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