Analysts see 60% chance of approval by year-end Reforms governing how Brazil taps vast new oil riches could be delayed by opponents in the Senate, prolonging uncertainty in the energy sector and undermining the force of a major government campaign promise. Brazilian President Luiz Inacio Lula da Silva had hoped to get the four reform bills through Congress by June, giving his chief of staff, Dilma Rousseff, extra ammunition in her bid to succeed him as the ruling Workers' Party candidate. But a lengthy seven-month passage through the lower house of Congress is likely to be followed by an even tougher struggle in the Senate, where the government has a narrow majority and the opposition has pledged to block attempts to fast-track the bills. The opposition presides over key committees in the Senate, allowing it to delay voting and possibly amend the bills, which create a legal framework to develop the new oil fields that could make Brazil one of the world's top 10 oil exporters. “It'll be tougher for the government than it was in the (lower) chamber,” said Andre Pereira Cesar, legislative expert at the CAC political consultancy in Brasilia. Analysts, who say the delays have caused shares in state-owned oil company Petrobras to lag an otherwise rising stock market, still expect the bills to emerge relatively intact from a heated Senate debate by year-end, before a possible opposition government could take over in January. Delay into January could put the reform package in the hands of the opposition if Sao Paulo state Governor Jose Serra beats Rousseff in the election, which polls show he has a fair chance of doing. The proposal made up of four reform bills would give the government more control over the massive reserves, capitalize Petrobras, make it sole operator with a minimum stake in each field, and create a fund to invest oil revenues mostly in education and health. Finance social programs The two main opposition parties favor more private sector participation in the economy and are wary that a larger government hand will hamper investment and efficiency in the oil industry. Developing the reserves that sit below a thick layer of salt and rock deep under the ocean floor will cost roughly $400 billion and the lack of a legislative framework would undermine future Petrobras and government revenue. At current oil prices, the estimated new reserves are worth $4.1 trillion and would generate tens of billions of reais (dollars) in government revenue each year to finance social and economic programs. Lula, who calls the estimated 50 billion barrels of offshore oil a “gift from God,” and Rousseff have billed the proposals as a ticket to sustainable economic growth and social equality that could give Brazil developed country status. In an attempt to speed up voting, the government will put the four bills on a fast-track, which requires simultaneous debate in all necessary committees and a plenary vote within 45 days. The opposition balked at the move, saying it required more time for debate, and promised to obstruct voting. “If there's a fast-track, we'll obstruct,” said Arthur Virgilio, leader of the opposition PSDB party in the Senate. That makes approval difficult before the government's target date of early June, when attention switches to the soccer World Cup, party conventions and subsequent campaigning for the Oct. 3 elections. “Approval by June is highly unlikely,” said Rafael Cortez, a political analyst with Tendencias consultancy in Sao Paulo. But both Cortez and Cesar gave a 60 percent chance of the bills being approved by the end of 2010. As in the lower house, the Senate is expected to maintain the fundamentals of the proposal and focus on changing aspects of the bills that most directly affect the pocketbooks of voters in an election year. The lower house, the Chamber of Deputies, changed the distribution of royalties between states, allowed workers to use special funds to buy Petrobras shares, and expanded the use of the oil fund to finance pension pay increases. “The Chamber approved the fundamental issues and I expect the Senate to follow suit, albeit after the elections,” said Cortez. With a narrow majority in the Senate, the governing coalition must be disciplined to prevent surprise votes called by the opposition to approve amendments, said Cortez. But given the president's right to exercise a veto on aspects of the bills without vetoing the whole package, the government has the final word.
