Sardenberg reinforces criticism of Lula.
A columnist for Globo is turning his articles about the "Lula Cost" into a series, and says that a hefty bill was also left for Vale.
247 – JThe series of articles about the messes Lula allegedly left behind upon leaving office is beginning to take on the air of an organized movement against him. In addition to Sérgio Guerra's article, which points to a "cursed legacy" at Petrobras, journalist Carlos Alberto Sardenberg, from Globo, has decided to turn his analyses of what he calls the "Lula Cost" into a series. In his first article, he discussed Petrobras. Now, he focuses on Vale. Is there already a fear that Lula will return in 2014? Read Sardenberg's new article below:
Lula Cost (2) - CARLOS ALBERTO SARDENBERG
One of then-President Lula's grievances with Vale concerned the issue of steel mills. The Brazilian company should progress from being a mere supplier of iron ore to a steel producer, such was Lula's desire.
When it was argued to him that there was a cost problem with investing in Brazil – and not just in steel mills – the former president appealed to patriotism. He argued that private national companies had an obligation to manufacture in Brazil.
Whether due to presidential reprimands or its own mistakes, the fact is that Vale is involved in three major steel mills – or three immense problems – as detailed in a report by Ivo Ribeiro and Vera Saavedra Durão in yesterday's "Valor". In Marabá, Pará, the Alpa plant project is stalled, awaiting the construction of a port and a waterway, an obligation of the federal and state governments, which is far from beginning. In Espírito Santo, the Ubu project also remains on paper while Vale waits for an increasingly unlikely foreign partner. Finally, the Pecém project in Ceará is almost off the drawing board, but at double the original cost.
And you know what? It would be better if it didn't happen. The fact is, there's an oversupply of steel in the world and, more importantly, Brazilian steel plant installation and production costs are the highest in the world. No, it's not just the dollar or the Chinese that's to blame. They produce the cheapest steel on the planet, using their traditional methods. But Brazilian steel ends up being more expensive than in the US, Germany, Russia, and Turkey, according to a study by the consulting firm Booz.
Our fault lies in the old one: the tax burden and system (high taxes are paid even during the construction of the plant, before the first cent is earned), infernal and costly bureaucracy, including in the judicial dispute over tax and labor issues, and the cost of labor.
Data from economist Alexandre Schwartsman shows that wages are rising in Brazil at a rate of 11 to 12% annually. Productivity is estimated at 1,5%. In other words, the effective cost of labor is increasing, even more so due to the low qualification of the workforce. Jorge Gerdau Johanpeter, a perennial advocate for these issues, shows that the unit of labor per ton of steel is more expensive in Brazil than in the USA.
No amount of patriotism will solve it. But good government action would help. Note: all the problems depend on political action and, especially, on the leadership of the President of the Republic. This includes tax and labor reforms, legal measures to improve the business environment, simplifying the environmental licensing system, judicial reform, and so on, not to mention a boost in education.
If this doesn't work, it's a government failure, not a market failure. The global crisis is the same for everyone, but it affects countries differently, according to their local conditions. Brazil needs to boost investments, but that's impossible in such an unfavorable and costly environment. The government then resorts to stimulating consumption and protectionism to block and/or increase the price of foreign products. Again, failing to reduce the "Brazil cost," it increases the "global cost."
The situation is even more serious regarding public investments. One of Lula's campaign promises was the North-South Railway, run by the state-owned company Valec. However, the Federal Audit Court found that the cost of a sleeper there was R$ 300, while on the Transnordestina railway, a private project, it was R$ 220.
The current president of Valec, José Eduardo Castello Branco, appointed a year ago after the dismissals due to corruption allegations, also says that he will buy a ton of rail for R$ 2, compared to the absurd price of R$ 3 from the previous administration, which came from the Lula government.
Of course, a president of the Republic cannot know how much a ton of rail costs, much less the price of a sleeper. Nor can he monitor the bidding processes. But the "let's-go-get-it-all" pace imposed by the former president, along with the political allocation of state-owned companies, created the environment for wrongdoing and, more importantly, because it was more costly, for enormous mistakes in project management.
The director of the National Department of Transport Infrastructure, General Jorge Fraxe, also appointed by Dilma to put things in order, says he found construction contracts worth R$ 15 billion - or "15 billion in problems".
When the world is doing well, with everyone thriving, nobody notices. But when things get tough, that's when you see how much wasn't done or was done wrong.