US embassy cable - 04BRASILIA464

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, Energy 
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