Brazil's new economic growth acceleration plan (PAC) and state-controlled Petrobras' role in it have investors concerned that President Luiz Inacio Lula da Silva and the company will repeat errors made in his previous terms in office.
The PAC envisages 1.7 trillion reals ($347.5bn) in public and private investment over the next four years in nine segments, with a focus on infrastructure. It needs to be approved by congress and included in the annual budget in December. The plan is a refreshed version of a similar initiative piloted during Lula's first two terms in 2003-11, and then by his successor and protege Dilma Rousseff. This time around, it earmarks R540bn for energy transition projects, while Petrobras' contribution to the PAC will include the R323bn that the firm already plans to spend on projects ranging from revitalisation of pre-salt fields and platforms to new bio-refineries and a decarbonisation fund.
But critics say this is all too familiar. The last two PACs left a trail of unfinished projects, such as the Rio de Janeiro petrochemical complex, which was left only 80pc complete, and the eventually cancelled Premium I refinery planned in northeastern Maranhao. In total, the plans left nearly 4,700 unfinished projects across Brazil, representing planned investment of over R135bn, of which R65bn had already been spent, according to Brazilian construction industry chamber CBIC. Previous PAC projects also faced massive corruption scandals. Nine of the 10 largest projects in previous PACs — including many led by Petrobras — were investigated by the Operation Car Wash anti-corruption probe that started in 2014. Lula himself was among those jailed, imprisoned in 2018 for alleged money laundering and corruption, but later acquitted and freed in 2019.
Lula pledges not to let a "lack of management" or "almost obsessive fiscal austerity" derail his plans this time, and says the new PAC will resume construction on "thousands of projects" as his government seeks to revive economic growth. Opposition politicians are adamant that they will keep a close eye on the PAC, which leaves a question mark hanging over whether it will be approved at all. But economists agree that Brazil spends far too little on infrastructure projects — it is projected to invest just 1.7pc of GDP in the sector in the current financial year, below China and India's 6pc and the US' 2.5pc.
Little-green PAC?
Petrobras, Lula and his team will also have to balance spending with the president's green goals, which was not always the case with previous PACs. One infamous scheme is the 11.23GW Belo Monte hydroelectric dam in Para state. The R20bn dam, which came on line in 2016, destroyed local wildlife and disrupted indigenous communities, and its licence is up for renewal by environmental watchdog Ibama. Despite being Brazil's second-largest hydroelectric plant and the fourth largest in the world, Belo Monte has failed to bring major energy gains and has become a symbol of the misuse of public resources.
Economy minister Fernando Haddad promises that the new PAC will be "greener", despite earmarking 19 new exploration and production licences in Brazil for Petrobras alone, and setting out plans to boost the Abreu e Lima refinery's capacity to 260,000 b/d from 230,000 b/d. But some of Petrobras' planned PAC spending will be directed towards building a bio-refining plant, which will produce sustainable aviation fuel and renewable diesel. And the firm notes that decarbonisation projects including "sustainable hydrogen and carbon capture and storage" are also part of its new PAC portfolio. Petrobras is due to push low-carbon investment to as much as 15pc of its capital expenditure in its next strategic plan, which will be unveiled in November.
