Opposition Grows in Brazil Against Energy Liberalization

President Michel Temer’s government is expanding efforts to liberalize energy policy, but opposition is also coalescing. Officials are looking to privatize state-controlled electricity company Eletrobras and allow Petrobras to sell its oil rights. However, these measures face mounting disapproval in Congress following the truckers’ strike in May and Temer’s concession to regulate diesel prices. The Democratic Labor Party (PDT) originally voted in favor of the bill allowing Petrobras to sell oil rights under its 2010 agreement with the government. This week, though, the PDT joined over 120 opposition federal deputies from the Workers Party (PT), the Communist Party of Brazil (PCdoB) and the Socialism and Liberty Party (PSOL) to obstruct a final vote on the measure.

Temer’s government argues that it needs this authorization in order to reach a deal on the final terms of its 2010 accord with Petrobras and prepare for an oil tender on 29 November. The proposed law would allow the NOC to sell up to 70% of its oilfield rights under the transfer-of rights-agreement and would regulate the auction of Petrobras-controlled blocks. There is mounting opposition to the bill, which requires a majority vote in the Chamber of Deputies before moving to Senate, so its chances of passing are unclear.

The Senate seems ready to pass the measure if it is approved by the lower house. However, PT Senator Lindbergh Farias from Rio de Janeiro introduced an amendment that would send signing bonuses from any such sales to a new social fund. If passed, the measure would return to the Chamber of Deputies for an additional vote. If Senator Farias’ amendment fails, then President Temer would move quickly to enact the new law, allowing for the National Petroleum Agency (ANP) to prepare the 29 November auction. Time is of the essence, as final negotiations depend on congressional approval before legislators’ recess begins on 17 July.

Meanwhile, the opposition continues to highlight a connection between rising fuel prices and E&P liberalization under Temer. Opposition leaders have joined members of the government’s coalition – including those from Chamber of Deputies President Rodrigo Maia’s Democrats (DEM) – to introduce legislation that would permit the direct sale of ethanol from producers to fuel stations in order to lessen the impact of fuel price hikes. Small and medium producers, especially those located in the northeast, favor the proposed measure. However, Temer is reluctant to support the legislation due to opposition from large producers and fuel distributors.

Growing opposition to E&P liberalization has also spilled into the presidential election. Leading presidential candidates have cautioned against further privatization, given the recent fuel price debacle. PDT candidate Ciro Gomes has announced that he would revoke the 2016 “Serra” law, thereby restoring the requirement that Petrobras operate all pre-salt production. He also promised that pre-salt blocks sold to foreign companies under the Temer government would be expropriated with fair market compensation. Gomes is currently polling third, behind Jair Bolsonaro of the Social Liberty Party (PSL) and Marina Silva of the Sustainability Network (REDE); he is projected to receive 10% of the vote.