The Brazil that should not have returned
Editorial, O Estado de S. Paulo (jan/19th/2024)
At a time when no oil company in the world dares to invest in new refineries, Lula intends to bet his chips on resuming the Abreu e Lima works to rewrite the past President Lula da Silva decided to continue his travels through the interior of the country. The route passed through Ipojuca (PE), to celebrate the expansion works at the Abreu e Lima Refinery. For Lula da Silva, there is no better place to announce from the rooftops that “Brazil is back”. The problem is that the Brazil that is back is the Brazil that would never have come back.
In his desire to expand investments and generate jobs, Lula, in his first two terms, decided that he would make Petrobras an arm at the government's service to execute grandiose (and very expensive) plans to supposedly boost national development. Several ambitious projects were announced, such as the Rio de Janeiro Petrochemical Complex (Comperj), the Premium I and II Refineries, in Maranhão and Ceará, and the Abreu e Lima Refinery, in Pernambuco.
The idea was to achieve self-sufficiency in fuel production and reduce prices, taking advantage of the company's dominant position in this market. What the government deliberately ignored was that oil derivatives fluctuate according to the price per barrel abroad and the behavior of the exchange rate, fundamental factors in defining the economic viability of each project.
As a mixed-capital company, Petrobras submitted the proposals to the Board of Directors, which would be able to evaluate their costs and benefits and their fit with the company's operating strategy. The government, however, abused its majority stake in the company to impose its will on private shareholders.
Remembering this context is extremely relevant at a time when the government is trying to rewrite recent history. In the PT version, if it weren't for the operation led by judge Sérgio Moro, all Petrobras works would have been completed and the country would be at another level of economic development.
In the delusional PT version, Moro would have used Lava Jato to undermine the growth of the country and the oil company to serve North American interests. Given that the investigation has fallen into total discredit, there is nothing more fair than resuming the original plans. Lula's fable ignores the fact that Petrobras was already in trouble even before the creation of the ill-fated Curitiba task force.
The slowdown in the Chinese economy since 2009 brought down commodity prices, including oil, and eroded much of the return on Petrobras projects. As if that weren't enough, the company began to be used as an instrument to control inflation, selling fuel at prices lower than those charged abroad. The devaluation of the exchange rate worsened the losses and took its debt to unsustainable levels. Unable to finance themselves, the pharaonic works began to delay, and some were never started.
There was no way for Petrobras to reconcile the two functions that the government expected of it – being an investment arm and an instrument of monetary policy – without losing a lot of money. In this sense, between 2011 and 2014, Petrobras accumulated losses of around R$100 billion, much more than the losses recognized in the balance sheet due to the Lava Jato discoveries, of around R$6 billion.
In the case of Abreu e Lima, there were other aggravating factors. The partnership with the Venezuelan PDVSA, announced in 2005 by Lula and leader Hugo Chávez, was never formalized, and the responsibility for the refinery remained entirely with Petrobras.
The cost of construction exploded, the works dragged on for nine years and construction company executives reported overpricing and bribes to various parties in the petrolão scheme. Finally, the installed capacity was reduced to half of the original project, which made Abreu e Lima one of the most expensive and least productive refineries in the world – so much so that Petrobras, when it wanted to get rid of the asset, was unable to sell it to nobody.
Now, when no company in the world dares to invest in new refineries, it is in this project that the government intends to bet its chips. Whether because he intends to take revenge on the Lava Jato gang, or because he wants to rewrite history, Lula resumes a project that was supposed to cost US$2.5 billion, consumed almost US$18.5 billion, was supposed to be ready in 2011 and remains unfinished, becoming a symbol of the lulopetist hubris that ruined the country.
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