Cancellation Risk
Cancellation Risk in Brazil
February 25, 2016
Marc Sirotnik – Primary Article Contributor
Tom Jones – Team Leader and Editor
Keywords: Brazil, infrastructure, impeachment, cancellation, private-public partnership, Petrobras Scandal, Olympics
Impeachment seems to be a serious consideration as a solution to Brazil’s current situation. Rousseff has just been elected for another term as the country’s President and would be up for re-election in 2018. Many people do not want to wait until this time to elect a new president, and this can be seen by her approval ratings as they have dropped dramatically into single digits.
In late 2014, the Petrobras Scandal in Brazil made its way into national news and would mark the beginning of a massive decline in governmental confidence from the people and foreign investors. Petrobras executives were found to have bribed high ranking government officials using money from company profits in order to maintain Petrobras’ domination of the Brazilian Oil sector. The current Prime Minister of Brazil, Dilma Rousseff, was the chairperson of Petrobras from 2003 to 2010 and while there is no evidence that Mrs. Rousseff took part in the scandal, there is a strong movement for her impeachment.
Since the scandal, Rousseff’s government has continuously been the target of heavy criticism as there have been questionable government dealings with national companies, a continuous decline of infrastructure, and lack of effective economic reforms. The case for impeachment has also been strengthened by the upcoming 2016 Olympics in Rio De Janeiro. Many citizens, investors, and companies are concerned with Rousseff’s lack of action against crime in the area, security for the games, pollution, and infrastructure. Because of the government’s seeming lack of attention toward these important matters, impeachment seems imminent.
Since impeachment is seriously considered, the risk of the cancellation of the proposed infrastructure plan is a possibility. If the infrastructure plan is cancelled, the 64 billion dollars will be in limbo, essentially halting the process of revitalization of Brazil’s infrastructure. Not only would many companies suffer, Brazil’s economy would decline rapidly as planned improvements to ports, railways, airports, and public transit would not be implemented. Without improvement to these sectors, there would be little profit and the GDP would continue to plummet. Also, many international and national investors would be deterred from taking an active role in the improvement of Brazil’s infrastructure. Without foreign investors, it is difficult to see how the government would be able to maintain any improvements made. If impeachment is successful, the risk of cancellation of the infrastructure plan may become a reality and is likely to be detrimental to private-public partnerships.
