Against corruption and privatization: Brazilian oil for Brazilian workers

With the recent corruption scandal in Petrobras, foreign investors seek to profit off of Brazilian oil. While former president Cardoso was much more aggressive and vocal about privatizing Petrobras, both Workers’ Party presidents Lula and Dilma have furthered the privatization. Workers must fight against all forces behind the privatization of Petrobras and build a movement for a 100% state-owned Petrobras, managed by workers. This is the only way Brazilian oil will help build badly-needed infrastructure and serve the people.

July 16, 2015

Photo: Esquerda Diario

“O petroleo é nosso! The oil is ours!” This was the banner under which Petrobras, the Brazilian oil company, was created in 1953. For some, Petrobras was a way for Brazil to take steps towards being self sufficient, a way for the Brazilian economy to survive—perhaps even thrive—despite the constant incursions of imperialist multinational corporations in Brazil and the rest of Latin America. After the discovery of pre-salt oil reserves in Brazil in 2014, this banner of “the oil is ours!” rings even more true—after all, Brazil has discovered it is sitting on a gold mine. The pre-salt oil should be for the Brazilian people: to build schools, hospitals, better transportation, and the infrastructure that Brazil so desperately needs. Instead, due in part to the Petrobras corruption scandal, there are laws and initiatives being debated and currently taking place that will feed large chunks of the crown jewel of the Brazilian economy to the imperialist sharks who have been circling Petrobras and Brazilian oil for a long time.

Workers must unite to fight against the corruption, as well as the privatization initiatives put forth by two “rival” parties, PSDB (Brazilian Social Democratic Party) and PT (Workers Party), who, despite disagreeing about method, agree about opening Brazilian oil to foreign investment. Workers must also fight against the sub-contracting within Petrobras that enriches the elite while workers struggle to get by. The solution to these problems lies in creating a state owned Petrobras, managed by Petrobras’ own workers.

Short History of Petrobras: A history of privatizing Brazilian oil

Founded in 1953, Petrobras is a semi-nationalized oil company and the second-largest open market oil extractor in the world. Until 1995, Petrobras had a complete monopoly on the Brazilian oil market; not only was it fully nationalized, but no other oil companies were allowed on Brazilian soil. In 1995, Fernando Henrique Cardoso of the PSDB (Social Democratic Party of Brazil) broke the Brazilian monopoly, allowing private companies to own parts of Petrobras, as well as allowing other oil companies to drill in Brazil. Cardoso and the mainstream media argued that in order to combat corruption and “modernize” Brazil, Petrobras should be partially privatized. This initiative altered Petrobras—and Brazil—to the core. It opened the door to foreign profit off the natural riches of Brazil, further enriching the CEOs of Chevron, Shell, and other oil giants. It changed Petrobras’s message from “the oil is ours” to “the oil is mostly ours . . . for now.” More than 45,0000 oil workers went on strike in protest of the privatization, but their strike was eventually defeated by the government, at which time Cardoso opened Petrobras to limited private investment, while the Brazilian government still remained the primary owner of the company.

Under the PT (Partido dos Trabalhadores, or Workers Party) President, Luiz Inácio Lula da Silva, huge amounts of pre-salt oil were found due to technological advances that allowed Petrobras to drill deeper in the ocean than was previously possible. According to Forbes, between 2010-2014, 63% of the oil found in deep water, and 36% of total oil found in the world, has been in Brazil. Although there have been many technical difficulties in extracting it, this oil has the potential to make Brazil rich. Oil analysts today project that 4 million barrels per day will be produced in Brazil’s pre-salt oil reserves by 2020. This would make Brazil one of the world’s top 5 oil producers.

While Lula continued Cardoso’s privatization, he did make new laws when it came to the new oil reserves. Under the law, private corporations are allowed to drill in pre-salt oil reserves. However, each bidding bloc must be at least 30% made up of Petrobras. Furthermore, private companies are granted drilling rights based on which company gave most oil to the Brazilian government. In other words, companies could submit bids to drill in pre-salt areas, and the company that would be allowed to do so would have to pay taxes, as well as giving Brazil a certain percentage of the oil they drilled. If two companies wished to drill in the same place, the company offering most oil to Brazil would be allowed to drill there. Furthermore, Petrobras was the only operator allowed at the oil sites.

Although this certainly opened Brazilian oil to private investments, it also made rules to retain oil for the Brazilian people. Often, the PT painted itself as against privatization, but Pre-Salt laws demonstrate that this is not true. Today, 72.3% of the profit from Petrobras is private, and 35.4% of that number belongs to foreign capital. Of the less than 30% of profit that remains in Brazil, a large portion is spent on paying the foreign debt, since 42% of the federal budget is spent on paying foreign debt and repaying bankers and speculators.

Although foreign corporations profit a great deal from Brazilian oil, this is not enough to satiate their thirst for profit. When former NSA employee and CIA operative Edward Snowden famously leaked classified US government documents, among his revelations was information showing that since the discovery of the Brazilian reserves oil, the United States had been spying intently on Brazil in order to find information that would help American multi-national corporations profit from the goldmine that is pre-salt oil.

While Cardoso was much more aggressive and vocal about privatizing Petrobras, both Lula and now Dilma, the current Brazilian President from the Worker’s Party, have furthered the privatization project as well. And recently, a notorious corruption scandal at Petrobras leaves foreign capital uniquely positioned to swoop in and take control of Brazilian oil.

Corruption: An Open Door for Foreign Investors

Petrobras has recently been rocked by a major scandal when it was uncovered that at least 3 billion dollars were stolen in the form of bribes, kickbacks and inflated contracts. Over 100 elites were implicated, from executives of Brazil’s biggest construction firms to the Worker’s Party treasurer. The scandal has already resulted in the resignation of the Petrobras CEO, and the investigation, known as “Operation Car Wash” (Lava Jato), is ongoing.

The consequences of the corruption at the highest level of Petrobras has been deeply felt by the Brazilian working class. Since Operation Car Wash began, 20,000 jobs have been lost. Workers at the Petrochemical Complex of Rio de Janeiro went three months without receiving their salaries, but were also unable to take other jobs because they had not been formally fired from their full-time jobs with Petrobras. Echoes of this story across the workforce show the ugly fallout of crimes that only made the richest elites richer at the expense of the workers.

The Federal Public Minister asked for help from the United States to investigate the corruption at Odebrecht, a Brazilian engineering and construction corporation involved in the Petrobras scandal. Clearly, the United States who has been spying on Brazilian oil, will not “help” Brazil out of it’s kind heart, but rather out of a thirst for profit. As was the case when Cardoso privatized, the argument that corruption should be combatted via privatization is being used. This action on the part of the Public Minister opens the doors for the imperialists to meddle in Brazilian affairs.

Imperialist countries are taking advantage of the current moment to open Petrobras to their corporations, allowing them to steal the oil and profit that rightly belongs to the Brazilian people. Today, there is the largest presence of foreign capital in the contract bids at Petrobras since all contractors that are being investigated by Lava-Jato (Operation Car Wash) are vetoed. Foreign corporations seek to take advantage of the absence of competition to purchase the rights to drill in large swaths of pre-salt oil areas

Imperialist countries often use the rhetoric of privatization and handing over companies like Petrobras to private and often foreign corporations as a way of fighting corruption. For example, the Washington Post says “Brazil needs more liberalizing reforms. Petrobras’s corruption was in large part the product of Ms. Rousseff’s misguided policies, such as trying to restrict its suppliers to Brazilian firms.” This rhetoric must be combatted fiercely. Privatizing companies is not the solution to corruption; handing Petrobras from the hands of elites who profit from it illegally to the hands of elites who will profit from it legally (and illegally) is not the solution. Privatizing does nothing in the way of improvement for workers, the company or the country; privatizing merely increases corporate profits.Therefore, it is essential to combat privatizations- both those proposed by Serra of the PSDB (Brazilian Social Democratic Party) and those by Dilma Rousseff of the Worker’s Party.

Dilma’s Privatizations

During the Lula years, Brazil was in a period of high economic growth, which meant that the Brazilian state had more room to create mildly tough deals for foreign imperialism- Brazil needed foreign capital less. The pre-salt laws are examples of the ways that the Brazilian bourgeoisie made mild efforts to strengthen their weak autonomy. However, the economic and political picture of Brazil in 2015 is very different. With a weakened economy and various Brazilian corporations being investigated for corruption, the Worker’s Party (Partido dos Trabalhadores) seeks to strengthen the economy by putting the country on sale for foreign investors, as was evident in Dilma’s recent trip to the United States. Dilma has signaled to foreign capitalists that Brazil is open to foreign investments, including selling off one of Brazil’s most precious resources- oil.

While the PT does not openly and publicly defend privatization, it does not defend a state run Petrobras and has been responsible for huge privatizations. This includes the 2013 “Leilao de Libra”, one of the biggest privatizations in Brazilian history. While President Dilma and the PT argued that it was not privatization, Brazil sold off the Libra oil field with only 40% Brazilian ownership and 60% ownership of foreign investors. Workers went on strike against this privatization, but they were brutally repressed. Since then other privatizations have occurred, selling off Petrobras for very cheap prices. For example, Petrobras sold their share in Bijupirá e Salema fields, which were operated by Shell, but 20% was owned by Petrobras. That 20% was sold for $25 million while 20% of that field’s yearly profits is $ 96 million, nearly 4 times the value that it was sold for.

However, what is worse is that in the recently published Petrobras business-plan, they plan to “disinvest” (in other words, privatize) a value of 57 billion dollars between 2015 to 2019. As is to be expected, a huge sum will be handed off to foreign investors. Petrobras is also discussing opening their distributor “BR Distributor” to foreign investments. BR Distributor is the biggest oil distributor in Brazil and is currently 30% open to investors. If Petrobras takes this step, it will allow investors to buy stocks in BR Distributor- yet another way that Petrobras and Brazilian oil are being open to foreign investment.

Serra’s Law

Jose Serra, of the PSDB (The Brazilian Social Democratic Party, the primary opposition party to the PT, the Worker’s Party) proposed a law that would further privatize Brazilian oil more than PT already does. If PT is a light version of privatization, Serra’s law is privatization unmasked and in full force. He would revoke the requirement that Petrobras be the only operator used on oil fields and 30% of each bid block. This would go back on the rules introduced by Lula that would preserve some Brazilian power and profit over pre-salt oil (although even in this model, most of the profits ended up in imperialist “partners” of Petrobras). Part of the logic of this law is a as a response to corruption in Petrobras. Serra logic is, “there is too much corruption in Petrobras, so let’s give it away to the imperialists”.

Privatization is Privatization: Against a Rhetoric of Lesser Evil

Some make the argument that PT’s privatizations, particularly under Lula, were not as bad as Serra’s new law. They make the argument that the PT wants to protect Petrobras from privatization, so workers should defend the PT from attack and accept their supposedly more mild privatizations. This is faulty logic. The PT has privatized Brazilian oil, just as Cardoso privatized Petrobras and just as Serra intends to. An anti-privatization struggle and an anti-imperialist struggle must confront the PT, not subordinate themselves to it. Accepting and arguing in favor of a “lesser evil” puts limits on any mass movement seeking to stop the privatization of Petrobras and against the money-hungry imperialist corporations who seek to bleed Brazil of its natural resources and wealth.

Against Killer Sub-Contracting

The Petrobras scandal is being felt on the backs of workers through mass firings at companies that depend on Petrobras. it is being felt by workers because new hirings are being reduced. In order for workers to confront the attacks on Brazilian oil orchestrated by the PSDB and the PT, as well as the attacks on their own jobs, they must be united. However, subcontracting, which increased exponentially under the PT, divide Petrobras workers between those contracted directly and those sub-contracted, forcing both to pay for the Petrobras crisis.

During the PT years, subcontracting increased nationally from 4 million to 12 million. Within Petrobras, subcontracting has also increase exponentially. The workers of the company are increasingly subcontracted, increasing from 121 thousand to 360 thousand. Almost all maintenance workers are sub-contracted. These workers are far more likely to be killed in accidents on the job than directly contracted workers, in part due to more relaxed workers rights regulations. From 1995-2014 there were 344 reported deaths and 280 of them were of subcontracted workers.

Ending subcontracting is another way to combat corruption, as it would stop secret contracts. However, neither the PT nor the PSDB suggests this method of fighting corruption. Ending subcontracting demonstrate that all Petrobras workers work for the company, from the cleaning crew, to the bus drivers, to the engineers to those who work on oil rigs. It means that all workers should have company protection at their jobs and should be paid directly by Petrobras for the services they provide. Furthemore, ending subcontracting strengthens workers to be united in a fight against privatization, against firings and against making the workers pay for the Petrobras crisis.

The Petrobras Brazil Deserves

Brazilian wealth should stay in Brazil. The immense oil riches of the nation should not be sold off to the highest bidder, filling the pockets of the richest Brazilians and the imperialist corporations of the world as they secure new ways to bleed Brazil and Latin America of their natural wealth and the wealth created by their workers. This is why Petrobras must be state run.

Though privatization is a foreign incursion and not a solution to Petrobras’s current travails, the corruption scandal does demonstrate the inability of its current (elite) leaders to run the company. So who should run Petrobras?

In short, the entire structure of Petrobras must change. It should be 100% state owned, but it should be run by those who are most invested in having quality working conditions, who understand how to produce oil, and produce for the good of Brazil, not their own pockets. It should be run by those who would benefit from the profit of Brazilian oil staying in Brazil to build schools, transportation and quality health care. Petrobras should be run by elected groups of Petrobras workers without special privileges who can best make decisions about production for the company and the country. This is the plan that was voted upon by the Second Conference of the labor union CSP Conlutas and for which the Revolutionary Workers Movement is currently calling upon the leftist political parties to build a broad campaign. Without moving to this kind of structure, Petrobras will continue to be threatened by corruption, as well as by greedy corporations seeking to exploit Petrobras and its workers for their personal gain.


Oil   /    Petrobras   /    PT Brazil (Worker’s Party)   /    Dilma Rousseff   /    Brazil