Archive for the ‘News’ Category
Lula the Diplomat and Iran
Iran
The agreement reached yesterday between Iran, Turkey and Brazil has been greeted with reactions in the international community ranging from euphoria to indifference. Indeed, some countries have demonstrated two reactions one, closely followed by another. The first reaction is to praise the efforts of Brazil and Turkey and to see the agreement at least as a sign of good intentions on the part of Iran. The second reaction is to recognize, as did Bernard Kouchner, the Foreign Minister of France, that the agreement “does nothing to settle the problem posed by the Iranian nuclear program”.
The government of the USA did its best not to appear churlish by welcoming the agreement, with faint praise, as a positive step. However, like many other nations they pointed to Iran’s continued resolve to add to its manufacture of uranium that is at least 20% enriched was a continuing violation of United Nations Security Council Resolutions.
The agreement, however, was expected to give some breathing room to Iran while Western diplomats come to a consensus as to whether there is still a need to move forward on the sanctions plan already mooted. Russia’s reaction was important, and the Deputy Prime Minister, Sergei Ivanov who said after the announcement of the agreement that the Sanctions resolution should be voted soon anyway, and that Iran should “open up to Inspectors”. However, if the agreement was an attempt by Iran’s President Almedenejad to give China and Russia pause for thought as they have been less inclined to vote for sanctions than the other members of the Security Counsel, then, it would appear he has failed.
In further developments today, United States Secretary of State, Hillary Clinton has announced the text of a draft resolution to be submitted to the United Nations Security Counsel that repudiates the agreement made yesterday, and calls for sanctions. The resolution has the support of all of the five permanent members of the Security Counsel, the USA, the United Kingdom, France Russia and China, in addition to Germany, which is not a permanent member. Secretary Clinton stated, in a direct rebuff to the efforts of Brazil and Turkey that “I think this announcement is as convincing an answer to the efforts undertaken in Tehran over the last few days as any we could provide.” In other words, she, and the other members of the Security Counsel were not impressed.
The question, from the Brazil perspective, is whither the international credibility of President Lula. Is he a statesman with vision and patience, or a meddler in affairs he does not understand? Jose Alencar, not an unbiased bystander, but Brazil’s Vice President said, “Brazil is every day more respected in the international area, thanks to this simple citizen” (President Lula). However, sources in the US Senate were saying that Brazil is squandering its good will in the USA with its attempts to assume a more important diplomatic role in the world. With today’s news it appears that Lula’s diplomatic prowess appears to have been short-lived.
Presidents Lula and Almedinejad
Down to Three – A Simplified Scenario
Ciro Ferreira Gomes
The Presidential race is about to change from four declared candidates to three. Insofar as there is already a race, and there undoubtedly is between the two top candidates, José Serra, (PSDB) former Governor of the State of São Paulo, and Dilma Rousseff (PT) the former Minister of Casa Civil, the one candidate who has had difficulty finding a strategy is the former Governor of the State of Ceara, Minister of Finance in the government of Itamar Franco, and currently Federal Deputy, Ciro Gomes.
The fourth candidate is Marina Silva, formerly the Minister of the Environment in the government of President Lula, and currently the Presidential candidate of the Green Party.
Today’s news concerns the candidacy of Ciro Gomes, which has lacked a certain consistency. On the one hand, Ciro is close to President Lula, as he has served in his administration, and is associated with the Brazilian Socialist Party (PSB) that is a natural ally of President Lula’s Party, the PT, and candidate, Dilma Rousseff. On the other hand, Ciro Gomez has attempted to be an ally of Governor Aécio Neves (PSDB) of Minas Gerais in encouraging the Governor to become a Presidential candidate and compete for the PSDB’s candidacy with José Serra, the opponent of Dilma Rousseff.
The fact that first, Aécio Neves decided not to compete with José Serra, and that secondly, the PSB’s desire to support a winner in the Presidential race i.e. the PT’s candidate, has left Ciro Gomes isolated. For what its worth at this stage of the Presidential election, Ciro Gomes’ standing in the polls has declined from the 13% level in January, to 8% today.
To be sure, President Lula has made signals that he would like Ciro Gomes to be the PT coalition’s candidate for the Governorship of the State of São Paulo this year. Ciro Gomes was actually born in the State of São Paulo, but has lived or been associated for most of his life with the State of Ceará. However, he has taken the precaution to re-register himself as a resident and voter in the State of São Paulo. We divine from his lack of interest so far in running for Governor, that the prospect of an electoral race against Geraldo Alckmin (PSDB) appears to him to be an uphill struggle.
In discussions yesterday the PSB and Ciro Gomes have come to the conclusion that his candidacy will not be endorsed by the PSB, but that regional directors of the PSB will suggest to Ciro that they see their future in the Presidential Election as being allied to the PT in support of Dilma Rousseff. This would provide Ciro Gomez with a way to gracefully withdraw his candidacy without it being seen that he was being pressured by President Lula. Or, that within the PSB there was a lack of respect for him as a candidate. The PSB’s announcement will be made on Tuesday of next week.
None of the above provides Ciro with an indication of what he might do next, but at 52 years old he still has time to wait.
Belo Monte – The Bid Happens
Demonstrators Against the Construction of Belo Monte
It would be difficult to say for whom the Belo Monte Bid came to a satisfactory solution on Tuesday. Neither the indigenous peoples nor the environmentalists (including academy award winning director, James Cameron), who had fought long and hard to have the bid postponed. Not many of the winning consortium bidders who have many economic concerns about the viability of the project (the Construction Company, Queiroz Galvão had withdrawn from the consortium prior to the bid being presented yesterday); not the Federal Public Ministry of Para that had tried on two occasions in the last week to stop the bid process via judicial actions, and presumably not the losing bidders in the consortium led by Andrade Gutierrez.
It was left to the Federal Government, which for short term Presidential electoral reasons, will now be able to at least claim some credit for a project that will add to the Program for Accelerated Growth (PAC) in the future. Without this bid taking place their claims for PAC 2 would have been feeble indeed. The other party able to celebrate at the victory was the Brazilian, publicly owned electricity generation company, and 49.98% participant in the winning consortium, Compania Hidro Elétrica do San Francisco – CHESF. Other members of the consortium were 4, (10.02%); Gaia Energia, (10.02%); J. Malucelli, (9.98%); Galvão Engeneria, (3.75%); Mendes Junior, (3.75%); Serveng-Civilisan, (3.75%); Contern, (3.75%); and Cetenco (5%).
In order for the bid to progress, the Government was successful in suspending three separate judicial actions that asked for the rights of indigenous peoples to be further considered, and for environmental issues to be dealt with in a thorough manner rather than the cursory treatment that had been given heretofore. With remarkable speed, the Regional Federal Tribunal suspended the actions which left many observers wondering whether the Tribunal had indeed been able to provide its opinion with adequate consideration.
The winning bid was 6.05% lower than the maximum price indicated by the Agency of Electric Energy Companies, ANEEL, or R$ 77,97 per MWh.
Belo Monte 2
The Xingu River - Site of the Belo Monte Plant
The various interests involved in the Belo Monte dispute are fighting hard in the Judiciary, on the one hand to stop the next step in the process of building a hydroelectric power plant by suspending the bid, due to be held today, April 20th. On the other hand there are two consortia ready to submit proposals if the bid goes ahead.
On Wednesday, April 14th, last week judicial action was taken, at the behest of the Federal Public Ministry of Para, by the court in the State of Para to stop the bid as the constitutional rights of indigenous residents of the area were not adequately considered prior to the issuance of the request for proposals. On Friday, April 16th, the Regional Tribunal Federal, suspended the judicial action of the Para Court on the basis that there was no “immediate danger” to the indigenous peoples, and that any further delays in the development of the hydroelectric plant would prejudice, gravely, the economy due to the deficiency of electric energy in the country.
On Monday, April 19th a further judicial action was taken by the same court in Para stating that the environmental considerations of the hydroelectric plant had not been adequately considered, and that the public meetings to consider environmental matters were being stage managed, and for this reason the bid should be suspended. Once again, the Federal Public Ministry of Para was the author of this action. Once again the Federal Government has filed an appeal.
The Federal Government will appeal this decision today, and attempt to allow the bid to go forward.
As mentioned in our recent post, “Belo Monte”, the Federal Government has had to sweeten aspects of the financial conditions surrounding the bid to entice participants to stay in the competition. One aspect will be the exemption from 75% of income tax, and another aspect, the financing of the Brazilian Development Bank, BNDES, will be for up to 80% of the project, and for a tenor of 30 years.
In other developments, the newspaper Valor Economico reports that the two major construction companies, Camargo Correa and Odebrecht whose consortium withdrew from the competition last week on the basis that the economic fundamentals were unfavorable, have now joined the Andrade Guiterrez/ Vale/ Neoenergia consortium. Details of the new shareholding have not been published.
The legal battle could go on for quite some time, as a number of interested parties, not least the Indians, and the Federal Public Ministry of Para have more judicial actions up their sleeves.
The public is only now becoming interested in the dispute which involves major issues for the government. One campaign issue that will go to the heart of differences between the PSDB Candidate, Jose Serra and the PT candidate, Dilma Rousseff is the efficiency with which disputes between various interested parties are reconciled in connection with public works. This is a debate that, based upon the Belo Monte experience, Jose Serra may relish!
Belo Monte
James Cameron in Belo Monte
Adding to the elements that make this situation which is already fascinating, even more interesting for observers is the importance of this project to the government, the PT and their pre-candidate, Dilma Rousseff. The project is of fundamental importance so that Dilma can meet the objectives of her PAC- Programa de Aceleracao de Crescimento (Accelerated [Economic] Growth Program. Since the withdrawal of the CCOF consortium, the Government has tried to pressure the government related pension funds, Previ, of Banco do Brasil, Petros of Petrobras, and Funcef to join in the bid. However, these funds are already heavily invested in the electric power sector, and only with difficulty, or investments made indirectly can they participate to any meaningful level. A new possible participant, Bertim, in partnership with construction companies, Galvao, OAS, Mendes Junior and Serveng has indicated its interest, which in addition to Andrade Gutierrez/ Neoenergia/ Vale and Votorantim, will make two probable bidders.
However, it is clear that even the consortia that continue with a desire to participate are lobbying the government for better economic conditions such as fiscal benefits such as those given to other electricity plant projects (Jirau and Santo Antonio) such as forgiveness of 75% of income tax for the first ten years, or favorable financing terms from BNDES.
On April 14th, however, the Government/ PT experienced their worst nightmare when a Judge issued a judicial order suspending the pre-license of the Hydroelectric plant, and cancelled the Bid that was to be held on April 20th. “There is the danger of irreparable damage in the bid”, the Judge agreed with the action of the Federal Public Ministry. In effect, the order was in favor of the Indians who are threatened, without the Government having taken all of the necessary measures to protect their rights. The Judge also noted irregularities in the issuance of environmental approvals that need to be reviewed.
The Government is in the process of appealing this ruling.
The issues of commercial viability still exist, however, and the Government appears to have taken the position that the CCOF was bluffing, as has happened in other bids in the electricity sector in the past. However, the sum of the low production rate, 40% of capacity, and a tariff rate of R$ 83 per MWh is still considered as marginal. While the Government has projected a value of R$ 19 billion for the costs of construction, the consortia believe that the total costs will be more like R$ 30 billion.
With so many risks affecting the project, it is not surprising that even bidders expected to submit proposals appear unenthusiastic. Also, pressuring the “government” pension funds to invest in a project where interest is low, and risks and exposure to the sector is already high, may not be a prudent move for anyone.
However, with the judicial order in place prohibiting the bid, the Government has more pressing issues to deal with.
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