Corruption, incompetence and impunity in unfinished works

President Lula stated two weeks ago that there are more than 14,000 works stopped in Brazil. And he said that the resumption of work will generate jobs and quality of life in the municipalities. The president knows the matter. Some of the biggest unfinished works started or went through the Lula and Dilma Rousseff governments without being completed.

Work on the Rio de Janeiro Petrochemical Complex (Comperj) began in 2008, during the second Lula administration, with planned investments of US$ 26.6 billion, according to data from the Federal Court of Auditors (TCU). In the first stage, Train 1 of the refinery would be built. Then, the petrochemical units and Train 2 of the refinery. The refinery would have the capacity to process 465,000 barrels of oil per day.

In 2014, however, Operation Lava Jato found the existence of a cartel of contractors that operated at Petrobras, with the practice of overbilling works, corruption and financing of political parties through bribes paid by contractors, records the TCU. Contractors paid bribes of 3% of the value of the work to PT, MDB and PP politicians. According to TCU, the damage caused by overbilling reached R$ 18.6 billion. Work on the refinery was paralyzed in 2015. Lava Jato’s discoveries weakened then-President Dilma, who would be impeached the following year.

Refinery did not have “attractiveness”, says Petrobras

In July 2016, with Dilma already removed from the Presidency of the Republic, the Board of Directors of Petrobras approved the reassessment of the Comperj project, associated with the implementation of the Natural Gas Processing Unit (UPGN). When the works on Train 1 at Comperj had a physical progress of 85%, they were suspended due to cash constraints experienced by Petrobras, says TCU Judgment 632/2017.

In 2019, Petrobras concluded that completing the construction of the refinery was not economically attractive. Today, Petrobras continues to develop Investment Projects at Polo Gaslub, in Itaboraí, as disclosed in the 2023-2027 Strategic Plan. Lula is again president of Brazil.

The blog questioned Petrobras about the amount recovered by the company based on court decisions and negotiations with contractors involved in corruption cases. Petrobras stated that the total funds transferred to Petrobras’ coffers (including subsidiaries), as a result of collaboration agreements, leniency and repatriations, exceeded the amount of R$ 6.7 billion.

Regarding the use of what was left of Train 1 of the refinery, Petrobras replied that “one of the assumptions used for all these projects is the use of the infrastructure and the maximum possible use of the facilities that were built and preserved after the discontinuity and subsequent cancellation of the old project Comperj”. (See note from Petrobras below)

A work of four decades

Construction of the Angra 3 Nuclear Power Plant began in 1984, stopped after two years and resumed in 2009, with the inclusion of the Growth Acceleration Program (PAC). It stopped again in 2015, due to corruption in the company’s management, investigated by Lava Jato. The resumption of works took place in November last year, with the concreting of the plant. With a budget of R$ 17 billion, its completion is scheduled for 2028 – 44 years after its inception. It will have a capacity of 1,400 megawatts (MW). The generation of plants 1, 2 and 3 will be equivalent to 60% of the energy consumption of the State of Rio de Janeiro, or 3% of the country.

Vice Admiral Othon Pinheiro, former president of Eletronuclear, suspected of having received bribes from the consortium of contractors responsible for the work, was sentenced to 43 years in prison by Judge Marcelo Bretas, in the first instance. In March last year, in a decision by the Federal Regional Court of the 2nd Region, he had his sentence reduced to 4 years and 10 months of imprisonment for the crimes of passive corruption and money laundering. Imprisonment was replaced by two restrictive penalties of law.

Changed project with 58% execution

Work on the Light Rail Vehicle (VLT) in Cuiabá began in June 2012, with a budget of R$ 1.48 billion. They should have been completed for the 2014 World Cup, which had the capital of Mato Grosso as one of the venues. After almost nine years, the financial execution percentage is at 72% and the physical execution at 58%. The state government, responsible for the project, claims that “the company did not meet the schedule for delivery of the work”. In 2017, the Federal Police’s Operation Derail discovered a corruption scheme in the execution of the VLT works, which led the government to terminate the contract with the VLT Consortium.

The VLT connects Cuiabá to Várzea Grande, where the airport is located, in a length of 23 kilometers. The 40 trains would have the capacity to transport 100,000 people a day. In January 2021, however, after much controversy, the Legislative Assembly of Mato Grosso approved the change in the modal to electric buses (BRT). The already laid rails were ripped out. The government of Mauro Mendes (União) understands that the construction of the BRT “will be more economical for public coffers, but, above all, it will have a cheaper operation, with lower cost for public transport users”.

The mayor of Cuiabá, Emanuel Pinheiro (MDB), is against changing modes. “The BRT was successful 50 years ago. Cuiabá has to look forward and match the main Brazilian and world capitals. We have to fight for the most innovative, for more sustainability, dignity and respect for public transport users”, says the mayor. According to the city hall, according to the calculations of the consortium that carried out 75% of the works, in an estimate made five years ago, it would take more than R$ 922 million to complete the work.

Transnordestina and Transamazônia: “Big Brazil”

Initiated in June 2006, during the second Lula administration, the Transnordestina Railroad has a physical advance of 59% of the new 1,209 km route – from Simplício Mendes (PI) to the port of Pecém (CE). R$ 7.5 billion have already been invested in the work. 815 km of railroad are completed, of which 215 km were executed in 2022. This year, the company’s forecast is to complete another 100 km, in Ceará, in addition to starting new lots depending on the release of resources already contracted. The stretch of Simplício Mendes (PI), where the railroad should start, is still in the earthworks phase, prior to the placement of the rails, sleepers and gravel. There is also the construction of bridges and viaducts.

The remainder is being structured between Transnordestina Logística (TLSA), the shareholder Companhia Siderúrgica Nacional (CSN) and the federal government to finalize the railroad. R$ 1 billion is contracted via constitutional funds – Northeast Development Fund (FDNE) and Northeast Investment Fund (Finor). TLSA is a private entity, but it has public investments. Invested own resources represent 61% of the total, while third-party resources (debt) reach R$ 39%.

The deadline for completing the work is 2029 in the contractual amendment signed with the National Land Transport Agency (ANTT), in December 2022. But TLSA told the blog that “internally” the forecast is 2027: “We are very interested in completing the railroad as soon as possible so that it can operate and generate revenue”. The amendment establishes conditions for the return of the Salgueiro/Porto de Suape (PE) section, originally foreseen in the project. The new schedule should consider a period of up to 7 years for the completion of works on the remaining stretch of TLSA.

According to TLSA, construction is ongoing, generating around 2,000 jobs. “Since 2017, the entrepreneur CSN has been funding the work with its own resources and honoring the financing even before the beginning of the commercial operation of the railroad”.

The oldest unfinished work in Brazil is the legendary Transamazônica, begun in 1970. The country was experiencing the military dictatorship, government of Emílio Garrastazu Médici, in the times of the “Great Brazil”, of the pharaonic works, of the “Brazilian Miracle”. The highway starts in Cabedelo (PB) and goes to Lábrea (AM).The first stretch was inaugurated in 1972, but most of the highway in the Amazon is still unpaved.

Petrobras says it uses Comperj facilities

The blog sent Petrobras the following questions: 1) what happened to Train 1 at Comperj, was it dismantled, demolished? 2) what is the damage resulting from the abandonment of the Train 1 stage? 3) TCU recorded, in 2020, that the loss resulting from corruption in the company was R$ 18.6 billion. What is the total amount of damage currently? 4) what is the value recovered by the company from court decisions and negotiations with contractors involved in corruption processes? 5) Why was the construction of the refinery no longer economically attractive? 6) Does Petrobras plan to build new refineries?

Petrobras responded that it continues to develop Investment Projects at the GasLub Hub, in Itaboraí, as disclosed in the 2023-2027 Strategic Plan. The Route 3 Integrated Project is in progress, in the final implementation phase, which includes the construction of the Itaboraí Natural Gas Processing Unit (UPGN Itaboraí) for processing up to 21 million m3/day of gas from the Pre-Salt Pole Santos Basin, with start-up scheduled for 2024.

The refining project for the implementation of fuel and lubricant production units is underway, in synergy with Reduc, which had its alternative and conceptual engineering study approved in December 2022 and continues to develop the basic engineering studies that will support the planning of the later phases of the project and studies for the construction of a Thermoelectric Plant, the UTE-GasLub.

Petrobras added: “It is also worth noting that Petrobras’ Strategic Plan 2023-2027 does not provide for the construction of a new refinery. Of the US$ 9.2 billion expected for the Refining and Natural Gas area over the next five years, about half will be applied to expanding and increasing the quality and efficiency of refining in the current facilities. The plan foresees investments in eight new processing units, in addition to six major adaptation works in existing units. With these projects concluded, it is expected that Petrobras’ refining processing and conversion capacity will increase by 154,000 barrels per day (bpd) and the production capacity of Diesel S-10 will be increased by more than 300,000 bpd”.