Fernando Alcoforado *
Brazil is fully developed in different engineering sectors. From the construction of roads to the energy sector everything is possible to be designed and built in Brazil. In some sectors, Brazil is also a world reference, as is the case with programs linked to Proalcool and biodiesel, the exploration of oil in deep waters, construction of large hydroelectric plants, such as Itaipu, the largest in operation until recently, projected , built and assembled by Brazilian companies. Engineers and engineering companies collaborated decisively to unleash the process of modernization of the country. It is also important to highlight public administrators engineers who had wide vision and contributed to materialize daring projects of energy infrastructure, transport and communications implanted in Brazil in the last 60 years. Also noteworthy are the pioneers in the manufacture of machinery and equipment, as well as capital goods and suppliers of inputs that helped to provide an extraordinary boost to Brazilian Engineering and Construction. Engineering was therefore responsible for the construction of modern Brazil.
The impact of Brazil’s economic crisis on national engineering has been devastating since 2014. The crisis led 253 contractors to judicial reorganization (bankruptcy) in 2015, whose number grew 25% compared to 2014. The bankruptcy process of the contractors resulted from the reduction of infrastructure works and delays in the payment of invoices by federal, state and municipal governments. The cuts in the public budget contributed decisively to raising the requests for judicial recovery of the contractors. The growth of requests for judicial recovery is a reflection of the country’s economic crisis, the lack of credit and the increase in the interest rate. The large construction companies stopped receiving and caused a cascade effect among the subcontracted smaller companies. The construction industry in Brazil was affected, not only by delays in government transfers, but also by Operation Lava Jato, which led a number of companies involved in Petrobras’ corruption scheme to the courts, especially the large construction companies. Indebted, with no credit in the square and with contracts canceled or suspended, several companies followed this way to renegotiate the debts.
The Brazilian construction market is experiencing an unprecedented crisis. The sector’s profitability fell from 11.2% in 2013 to 2.3% in 2014. Only three of the 23 construction companies ranked among the 500 largest in the country were able to grow in 2014. Odebrecht, the largest of them, dropped 32 % in sales. In 2014, the construction sector was responsible for about 6.5% of the Gross Domestic Product of the Country and directly employed more than 3 million people. The debts of contractors in excess of R $ 100 billion may also lead the country’s main banks to losses, which in turn will further restrict the granting of credit. Only Odebrecht has 63 billion reais in debt. Due to Operation Lava Jato, contractors find legal restrictions to enter into bids. Petrobras, the main client of the contractors investigated at Lava-Jato, planned to cut about 30% of the investments until 2019. Without cash and without new contracts, the last resort of these companies was to enter with judicial recovery to renegotiate the debts.
Odebrecht, the largest Brazilian engineering company, was destroyed by Operation Lava Jato. The largest Brazilian construction company loses successive contracts abroad, faces tremendous credit difficulties in Brazil and abroad, supports political discrimination and loses the most elementary conditions to establish a strategy to overcome the crisis. The number of workers, a large part of high-quality and well-paid jobs, has drastically reduced, while middle managers, with different areas of expertise who in the past represented the soul of the company’s business creativity, are totally disoriented and without initiative. Odebrecht is gradually disappearing in a process of inexorable degradation. This is the greatest national engineering disaster of all time. It is an unparalleled disaster for the Brazilian economy.
The participation of major works in the construction GDP plummeted in 10 years. The share of large construction projects in the GDP of Brazilian construction fell from 41.3% to 29.5% in ten years. The fall reflects the end of a cycle of expansion of infrastructure in the country. The data are part of the Annual Survey of the Construction Industry (PAIC), released by the Brazilian Institute of Statistical Geography (IBGE), which mapped the sector between 2007 and 2016. In 2012, at the height of economic expansion in the 21st century, investment in infrastructure totaled R $ 67.04 billion, more than triple that of 2016. In the last three years, the Brazilian economy slowed down. Political uncertainties led to a drop in investment affecting all sectors, especially the construction industry. With less money, large construction companies are being dismantled by Lava-Jato Operation and works stopped, in addition to other factors, such as the fall in the price of oil per barrel in 2015, the construction market presented negative numbers for the fourth consecutive year.
In 2017, the decline in GDP (Gross Domestic Product) of construction was 6%. By the end of 2017, the Engineers were the top-level professionals who lost most of their jobs in the private sector. With the crisis and the outflow of so much skilled labor from the sector, there was an avalanche of microenterprises opening for engineering services, which made the environment even more competitive, leading to a deterioration in the fees of already established companies and consolidated. The current balance of the construction sector indicates the existence of 5,000 works stopped and 50,000 unemployed engineers.
It is important to note that the Brazilian Engineering is a fundamental piece in the effort to promote the resumption of the country’s economic growth since, through it, it will be possible to overcome the weaknesses of Brazil in economic and social infrastructure. The country will have to invest an additional R$ 2.5 trillion to achieve investments in the infrastructure sector of 4% of GDP, the minimum needed to reach a reasonable level of modernization. According to the Institute of Logistics and Supply Chain, the necessary investments in Brazil in ports (R$ 42.9 billion), railroads (R$ 130.8 billion) and highways (R$ 811.7 billion) total R$ 985.4 billion. Adding this value to the investments required for waterways and river ports (R$ 10.9 billion), airports (R$ 9.3 billion), electric sector (R$ 293.9 billion), oil and gas (R$ 75.3 million, basic sanitation (R$ 270 billion) and telecommunications (R$ 19.7 billion) totaled R$ 1,664.5 billion.
In Brazil, the education sector requires investments of R$ 83 billion per year, health R$ 54 billion per year and the popular housing requires R$ 68 billion to eliminate the housing deficit. Adding the total investment required in economic infrastructure (energy, transportation and communications) and social infrastructure (education, health, sanitation and housing) would total R$ 1,869.5 billion, that is, almost R$ 2 trillion. The economic and social infrastructure program that may be adopted in the short term could achieve these objectives. Brazilian engineering would certainly be retaken with the execution of this infrastructure program.
The uplift of Brazilian engineering should also contemplate the adoption of measures that make the Brazilian justice system in its fight against corruption seek to penalize corrupt people, businessmen and executives and not attack companies, as if legal entities had the human quality of virtue and sin. It is necessary to avoid that the national legal system destroys Brazilian companies responsible for the generation of hundreds of thousands of jobs and for the accumulation of Engineering knowledge unparalleled in the world, and with a high international competitive capacity. Regrettably, the federal government did not create a recovery plan that would help engineering firms get out of the crisis. Even with the signing of leniency agreements, there is no resumption of works, and the damage already reaches R$ 50 billion.
It can be said that Brazilian engineering is experiencing the greatest crisis in its history. Companies with recognized technical capacity, with significant contribution in works and services for our engineering, are paralyzed before the legal processes to which they are responding. We are witnessing the destruction of our largest engineering companies. The professionals, especially their engineers, are laid off in the thousands, works are suspended, while waiting to see to what extent these companies will be hit by Lava Jato charges. Large scale projects were interrupted, some of them already in an advanced stage of execution, such as the works of COMPERJ, Angra III, the nuclear-powered submarine, the Abreu e Lima refinery in the Northeast, the transposition of the São Francisco River and many others. The losses already amount to tens of billions of reais and unemployment for millions of workers.
Urgent measures must also be taken to prevent Petrobras from contracting only foreign companies to tender for the resumption of works in COMPERJ. What is being done in Brazil with Brazilian engineering companies is not happening in other countries that act against corruption as happened with Volkswagen in Germany that due fraudulent data of pollution of their cars it was applied very high fine while company leaders were dismissed and imprisoned. At Volkswagen, no car is no longer produced and no worker has lost his job. Germany has preserved its wealth and jobs. In Brazil the behavior has been the opposite. Leaders are arrested, works are suspended, these companies are prevented from participating in other bids and workers are laid off in the thousands. A national patrimony is destroyed, formed by companies over decades and holding important technological assets and teams of experienced professionals. This has to stop.
The timing is serious. In order to overcome this, there is an urgent need to mobilize representatives of engineering professionals under the leadership of CONFEA / CREAs to build a strong alliance in defense of national engineering involving engineers, workers in general, companies committed to job creation, the union movement that is feeling the loss of rights won since the 1930s, as well as universities and technology centers.
* Fernando Alcoforado, 79, holder of the CONFEA / CREA System Medal of Merit, member of the Bahia Academy of Education, engineer and doctor in Territorial Planning and Regional Development by the University of Barcelona, university professor and consultant in the areas of strategic planning, business planning, regional planning and planning of energy systems, is the author of 14 books addressing issues such as Globalization and Development, Brazilian Economy, Global Warming and Climate Change, The Factors that Condition Economic and Social Development, Energy in the world and The Great Scientific, Economic, and Social Revolutions that Changed the World.
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