NEW ENERGY MODEL BILL DELAYED AMID CRITICISM

UNCLAS BRASILIA 000464 SIPDIS NSC FOR DEMPSEY DOE FOR GWARD COMMERCE FOR 4332/WBASTAIN/JANDERSON/DMCDOUGALL COMMERCE FOR 3134/010/DEVITO/ANDERSON/OLSON E.O. 12958: N/A TAGS: ENRG EINV EFIN PGOV ECON BR SUBJECT: NEW ENERGY MODEL BILL DELAYED AMID CRITICISM REF: A. BRASILIA 321 ¶B. 03 BRASILIA 3940 ¶C. 03 BRASILIA 3088 ¶D. 03 BRASILIA 2859 ¶1. A flurry of industry and press criticism has helped delay the Brazilian Senate's scheduled February 17 committee vote on the new energy model proposed by Minister of Mines and Energy Dilma Rousseff (reftels). The bill sailed through Brazil's lower chamber with fairly insignificant revisions, but hit a roadblock during the Senate debate. Senators delayed the vote to March 3, after the Carnaval recess. Unrelated legislative battles on whether to open a congressional investigation into allegations of Lula administration corruption, other legislative priorities, and, perhaps most of all, the intensifying protest from energy-sector associations, investors, companies, and lobbyists who now appear unanimously to oppose the bill in its current known form, may well further delay the vote. ¶2. Five energy-sector industry associations on February 19 published appeals in Brazil's national press arguing that a future Brazilian energy crisis could be prevented only if the new energy bill were greatly altered. In a much- publicized process, industry has lobbied specifically for eleven amendments that it calls critical to make the bill minimally acceptable and thus ensure the survival of the sector and attraction of private investment. Minister Rousseff's reaction was to publicly reject all but four of the proposed amendments. The February 25 edition of weekly magazine 'Isto E Dinheiro' (`Fortune'-equivalent) ran an article proclaiming that, "Everyone is against Dilma," noting the fear that the new energy model would put too much power in the hands of the ministry, debilitate the energy regulator, prejudice existing investors, and repel new ones. ¶3. COMMENT. Fifteen months into Lula's administration, the new GoB's energy model and rules for sector investment seem as bogged down as ever -- if not in fact moving in the wrong direction. Minister Rousseff and the Lula administration chose to introduce the bill via Presidential Decree, presumably to propel the model through the Congress quickly. The political pushback from introducing it in this manner, however, coupled with the Minister's ever-more-widely- criticized alleged failure to accept input from industry stakeholders, has left the bill wallowing. Given its apparent general unacceptability to virtually every affected part of the sector, a further delay in the Senate vote and debate might only be a plus. HRINAK