirds majority in the lower house to authorise the impeachment trial, which is held by the Senate, where a two-thirds majority is also needed to find the accused guilty.

Brazilian President Dilma Rousseff’s political fate will be decided in the next few months in this emblematic building in Brasilia, the seat of the national Congress. Credit: Brazilian Congress

It is a lengthy process, because it begins in a committee of legislators from all parties, represented in proportion to each party’s number of seats in the house. In this case, Rousseff is accused of violating Brazil’s fiscal responsibility law by signing decrees that increased public spending without authorisation from the legislature. The president denies any wrongdoing.

Impeachment requires that a concrete crime be committed during the president’s current term. But it is a political trial, based on criteria that differ from legal trials. Former president Fernando Collor de Mello was found guilty in 1992 by the Senate, which barred him from holding public office for eight years, even though the Supreme Court failed to find sufficient grounds to convict him for corruption.

One serious effect of the new political dispute is its impact on the economy, in recession since 2014, which many now describe as depression. GDP was 4.5 percentage points lower in the third quarter of this year than in the same period last year. Economists forecast a slight recovery in 2017.

With unemployment standing at 7.9 percent in October against 4.7 percent in the same month in 2014, and annual inflation at 10 percent, Brazil is suffering one of its worst crises in history. The political chaos is making the situation even worse, by standing in the way of the adoption of necessary measures and generating uncertainty that has led to a reduction in investment, consumption and credit.

To make matters worse, there was a threat of a paralysis of government this month, due to failure to meet the budget’s fiscal deficit target. But the government managed to get approval Wednesday to change this year’s fiscal target, allowing it to end the year with a primary deficit of 31 billion dollars, which eased the tension.

Without that it would be necessary to cut all public expenditure, including water and energy in public buildings and travel by the president herself, such as her trip to the swearing-in ceremony of Argentine president-elect Mauricio Macri on Dec. 10.

It was a triumph by the government, which won approval of several economic measures in the last few weeks, after suffering numerous defeats this year, especially in the lower house, where the speaker has a strong influence.

“Cunha’s leadership is hollow, he no longer has power or legitimacy to demand loyalty from his allies,” said Antonio Augusto de Queiroz, director of documentation of the Inter-Parliamentary Advisory Department.

Given the political bickering and the government’s difficulties, legislators “are responding to pressure from society and from economic players, on the argument that the political crisis must not paralyse the country,” he told IPS.

“All politicians are worried” about the scandal unleashed by Operação Lava Jato or Operation Car Wash, the investigation by prosecutors and police of the fraud and corruption scheme designed to embezzle assets from Petrobras, especially since the Nov. 25 arrest of Delcidio do Amaral, the leader of the PT in the Senate.

Recent laws, such as the one to combat organised crime and money laundering, gave “unprecedented power and instruments enabling them to take action” to oversight and law enforcement bodies like the prosecutor’s office, the federal police and the courts of auditors, “combating the culture of secrecy and strengthening transparency,” with positive effects for politics, said Queiroz.

Edited by Estrella Gutiérrez/Translated by Stephanie Wildes

Excerpt:

Part of the Rio de Janeiro Petrochemical Complex (COMPERJ) in October, seen from the banks of the Caceribu river, the closest to the installations that the public can get. Credit: Mario Osava/IPS

By Mario Osava
ITABORAÍ, Brazil , Oct 29 2015 (IPS)

Working as a musician in a military band is the dream of 21-year-old Jackson Coutinho, since hopes that a petrochemical complex would drive the industrialisation of this Brazilian city near Rio de Janeiro have gone up in smoke.

“I’ll try out for the navy, army and even the military police, but only to be a musician, not a police officer,” said Coutinho, who plays the double bass in bands he has set up with friends in Itaboraí.

Until last year he was working for the QGIT consortium on the construction of the Rio de Janeiro Petrochemical Complex (COMPERJ). He was a machine operator assistant on the embankment where the Natural Gas Processing Unit (UPGN), part of the complex, was built.

But he lost his job in early 2015, when lay-offs intensified as a result of the crisis faced by Petrobras, the state oil company that owns COMPERJ.

The initial projected cost of the megaproject was 6.5 billion dollars. But with cost overruns it has risen to twice that amount, even though the project was reduced drastically to a single refinery and the UPGN.

The most expensive part, the petrochemical plant, which would have fuelled industrialisation in this city 45 km from Rio de Janeiro, was cancelled because Petobras did not manage to find partners.

The plunge in oil prices and the corruption scandal shaking the company since March 2014, implicating dozens of politicians and businesspersons for billions of dollars in kickbacks, smothered the plan to build in Itaboraí the biggest petrochemical complex in Latin America.

The losses are huge. “Of 14 plants or buildings where I worked on the construction, only four or five will be used,” said Rogerio Henrique Lourenço, 26, a building technician who was employed by the COMPERJ works for five years.

Besides the white elephants – the shiny modern buildings still empty within the 45 square kilometres of the shrunken megaproject – equipment was purchased and infrastructure was built, which require costly maintenance while the future remains uncertain.

To that is added the expense of the compensation and mitigation of the social and environmental impacts, which has included sanitation, clean-up of rivers, and reforestation – obligations that have not shrunk in accordance with the downsizing of the project.

The municipalities under the influence of COMPERJ, especially Itaboraí, are losing the prospect of development promised in 2006, when then president Luiz Inácio Lula da Silva (2003-2010) announced the project.

At the time he said it would consist of two refineries and two petrochemical units, besides installations for services and training of the necessary technical personnel.

The Getulio Vargas Foundation, a leading economic think tank, predicted that the petrochemical complex would foment the emergence of a plastics industry hub. According to its projections, between 362 companies – a conservative estimate – and 724 companies – a more optimistic forecast – would set up shop in the area.

That fast-forward industrialisation was expected to generate between 117,000 and 168,000 jobs in the southeastern state of Rio de Janeiro – just over one-third of which were to be concentrated in COMPERJ’s direct area of influence.

Itaboraí, as the city where COMPERJ is located, was to reap the greatest benefits, leaving behind its status as one of the poorest municipalities in the state – a commuter town whose residents work in neighbouring cities.

Jackson Coutinho, 21, managed to buy a car after working 18 months in a construction company helping to build the Rio de Janeiro Petrochemical Complex (COMPERJ) in Brazil. Now unemployed, the dream of this worker from the city of Itaboraí is to join a military band as a musician, and study accounting. Credit: Mario Osava/IPS

“The castle came crumbling down,” said Lourenço, who was laid off in March 2014, when construction of the petrochemical complex began to run out of steam.

The father of three young children now gets by with casual work, mainly on small-scale construction sites. When he talked to IPS he was handing out pamphlets on the main street of Itaboraí.

His dream is to pass a civil service exam and become a public employee, with job stability.
“In COMPERJ I had well-paid jobs, but they were temporary,” he said. His five years there were divided between short-term contracts in a number of different companies.

Francisco Assunção, 22, had a similar experience. He worked for nearly two years in three of the dozens of companies participating in the construction of COMPERJ.

Now he is trying to make a living with his motorcycle taxi, “but people prefer to walk, because they don’t have money,” he said. So he also finds casual or part-time work in the construction industry and restaurants.

“I earned more in the COMPERJ jobs,” he said. Although he was paid just 300 dollars a month, he got an additional 40 percent for food and medical assistance, he explained.

Coutinho stands out because he spent 18 months in the same job, which made it possible for him to be promoted and to earn enough to buy a car. “It was a dream, but it’s over,” he said.

Although he is focused on his musical career, he has a “Plan B”: to study accounting, although he doesn’t like math. “I have friends who are accountants,” he said.

But he is confident that “COMPERJ will resume its original plan (to build a petrochemical complex), because too much money was invested there, and they went beyond the point of no return.” An estimated 80 percent of the construction is complete.

Rogerio Henrique Lourenço, 26, worked for five years on the construction of the Rio de Janeiro Petrochemical Complex (COMPERJ) in Brazil, for several different companies. Now he supports his three young children and their mother in the city of Itaborai, where the shrunken and stalled megaproject is located, with casual work. Credit: Mario Osava/IPS

For these young men, the well-paying, steady work they enjoyed for several years merely drove home the lack of opportunities in Itaboraí, a 343-year-old city of 230,000 people that has remained faithful to its origins as a town that emerged alongside a highway, which is now its long central avenue.

The scant local productive activity, virtually limited to ceramics and orange groves, offers neither jobs nor intellectual stimulus for young people.

“This is a city that does not cultivate a cultural identity,” Franciellen Fonseca, who is studying to become a social worker and is taking part in the Incid research project, told IPS. “There are no recreational opportunities, plazas or places where locals can gather.”

The study by the Brazilian Institute of Social and Economic Analyses (IBASE) monitors compliance with citizen rights in the 14 municipalities in COMPERJ’s area of influence, based on a system of indicators that the non-governmental organisation developed.

Its most recent study, on “the invisible citizenship rights of COMPERJ workers”, stressed the difficulty of obtaining information about the situation faced by labourers working on the project.

Refusing to provide information on the workers’ conditions is “a serious rights violation, because it makes it impossible to closely monitor the effects and impacts of these megaprojects on people’s lives,” says an Incid research project report.

The number of workers on the COMPERJ construction sites has never been revealed. There was talk of 30,000 at the height of construction, in 2012-2013, and figures have varied widely since then.

The young men who were laid off and talked to IPS say local workers were a minority on the construction sites – running counter to the promise to put a priority on hiring local labour. One of the numerous strikes that brought work temporarily to a halt demanded precisely that more local workers be hired, Coutinho pointed out.

The companies argued that there was not enough skilled local labour. But when people with the necessary training appeared, the companies set impossibly high standards for prior work experience, or simply did not hire them, said Lourenço.

The “invisibility” surrounding workers at COMPERJ was broken by the frequent strikes and rioting, which the old union was unable to handle.

Its successor, the Itaboraí union of assembly and maintenance workers, emerged in June 2014 to confront a different reality: the growing wave of lay-offs.

Edited by Estrella Gutiérrez/Translated by Stephanie Wildes

All of the offices, shops and locales in the modern two-building Enterprise complex are empty. It is one of the many white elephants left in the city of Itaboraí, in southeast Brazil, by the state-run Petrobras’ aborted petrochemical and oil industry megaproject. Credit: Mario Osava/IPS

By Mario Osava
ITABORAÍ, Brazil , Oct 23 2015 (IPS)

Itaboraí still recalls its origins as a sprawling city that sprang up along a highway, not far from Rio de Janeiro. But a few years ago big modern buildings began to sprout all over this city in southeast Brazil, whose offices and shops are almost all empty today.

The number of white elephants, or costly, useless constructions, in this city of 230,000 people was the result of “two huge shocks” caused by the Rio de Janeiro Petrochemical Complex (COMPERJ), Luiz Fernando Guimarães, the municipal secretary of economic development, told IPS.

“The first impact came from the 2006 announcement by then President Luiz Inácio Lula da Silva (2003-2010) of the project, which was to consist of two refineries and two petrochemical plants that would generate 221,000 jobs, according to the Getulio Vargas Foundation,” he said.

The estímate by the prestigious Rio de Janeiro-based think tank was larger than the entire population of the city, which stood at 218,000 in 2010, according to that year’s census.

The complex, belonging to Brazil’s state-run oil company Petrobras, was to cost around 6.5 billion dollars according to initial projections. But it ballooned to twice that, and will now only entail a single refinery with a capacity to process 165,000 barrels a day of oil. Construction of the petrochemical plants and the second refinery was cancelled.

The original announcement and the start of construction in 2008 “turned Itaboraí into an El Dorado, attracting people from across Brazil, as well as many foreigners. Rents skyrocketed, the prices of food and services soared, and the value of land for building housing more than doubled,” Guimarães said.

The employment of some 30,000 workers and the prospect of a surge in industrialisation around the petrochemical complex drew abundant investment, because of the expectation that the city, “one of the poorest in the country, would soon to enjoy great prosperity,” the municipal secretary of finance, Rodney Mendonça, told IPS.

The real estate boom in this city 45 km from Rio de Janeiro led to the construction of modern buildings, including two big hotels – instead of the four that were originally planned.

In just a few years, there were 4,000 new shops and office buildings, said Guimarães, whose office was renamed the Secretariat of Economic Development and Integration. The former oil industry executive is now in charge of relations between the city government and COMPERJ.

The second shock was the decision to reduce the project to a single refinery, which was only announced in 2014. “But the change happened in 2010, and the public was not informed,” the official said. “I knew because several subsidiaries of Petrobras and Braskem (Latin America’s biggest petrochemical company) pulled out of the consortium.”

Bazarzão, which sells building materials and hardware in the city of Itaboraí, in southeast Brazil, saw its sales rise twofold when construction on the Rio de Janeiro Petrochemical Complex (COMPERJ) began. But they later plummeted when Petrobras cancelled the petrochemical side of the project. Credit: Mario Osava/IPS

“Imagine, a local university was getting ready to launch a new degree programme in petrochemical technology, with a view to the jobs that would be offered by COMPERJ. When I told him what was happening, the director just about killed me,” Guimarães said.

Not ony were the petrochemical plants and second refinery cancelled, but “construction of the first refinery stalled, and according to Petrobras, financing is being sought to finish it,” he said – even though it is 87 percent complete.

On the 45 sq km acquired for the construction of COMPERJ, Petrobras is forging ahead with the construction of the Natural Gas Processing Unit, which is now employing around 3,000 workers. “But after it is built, only 80 employees will be left to operate it,” said Guimarães.

The city has felt the blow. The shiny new commercial and office buildings are empty, and walking down the streets you see “to rent” or “to lease” signs everywhere, while most shops and other businesses are closed.

“The land of oranges turned into the land of white elephants,” joked Bruno Soares, the manager of a building materials, hardware and appliances store, Bazarzão, on 22 of May avenue, the main street in Itaboraí.

His store did not register as a COMPERJ supplier. Nevertheless, it has suffered the effects. “Our sales have fallen 50 percent since late 2014,” he estimated, although he admitted that they actually returned to the levels prior to the boom that was cut short.

“Business went up and down in five years, too quickly. Other stores closed and neighbouring towns were also hurt,” he said.

“Itaboraí would be a powerhouse in Latin America if the petrochemical complex was doing well, but it all came crumbling down because of the corruption,” Soares maintained.

The entrance to the nearly empty Hellix luxury office building. The local Secretariat of Economic Development in Itaboraí, in southeast Brazil, moved into several of the offices because of the low rent, driven down by the lack of demand after Petrobras drastically cut back its oil and petrochemical industry megaproject nearby. Credit: Mario Osava/IPS

That is a common conclusion reached by the public – and not only in Itaboraí – in response to the daily reports on the kickback scandal involving Petrobas projects, including COMPERJ, in which dozens of politicians and construction companies have been implicated.

Valcir José Vieira, the owner of a parking lot in downtown Itaboraí, concurs with Soares. “Between 2006 and 2014 my parking lot was always full – 200 cars a day came in. Today, I receive 100 at the most,” he told IPS.

The decline in the number of cars began in November 2014, and forced him to reduce his fees from five to two reais (1.30 dollars to 52 cents) an hour.

For the city government the disaster is twofold. Tax revenue plunged, while expenditure, which was driven up by the frustrated megaproject and the illusion of progress, continued to increase.

The tax on services, the municipal government’s main source of income, brought in around 64 million dollars a year during the COMPERJ construction boom – an amount that will fall 40 percent this year, according to forecasts by the local Secretariat of Finance.

Revenue from other taxes is also falling, due to the insolvency faced by companies in crisis.

Meanwhile, public spending has not dropped. The influx of workers and their families drawn by the prospect of jobs and prosperity drove up demand for healthcare, schools and other public services.

“The number of people who visited the emergency room of the Municipal Hospital climbed from 500 a day, to 2,000 since 2013,” said Mendonça, the finance secretary. The city government dedicates 30 percent of its budget to healthcare – double what is required by law, he pointed out.

And the administration that left office in 2012 hired 2,000 new public employees through competitive examinations, based on the increased demands and projected new revenue flow. And although the tax revenue dropped, the new civil servants can’t be laid off, because they enjoy guaranteed job stability in Brazil. So that increase in expenditure remains in place.

The two municipal secretaries complained that there was no compensation from COMPERJ for the impacts in the municipality, nor investment to mitígate the damaging effects of the shrinking megaproject.

In the face of these challenges, the city government is seeking alternatives to fuel development. Guimarães is convinced that logistics will be the main future activity in Itaboraí.

The city is located at the intersection of several highways, outside of the congested Rio de Janeiro metropolitan region, and in the centre of an area of oil industry activity – unrelated to COMPERJ – ports, shipyards and various industries, he pointed out.

At the same time, the municipalities affected by the downsizing of the COMPERJ project mobilised to pressure Petrobras to at least resume construction of the first refinery.

Itaboraí is also focusing on boosting small businesses. Guimarães’ Secretariat of Economic Development created a centre for entrepreneurs, aimed at expediting the creation of microenterprises and formalising the ones currrently operating in the informal sector of the economy.

Small firms that refurbish or expand housing, and beauty salons are the most frequent businesses opening at this time. “They rival the evangelical churches,” the head of the centre, Wilson Pereira, told IPS.

Edited by Estrella Gutiérrez/Translated by Stephanie Wildes

The third floor of the central building of Petrobras’s R&D centre, CENPES, built in 2010 on University City Island. On the right, a scale model of an oil rig. Credit: Mario Osava/IPS

By Mario Osava
RIO DE JANEIRO, Aug 18 2015 (IPS)

The extraction of deepwater oil, the most abundant kind in Brazil, is costly but foments technological and industrial development, requiring increasingly complex production equipment and techniques.

One challenge is the water extracted with the oil, the proportion of which grows with the age of the well, reducing productivity by using up an increasing proportion of the transport and processing capacity of the productive installations.

“Since two years ago we’ve had a separator of oil and water that operates at a depth of 2,000 metres,” said Oscar Chamberlain, head of supplies and biofuels in the Research and Development Centre (CENPES) of Petrobras, Brazil’s state oil company. “That water, in time, can represent 80 percent of the volume extracted, which is why it has to be separated deep down in order to not overtax the rig.”

Rio de Janeiro has become a centre of know-how and innovation in offshore oil, thanks to CENPES, which has 227 laboratories and a technological park where 52 institutions and companies have set up shop so far, including 12 multinational corporations.“There are no longer any technological barriers to the production of oil in the presalt layer; all of the challenges identified – involving the distance, depth and complexity posed by the layer of salt - have been overcome.” -- Luiz Felipe Rego

University City Island, widely known as Fundão Island, is the epicentre of that transformation. It is the campus of the Federal University of Rio de Janeiro (UFRJ), near the international airport of this city that is more famous for its beaches and carnival.

This development has been driven by Petrobras’s 2006 discovery of oil deposits in what is known as the presalt area, under a two-kilometre-thick salt layer more than 5,000 metres below the surface in the Atlantic ocean.

The new reserves brought Brazil new oil wealth as well as new challenges.

The presalt reserves are at least 250 km from the coast of southeast Brazil, which poses logistical difficulties.

“There are no longer any technological barriers to the production of oil in the presalt layer; all of the challenges identified – involving the distance, depth and complexity posed by the layer of salt – have been overcome,” Luiz Felipe Rego, Petrobras general manager of well engineering, told IPS.

As a result, just eight years after they were discovered, the presalt reserves account for 23 percent of Petrobras production in Brazil, which in October climbed to 2.58 million barrels a day of oil-equivalent, including natural gas.

But the constant battle to reduce costs has fuelled the effort to do as much as possible deep below the surface, with underwater systems that require electrification, robots and remote maintenance services in a corrosive, high-pressure atmosphere with wildly varying temperatures, said Chamberlain, a Nicaraguan who has been with Petrobras for 30 years.

Corrosion is a threat at every stage of the process, all the way up to the refinery where the petroleum can damage the equipment if the excess salt is not previously removed.

CENPES was founded in 1963 when Petrobras, a state company created to explore for oil and reduce the imports that Brazil depended on, was 10 years old. Its 1,930 researchers, 36 percent of whom hold masters’ or doctoral degrees, are now carrying out 862 R&D projects.

“Thanks to their work, Petrobras is the Brazilian company that has applied for the most patents in Brazil and abroad,” the executive manager of CENPES, André Cordeiro, told IPS. “In 2013 alone 56 new applications were made.”

Petrobras’s investment in R&D, administered by CENPES, has increased nearly eight-fold so far this century. The annual average, which stood at 160 million dollars from 2001 to 2003, climbed to 1.2 billion dollars in the last three years.

A circular laboratory and office building in CENPES, built in 1973 on University City Island in Rio de Janeiro. The Maré and Floresta de Tijuca favelas or shantytowns can be seen in the background. CENPES is the R&D arm of Brazil’s state oil company Petrobras, whose symbol is BR. Credit: Mario Osava/IPS

“We currently work with 122 Brazilian universities and research institutes, organised in 49 thematic networks – a model that has fomented partnerships between Petrobras and academia in strategic questions in the area of oil and gas,” Cordeiro said.

The closest partnership began 46 years ago with the UFRJ’s Alberto Luiz Coimbra Institute for Graduate Studies and Research in Engineering (COPPE), which is also a technology business incubator.

For example, Ambidados, which emerged there in 2006, provides oil companies with environmental assessments and data. And with just 11 staff members in its office in the UFRJ’s Technological Park, it created its own buoys and devices to monitor wind, tides, ocean currents and rainfall, which affect operations out at sea.

“We also study the ocean bottom relief, the water temperature at different depths, the salinity, and the amount of algae,” oceanographer Leonardo Kuniyoshi told IPS.

There are another 31 small and medium-sized companies in the Technological Park, along with seven laboratories, and R&D centres of global leaders in oil industry services and equipment, such as Schlumberger, FMC Technologies and Halliburton, which recently acquired Baker Hughes, another oilfield services provider with offices on Fundão Island.

The U.S.-based GE opened its new Global Research Centre in the park on Aug. 13, joining other multinationals outside the oil industry, such as France’s L’Oreal cosmetics company and Brazilian beer maker Ambev.

“This coexistence among different industries is fascinating,” said the director of the Technological Park, Mauricio Guedes. “The coming together of knowledge from different areas constitutes the wealth of the Technological Park, which will generate innovations.”

That also requires “bringing companies and the university together in the same place, to generate knowledge that gives rise to products and services, because without business, technology and know-how are lost,” he said.

The park was designed to hold 200 companies in its 350,000-square-metre area at the southeastern tip of the island, which belongs to the UFRJ. The area was flood-prone and had to be filled in before the Technological Park opened in 2003. One hundred thousand truckloads of soil and rubble, dumped over the space of four years, raised the ground level two metres, Guedes said.

After the discovery of the presalt reserves, which meant Brazil could become one of the world’s leading oil producers and exporters, the park began to attract major international firms like the British multinational oil and gas company BG Group or Germany’s Siemens.

The list includes information technology companies that are not limited to oil industry services, such as EMC2, which opened “its first research centre outside of the United States” in the UFRJ park, according to Karin Breitman, the company’s local chief scientist.

The future of the Technological Park and oil industry research is ensured in Brazil. Contracts to exploit the country’s oilfields require that the companies must invest one percent of their revenue in R&D.

That adds up to some 12 billion dollars over the next 10 years. “The combination of technological challenges and resources to tackle them promises success,” said Guedes.

Besides boosting the oil industry’s productivity, the R&D contributes to the development of other sectors, with oceanographic and environmental knowledge and multiple-use technologies.

One example is the hyperbaric chamber, a steel vessel in which atmospheric pressure can be raised or lowered by air compressors, which is being used to generate electric power from waves, in a plant developed by Coppe. New materials, new inputs and energy solutions will emerge from the bottom of the sea, said Guedes.

Edited by Estrella Gutiérrez/Translated by Stephanie Wildes

By Roberto Savio
ROME, Apr 20 2015 (IPS)

This month’s World Economic Outlook released by the International Monetary Fund (IMF) only confirms that consequences of the collapse of the financial system, which started six years ago, are serious. And they are accentuated by the aging of the population, not only in Europe but also in Asia, the slowing of productivity and weak private investment.

Roberto Savio

Average growth before the financial crisis in 2008 was around 2.4 percent. It fell to 1.3 percent between 2008 and 2014 and now the estimates are that it will stabilise at 1.6 percent until 2020, in what economists call the “new normal”. In other words, “normality” is now unemployment, anaemic growth and, obviously, a difficult political climate.

For the emerging countries, the overall picture does not look much better. It is expected that potential growth is expected to decline further, from an average of about 6.5 percent between 2008 and 2014 to 5.2 percent during the period 2015-2020.

The case of China is the best example. Growth is expected to fall from an average 8.3 percent in the last 10 years to somewhere around 6.8 percent. The result is that the Chinese contraction has worsened the balance of exports of raw materials everywhere.

The crisis is especially strong in Latin America, and in Brazil the fall in exports has contributed to worsening the country’s serious crisis and increasing the unpopularity of President Dilma Rousseff, already high because of economic mismanagement and the Petrobras scandal.“Progressive parties were able to build their success during economic expansion but the Left has not developed much economic science on what to do in period of crisis”

This, by the way, opens up a reflection which is fundamental. From Marx to Keynes, redistribution theories were all basically built on stable or expanding economies.

Progressive parties were able to build their success during economic expansion but the Left has not developed much economic science on what to do in period of crisis. What it tends to do is mimic the receipts and proposals from the Right and, when the crisis is over, it has lost its identity and has declined in the eyes of the electorate.

From this perspective, the situation in Europe is exemplary. All those right-wing xenophobic parties which have sprouted up – even in countries long held to be models of democracy such as the Nordic countries – have developed since 2008, the beginning of the financial crisis. In the same period of time, all progressive parties have lost weight and credibility. And now that the IMF sees some improvement in the European economy, it is not the traditional progressive parties that are the beneficiaries.

The term that the IMF gives to the current economic moment is “new mediocrity” – which is a franker way of saying “new normal” – and it observes that in the coming five years, we will face serious problems for public policies like fiscal sustainability and job creation.

In fact, every day, the macroeconomic figures, which have become the best way to hide social realities, are becoming less and less realistic if we go back to microeconomics as we have done during the last 50 years.

The best example is the United Kingdom, which is the champion of liberalism. Each year it has cut public spending and now claims to have growth in employment, with 600,000 new jobs in the last year. The only problem is that if you look into the structure of those jobs, you will find that the large majority are part-time or underpaid, and employment in the public sector is at its lowest since 1999.

A clear indicator is the number of people who visit the food banks created to meet the needs of the indigent. In the world’s sixth largest economy, their numbers have grown from 20,000 before the crisis seven years ago to over one million last year. And the same has happened all over Europe, albeit to a lesser extent in the Nordic countries.

U.K. economists have published studies on how austerity has affected growth. According to the Office for Budgetary Responsibility, established by the U.K. government, austerity blocked economic growth by one percent between 2011 and 2012. But, according to Simon Wren-Lewis of Oxford University, the figure is actually about five percent (or 100 billion pounds).

In other words, fiscal austerity reduces growth, and this creates large deficits which call for more fiscal austerity. It is a trap that Nobel laureate Keynesian economists Joseph Stiglitz and Paul Krugman have described in detail to no avail. We are all following the “liberal order” of Germany, which think its reality should be the norm and that deviations should be punished.

Now, while we can all agree that much of this is obvious to the average citizen in terms of its impact on everyday life, what is important and new is that the IMF, the fiscal guardian which has imposed the Washington Consensus (basically a formula of austerity plus free market at any cost) all over the Third World with tragic results, has woken up to reality.

Don’t get me wrong – I’m not implying that the IMF is becoming a progressive organisation, but there are signs that an important pillar of neoliberal thinking is vacillating.

Of course, those responsible for the global crisis – bankers – have come out with impunity. The world has exacted over three trillion dollars from its citizens to put banks back on their feet. The over 140 billion dollars in fines that banks have paid since the beginning of the crisis is the quantitative measure of illegal and criminal activities.

The United Nations calculates that the financial crisis has created at least 200 million new poor, several hundred millions of unemployed, and many more precarious jobs, especially for young people. And, yet, nobody has paid, while prisons are full of people who are there for minor theft, the social impact of which is infinitesimal by comparison.

In 2014, James Morgan, the boss of Morgan Stanley, cashed in 22.5 million dollars, Lloyd Blanfein, the boss of Goldman Sachs, 24 million, James Dimon, the boss of J.P. Morgan, 20 million. The most exploited of all, Brian Moynihan of the Bank of America, a paltry 13 million. Nobody stops the growth of bankers.

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

Excerpt:

By Fernando J. Cardim de Carvalho
RIO DE JANEIRO, Apr 1 2015 (IPS)

Even moderately well-informed analysts knew that the Brazilian economy was in dire straits as President Dilma Rousseff initiated her second term in office in January.

Unlike her predecessor, Luiz Inácio Lula da Silva (2003-2011), Rousseff had not the same luck with the situation of the international economy. But also, unlike Lula, Rousseff showed herself a poor saleswoman for Brazilian goods and an even poorer manager of domestic economic policy.

Fernando Cardim de Carvalho

There was a strong suspicion that economic policy, especially in the last two years of her first term, had been conducted in ad hoc ways and that serious adjustments would be needed to steer the economy back to working condition anyway. Still, the situation seemed to be even worse than most analysts feared.

More surprising, however, is to find out that Brazilian politics is also in dire straits. Caught off guard by the Petrobras corruption scandal, federal authorities, beginning with Rousseff herself, seemed to become paralysed by the rapid fall in public support, completely losing the power of initiative and creating a dangerous political vacuum in the country.

It is a vacuum rather than a political threat because the opposition seems to be as lost as the president. The political right, never very fond of democratic institutions any way, seemed to be more interested in making the president “bleed” – as stated by Senator (and former vice-presidential candidate) Aloysio Nunes Ferreira, of the Brazilian Social Democracy Party – than with fighting for political hegemony.

Economic problems were certainly fostered by the quality of economic policy-making in the second half of Rousseff’s first term. The realisation that tailwinds created by the Chinese demand for raw materials were no longer blowing led the government to implement a series of measures to stimulate the economy that turned out to be largely useless.

It was not “heterodoxy” that characterised the policy, it was uninformed wishful thinking. A plethora of measures were taken in isolation, without any apparent unifying strategy behind them, distributed mostly as “gifts” from the federal government (which later contributed to the public perception that corruption became a system of government). “Brazil is living through a very dangerous period right now. Neither the government, nor the parliamentary opposition are led by leaders the population trusts”

Plagued by semi-structural exchange rate problems, whereby Brazilian producers lose competitiveness in the face of imported goods in domestic markets and of other sellers in international markets, the federal administration tried to deal with them piecemeal, mostly through instruments like tax reductions or changes in tax rates.

Obsessed with car production, the government burned resources trying to stimulate production (only to meet increasing resistance of other countries to import them, most notably Argentina), again without any strategy thinking about how these newly-produced automobiles would be used in polluted and traffic-jammed Brazilian cities.

The federal government was not deficient only in terms of strategic thinking but also in terms of home caretaking: all available evidence points to the high probability that tax reductions and other similar measures were decided without any calculation of costs, lost fiscal revenues, and so on.

Anti-cyclical macroeconomic policy in late 2008 relied to a large extent on the expansion of consumption expenditures fuelled by increasing household indebtedness. The increase in non-performing loans and income stagnation made this option more and more unsustainable. Investment, in contrast, public and private, repeatedly frustrated expectations.

Unable to finance badly needed infrastructure investments, the government showed itself to be extraordinarily slow in devising appropriate strategies to attract private investors to implement them. Apparently lost in their own inability to define a way out of the mess, the government “muddled through” situations where more forceful definitions were required, as was the case of electric power.

The list of failures or of situations where the government showed inability to lead is long and well known. What was surprising to some extent was to find out that all evidence suggests that the government itself was unaware of what was going on.

Winning re-election by a narrow margin, President Rousseff, characteristically after a long period of hesitation, decided to take a 180-degree turn, asking a known orthodox and fiscal conservative economist to head an empowered Ministry of Finance, surprising even her supporters who seemed to be perplexed by the need to defend policies that they hotly denounced when presented by opposition politicians.

This picture would be difficult enough to manage without the Petrobras scandal. But Petrobras is not only the largest company in the country, it is practically a symbol of the nationality. Besides, energy was supposed to be Rousseff’s area of expertise and she was in fact responsible for the company’s policies for a while, as Minister of Mines and Power.

An increasingly loud murmur of a possible impeachment of the president led her to equivocal political decisions, beginning with the definition of her cabinet, widely considered to be particularly low quality, and alienating not only her major party in government, the Brazilian Democratic Movement Party, but even the majority of her own Workers’ Party.

The result of such initiatives was illustrated by the twin public demonstrations of Mar. 13 and 15.

On Mar. 13, nominal supporters of Rousseff marched through the streets of most of the largest cities in the country. Speaking to the press, most of the leaders of the march (Lula did not participate) declared conditional support for Rousseff – that is, conditional on the firing of the Minister of Finance and change of newly announced austerity policies.

On Mar. 15, an even larger crowd marched in the same cities declaring unconditional opposition to the president.

Brazil is living through a very dangerous period right now. Neither the government, nor the parliamentary opposition are led by leaders the population trusts. The president is slow and generally equivocal when making fateful decisions. The right-wing opposition seemed to be more interested in enjoying the possibility of enacting a “third” ballot to obtain at least a moral condemnation of the president.

This would be bad enough for a country that has just celebrated thirty years of civilian government. When the economy adds its own heavy problems to the political vacuum, it is impossible not to fear the future. (END/IPS COLUMNIST  SERVICE)

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

Excerpt:

By Fernando J. Cardim de Carvalho
RIO DE JANEIRO, Oct 30 2014 (IPS)

The tight race between incumbent President Dilma Rousseff of Brazil’s Workers’ Party and her opponent, Aecio Neves from the centre-right Brazilian Social Democracy Party (PSDB) party, ended on Sunday, Oct. 26 with the re-election of Rousseff.

As happens in cases of re-election, the new government is, for all purposes, inaugurated immediately, because there is no need to wait until the legal date of January 1 to begin forming the new government and making necessary decisions.

Fernando Cardim de Carvalho

Neither is there a honeymoon in a re-election: voters expect work to begin and some results to show right away.

There is no doubt that Rousseff faces a difficult period ahead. The economy has ground to a halt during 2014 and the perspectives for 2015 are not much better. During practically the whole of the first semester, inflation remained near or above the ceiling of 6.5 percent that was set by the government itself, and the perspectives for next year are not good either.

Balance of payments positions are not comfortable, marked by very high deficits in current transactions and dependence on capital inflows. Social inclusion programmes that were very successful in the recent past may be near exhaustion and will need an upgrade.

Finally, a huge deal was made during the electoral campaign of corruption cases in the administration and in state enterprises, notably Petrobrás, the Brazilian oil company, raising issues that will have to be dealt with by the incoming administration.“There is no doubt that Rousseff faces a difficult period ahead. The economy has ground to a halt during 2014 and the perspectives for 2015 are not much better”

This does not address, of course, another set of difficulties related to the formation of governments in the Brazilian political system, requiring coalitions to be formed with political parties that look like being for rent rather than available for political debates around principles or programmes.

Let us be clear: the situation is uncomfortable on many fronts but is far from catastrophic, no matter how dramatic opposition speeches have tried to suggest.

Things are far better than in Western Europe, for example, where a second recession is very likely to happen in the near future in economies already devastated by the irrational adherence to austerity policies imposed by some governments led by Germany. But the problems the new government will have to face cannot be underestimated either.

Focusing only on the economic challenges, Rousseff’s first task is to try to escape the curse the Brazilian economy has been facing since it achieved control of inflation twenty years ago.

The Real Plan, named after the new currency that was introduced in 1994, was based on the access to cheap imports obtained by liberalising foreign trade and an overvalued currency. To maintain overvaluation it was necessary to attract foreign capital inflows, which required high interest rates (higher than that paid in other countries). High interest rates were also necessary to control domestic demand so that no significant pressure would be applied on domestic prices.

However, exchange rate overvaluation and high interest rates reduced the competitiveness of local producers, particularly in the manufacturing sector, which are very sensitive to exchange rate behaviour.

As a result, the Brazilian economy has lived on a see-saw in these twenty years, alternating periods where devalued exchange rates have allowed some industrial expansion at the cost of accelerating inflation with periods of controlled inflation at the cost of industrial stagnation.

Fernando H. Cardoso was imprisoned by this dilemma, as was Lula da Silva. So was Rousseff in her first term, when she, to her credit, realised that the country had to escape the trap but was unsuccessful in finding the way to do so.

With the international economy in a weak condition, and which is forecast to last, Rousseff has to find a way to promote growth without fuelling higher inflation and increasing external vulnerability, that is, without raising the volume of imports when exports are stagnating.

Bringing the inflation rate down is also needed. Societies tend to have long memories (see how the Germans still react to the hyperinflation they experienced a century ago). A large number of Brazilians still remember how unbearable life was when inflation was in the two-digit figures a month.

We are not anywhere close to repeating that experience, but it has made Brazilians alert and sensitive to any signs that government may be lax in fighting inflation. Besides, 6.5 percent a year for more than three years in a row does add to significant loss of purchasing power for fixed incomes and for those wages and salaries that are not compensated by more generous increases.

Even the greatest triumph of the Workers’ Party administration – social programmes – may be near exhaustion.

The Food and Agriculture Organization of the United Nations (FAO) has announced that hunger is no longer an issue for Brazil. Of course, this is great news but it also means that social policies will now have to be designed with higher aims, to improve the quality of life for the populations that were upgraded by past programmes.

Jobs, education and health are much more difficult to address than extreme poverty, the reduction of which could be dealt with cash transfers. Even if no other important problem was on the agenda, this is a tall order for any political leader, but it is even more so for a re-elected president.

Brazilian citizens are impatient to see how Rousseff will meet the challenge. (END/IPS COLUMNIST SERVICE)

(Edited by Phil Harris)

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

Excerpt:

P-51, the first 100 percent Brazilian platform, has a capacity to produce 180,000 barrels of crude and six million cubic metres of gas per day. Credit: Divulgação Petrobras/ABr

By Fabiana Frayssinet
RIO DE JANEIRO, Sep 16 2013 (IPS)

Reported U.S. spying on Brazil’s Petrobras oil firm revived the controversy over opening up the company, a symbol of Brazilian sovereignty since the 1950s, to foreign investment.

“The oil is ours” was the cry that arose with the discovery of oil and gas during the government of Getulio Vargas (1930-1945) and that became the slogan of the founding of Petrobras in 1953.

It took on new force in 1997, when then president Fernando Henrique Cardoso (1995-2003) declared the end of the state monopoly and opened the company up to local and foreign private investment.

It began to be heard again in 2007, when Petrobras discovered massive offshore oil reserves 180 km from the coast and 7,000 km below sea level, under a thick layer of salt.

And then again in 2010, when then president Luiz Inácio Lula da Silva (2003-2011) replaced the current concessions system, under which companies bid for the rights to explore new oil blocks, with a production-sharing regime between the state and private companies.

The Brazilian government is the largest shareholder in Petrobras, a publicly traded company whose closely guarded secrets – such as the volume of reserves or the deep water exploration technology it has developed – may already be in the hands of the U.S. government and its allies.

Rio-based U.S. journalist Glenn Greenwald revealed earlier this month that leaked National Security Agency (NSA) documents indicated that it had spied on Petrobras – Brazil’s largest company and the world’s fourth largest oil company.

Secret documents from 2012 that were given to Greenwald by former NSA contractor Edward Snowden reportedly show that Petrobras was at the top of a list of targets for intelligence gathering.

The documents, part of a presentation used to train new agents on how to breach private computer networks, do not show to what extent NSA deciphered secret information from Petrobras’ computers.

But they do undermine the explanation presented by the U.S. agency with respect to earlier reports that it had intercepted the private communications of Brazilian citizens and of President Dilma Rousseff herself.

“Without a doubt, Petrobras does not represent a threat to the security of any country,” Rousseff said. “What it does represent is one of the world’s largest oil assets, a heritage of the Brazilian people.”

Petrobras has an annual turnover of around 90 billion dollars.

“It is clear that the motive was not security or fighting terrorism, but economic and strategic interests,” the president added.

The vulnerability of the company’s secrets has once again fanned the sentiment that “the oil is ours”, as well as arguments in favour of and against a greater opening to private investment in Petrobras.

One of the focuses of the controversy is the Libra oil field in the Santos Basin, one of Brazil’s richest offshore sub-salt deposits, set to be opened up to bidding in October.

The Brazilian government denied that the bidding would be suspended due to fears that leaked information could favour U.S. or British companies, as newspaper reports claimed.

The president of the association of Petrobras engineers, Silvio Sinedino, told IPS that “We are opposed to any bidding. We have long demanded that our oil should not be handed over the way it is here, and especially not in a fabulous oilfield where there is no risk because it has already been explored and has a confirmed capacity of 12 to 15 billion barrels of oil.”

Brazil’s sub-salt reserves are estimated at 80 to 100 billion barrels – enough to supply the country for 40 to 50 years, he noted.

Sinedino said the Cardoso administration’s “privatisation” of Petrobras and telecommunications left Brazil more exposed to espionage.

“Even our military communications go through U.S. satellites, which are obviously controlled by agents from that country,” he added.

Adriano Pires, a consultant with the Brazilian Infrastructure Centre, said Petrobras was targeted by spying because “after 50 years of monopoly…no one knows the technological secrets of deep water oil drilling like Petrobras does.”

Describing the company as “number one” in that area, Pires told IPS that “no one knows more about the probability of finding oil.”

That knowledge, he said, is coveted at a time when possible sub-salt reserves off the coast of West Africa are being disputed.

But using the revelations of espionage to once again discuss the merits of opening up Petrobras to private investment is “foolishness” characteristic of “extreme nationalist” rhetoric, he argued.

“There is a great deal of noise and speculation about the espionage, fuelled even by people inside the government, to once again allege that the United States is trying to seize Brazil’s wealth,” he said.

“The sub-salt reserves are huge, and Petrobras cannot exploit them by itself, with its liquidity issues. We need U.S., Swedish, British, Norwegian or Australian companies to tap the reserves,” Pires said.

Tullo Vigevani, a political science professor at the São Paulo State University, said he was not surprised by the news of the alleged industrial espionage because “the energy question is a central focus of U.S. policy.”

“It is one of the key issues of politics at a global level,” he told IPS. “And information is an essential element. The new discoveries in Brazil, especially in the sub-salt area, require tight surveillance.”

Vigevani said that above and beyond the Brazilian government’s demand for explanations, any solution to defend the country’s strategic interests must be long-term in nature.

In view of what appears to be inevitable, he said, Brazil should invest more in developing science and technology “autonomously, in developing skills, and in developing systems that are more immune to intrusions.”