BRAZIL – Last week, Brazilian legislators passed a bill that designates the country’s oil royalties to public health and education. The law, which awaits President Dilma Rousseff’s signature, was passed by the Senate in early July and passed by the House last week.
The law drastically increases funding for health and education, two sectors which many Brazilians see as inadequately funded. Oil-producing states experience greater social welfare, whereas states without oil lack additional funding and, oftentimes, social programs are cut as a result.
This bill, however, did not come out of nowhere. Last year, President Rousseff proposed earmarking all future oil royalties for education, but this suggestion was put aside as legislators fought over how to distribute the funds amongst the states.
In December, Brazil ended a long debate over the redistribution of oil royalties amongst its states. The bill passed in December made it such that all future oil contracts and their subsequent royalties are to be redistributed amongst all of Brazil’s states. However, President Rousseff chose to veto a section of the bill which included previously signed contracts into the total of all royalties collected.
Congress then overturned Rousseff’s veto, allowing redistribution to take place. At this time, the Brazilian government also set out a plan to utilize these royalties for education. Rousseff has made it clear in the past that she hopes that eventually 10% of its GDP will be spent on education.
After the bill was passed, Rousseff said, “For me and my government, education is the principal pillar to transform Brazil into a great nation, assuring that our people are freed from poverty.” Rousseff even went so far as to call the bill a “historic victory.”
At its core, the bill is a response to this summer’s protests and public outcry over government corruption and wealth inequality in the country. Brazil’s Congress, which is overrun with corruption, has good intentions in passing this law but many see it as an ill-fated attempt.
If the distribution of these funds becomes corrupt and impacts those who benefit from the newly expanded social programs and how much benefit they receive, many of Brazil’s poorest may not see their communities changed for the better as intended. Moreover, the Brazilian government is being advised to create an effective system to monitor and evaluate the collection and spending of these royalties.
The bill, which designates 75 percent of oil royalties for education and 25 percent for health care, should bring $800 million to these sectors next year. Brazil’s oil royalties, which are expected to rise when the nation taps into the subsalt fields off its Atlantic coast, could bring as much as $150-300 billion to the country in the next 35 years. Most importantly, this law brings the country’s resources full-circle; its non-renewable natural resources will be invested in the country’s largest renewable resource, human capital.
If passed, the Brazil oil royalties bill can impact millions of Brazilians and ultimately change the course of Brazil’s future if properly implemented.
– Kelsey Ziomek