Wednesday, 15 September 2010

What effect will the election have on Brazil's energy sector?

Before becoming Lula's Chief of the Civil Cabinet and his right hand, Dilma Rousseff had been his Minister for Mines & Energy and chair of Petrobrás. Throughout Lula's eight-year mandate, she remained in control of the energy sector, under the political dominance of PT and PMDB parties.

The results were not encouraging. The sector today reflects the government's general proclivity towards nationalism and state interventionism. Petrobras' capitalisation has been an unmitigated mess, as has been the entire pre-salt institutional framework. These tendencies are likely to persevere under Dilma's tenure as president. Moreover, she is prone to greater influence than Lula by the radical wing of the PT party, which translates into a statist, xenophobic and anti-capitalist bias.

There might be more overtures to South American energy integration, but in practice this means yielding to the demands of Brazil's 'Bolivarian' neighbours led by Venezuela's President Hugo Chávez, plus Paraguay, thus continuing Lula's failed scheme of a "diplomacy of generosity" at the expense of the Brazilian taxpayer.

If the former São Paulo governor and main opposition candidate, José Serra, wins the presidency, there will be none of the latter, and indeed the model for the energy sector will most likely consist predominantly of public-private partnerships (PPP), for which laws are now in effect, but, under Lula, not enough political will to implement them.

Dilma can be expected to pursue Lula's national-developmentalist strategy, in the energy sector, as well as Brazilian infrastructure in general.

For more news and expert analysis about Brazil, please see Brazil Focus.

© 2010 Menas Associates

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