Brazil, axing big state combines, spares power, energy

By , Special to The Christian Science Monitor

The paradox of Brazil's long-range national development is that a 16-year-old regime of conservative military technocrats, committed to laissez faire economics for growth, must rely on huge state enterprises for its main thrust.

Even the most right-wing of the generals who seized power in April 1964 have had to suppport the nationalistic role of the state as the major instrument in economic advance.

This remains true even when the ruling Figueiredo administration is deeply committed to a reduction in the staggering array of about 350 government-owned and -operated companies and agencies. The program, called ''debureaucratization, '' is now in effect across the country.

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State-run industrial giants basically untouched by this program are Petrobras , Volta Redondo, CVRD, and Electrobras (Brazil Electrical). For instance, ''O petroleo e nosso'' (The oil is ours), is the unofficial motto of Petrobras, or Petroleos Brasileiros, the big state agency committed to Brazil's future self-sufficiency in energy.

Petrobras, with its integrated operations in fuel and energy supplies, is the kingpin of the Brazilian state enterprises. The enterprise negotiates vital offshore petroleum purchases for this huge developing country, still relying on foreign imports for 60 percent of its oil. It is also engaged in the largest offshore oil drilling program in the Western Hemisphere.

Equally important to the current oil import contracts is the role of Petrobras in the development, manufacture, and distribution of alcool, or gasohol, Brazil's fuel substitute made from sugar cane residue. This is already widely available through the state agency's expanding chain of retail gas stations. About one quarter of the cars produced in Brazil during 1981 were fitted with engines using the gasohol fuel.

Volta Redonda is the country's oldest and largest steel mill. The mill was built in 1943 with financing and know-how from the United States steel industry, in return for US Navy and Air Force access to Brazil's South Atlantic naval bases.

Today Volta Redonda has been expanded and modernized with technical aid from Japan's steel industry in a country with an influential Japanese minority of businessmen -- for instance, Shigeaki Ueki, former energy minister, is now president of Petrobras.

The wartime geopolitics which made possible the birth and growth of Volta Redonda as a major state corporation has been perpetuated during the military era in the industrial strategies first developed within the influential Superior War College in Rio.

CVRD (Companhia Valle Rio Doce), a state-run mining company and the largest iron ore producer in Latin America, became even larger during 1981. It assumed 52 percent ownership of the new aluminum producer, Mineracao Rio do Norte, in the eastern Amazon, thereby making the latter company also a major state enterprise.

But in the troubled 1980s, with the mounting costs of starting up huge capital projects in a country with a record external debt of $55 billion (US), the industrial strategies are changing. A company like Electrobras, which is in charge of the 25-year program to develop hydroelectric dams in the country's vast interior, especially feels these costs.

With this in mind, the government has loosened the reins a bit. Not only are many of the growth-oriented state enterprises, chiefly in mining and energy, freed from current government reductions in traditional subsidies, they are allowed to seek foreign loans for working capital requirements.

Since mid-1979 state entities including Petrobras, Electrobras, and the CVRD have received cabinet approvals to borrow about $1 billion Eurodollars from consortia of international private banks.

A further case in point is the mixed industrial project of Serra dos Carajas in the Amazon, which, even by the standards of the already large hydroelectric dams and mineral developments under way since the mid-1970s, is immense.

Absorbing much of the estimated $60 billion (US) in new energy and industrial growth planned by Brazil to the end of the century, the project (also called Great Carajas) extends across 100,000 square miles. It will include cattle raising, gold mining (Brazil's fastest-growing mineral development), and still more iron ore and bauxite, as well as further possibilities for millions of tons of concentrates. These concentrates will yield nickel, aluminum, and probably tin.

At its start in 1977, the US Steel Corporation held a $77 million minority interest in Great Carajas. This was later absorbed by the CVRD, whose own growth plans in the region will be supported by five new power plants, to be built under the auspices of Electrobras, as well as a new townsite.

Instead of such major direct foreign participation in government-dominated projects like Great Carajas, the government's present formula puts a strong preference on outside participants bringing their own technology to such projects. It also prefers to have foreign risk capital take minority ownership in such projects.

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