Fernando Alcoforado*
The impact of Brazil’s economic crisis on national engineering has been devastating since 2014. The crisis led 253 contractors to bankruptcy (bankruptcy) in 2015, the number of which grew by 25% compared to 2014. The bankruptcy process of contractors resulted from the reduction of infrastructure works and delays in payment of invoices by the federal, state and municipal governments. The cuts in the public budget contributed decisively to increase the requests for judicial reorganization of the contractors. The growth in requests for judicial reorganization reflects the country’s economic crisis, the lack of credit and the increase in interest rates. Large construction companies stopped receiving and caused a ripple effect among smaller subcontracted companies. The civil construction sector in Brazil was affected, not only by delays in transfers from the government, but also by Operation Lava Jato, which took a number of companies involved in Petrobras’ corruption scheme to the courts, especially the large construction companies. Indebted, without credit in the market and with contracts canceled or suspended, several companies followed this path to renegotiate debts.
The Brazilian civil construction market is experiencing an unprecedented crisis. The sector’s profitability dropped 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 managed to grow in 2014. Odebrecht, the largest of them, fell 32 % in sales. In 2014, the civil construction sector was responsible for about 6.5% of the country’s Gross Domestic Product and directly employed more than 3 million people. The debts of contractors that exceed R$ 150 billion can also lead the country’s main banks to losses that, in turn, will further restrict the granting of credit. Odebrecht alone had R$ 98.5 billion in debt in 2019. Due to Lava Jato Operation, contractors encounter legal restrictions on bidding. Petrobras, the main client of the contractors investigated at Lava-Jato Operation, predicted to cut about 30% of investments by 2019. Without cash and without new contracts, the last resort of these companies was to enter into judicial recovery to renegotiate debts.
Odebrecht, the largest Brazilian engineering company, was destroyed by Lava Jato Operation . The largest Brazilian construction company loses successive contracts abroad, faces tremendous credit difficulties in Brazil and abroad, faces political discrimination and loses the most elementary conditions to establish a strategy to overcome the crisis. The number of workers, mostly in quality jobs and with good salaries has drastically reduced, while intermediate executives, with different areas of specialization that in the past represented the soul of the company’s entrepreneurial creativity, are totally disoriented and without initiative. Odebrecht is gradually disappearing in a process of inexorable degradation. This is the biggest national engineering disaster of all time. It is a disaster without equal for the Brazilian economy.
The share of major works in the GDP of Brazilian construction decreased from 41.3% to 29.5% in ten years. The decline 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 the economic expansion in the 21st century, investment in infrastructure totaled R$ 67.04 billion, more than three times that of 2016. In the past five years, the Brazilian economy has slowed down. The recession generated by the Dilma Rousseff government and the inaction to reactivate the Brazilian economy under the Bolsonaro government contributed to the fall in investments affecting all sectors, mainly the construction industry. With less money, large construction companies being dismantled by Lava-Jato Operation and stopped works, in addition to other conjunctural factors, the civil construction market suffered negative numbers for the fifth consecutive year.
In 2017, the decline in GDP (Gross Domestic Product) of civil construction was 6%. By the end of 2017, Engineers were the top-level professionals who lost the most jobs in the private sector. With the crisis and the departure of so many qualified labor from the sector, there was an avalanche of opening of micro companies to provide engineering services, which made the economic environment even more competitive, leading to a degradation of earnings for established companies and consolidated. The current balance sheet in the civil construction sector points to the existence of 14,000 stopped works and more than 50,000 unemployed engineers
It is important to note that Brazilian Engineering is a fundamental part in the effort to promote the resumption of the country’s economic growth, given that, through it, it will be possible to overcome Brazil’s weaknesses in economic and social infrastructure. The country will have to invest an additional R$ 2 trillion to achieve investments in the infrastructure sector of 4% of GDP, the minimum necessary 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), railways (R$ 130.8 billion) and highways (R$ 811.7 billion) total R$ 985.4 billion. Adding this amount to the necessary investments in waterways and river ports (R$ 10.9 billion), airports (R$ 9.3 billion), electricity sector (R$ 293.9 billion), oil and gas (R$ 75.3 billion), basic sanitation (R$ 270 billion) and telecommunications (R$ 19.7 billion) total R $1,664.5 billion.
In Brazil, the education sector requires investments of R$ 83 billion a year, health care R$ 54 billion a year and popular housing requires R$ 68 billion to eliminate the housing deficit. Adding the total investment required in economic infrastructure (energy, transport and communications) as well as social infrastructure (education, health, basic 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 rebuilt with the execution of this infrastructure program.
The uplift of Brazilian engineering should also include the adoption of measures that make the Brazilian justice 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 prevent the national legal system from destroying 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 high international competitive capacity. Unfortunately, the federal government did not create a recovery plan that would help engineering companies get out of the crisis. Even with the signing of leniency agreements, there is no resumption of works, and the loss has already reached more than R$ 50 billion.
What is being done in Brazil with engineering companies in Brazil is not occurring in other countries that act against corruption as happened with Volkswagen in Germany in 2018 in the case “Dieselgate” that defrauded pollution data from its cars and was applied € 1 billion fine while company officials were fired and arrested. At Volkswagen, no car has ceased to be produced and no worker has lost his job. Germany was able to preserve its wealth and jobs. In Brazil, the behavior has been the opposite. Business leaders are arrested, works are suspended, companies are prevented from participating in other tenders and workers are dismissed by the thousands. A national heritage made up of companies formed over decades and holding an important technological collection and teams of experienced professionals is destroyed. This needs to end.
It can be said that Brazilian engineering is experiencing the greatest crisis in its history. Companies with recognized technical capacity, with a significant contribution in works and services for our engineering, are paralyzed due to the legal processes to which they are responding. We have seen the destruction of our largest engineering companies. The professionals, especially their engineers, were dismissed by the thousands, the works were suspended, while waiting to see to what extent these companies would be affected by the penalties of Lava Jato Operation. Large-scale projects were interrupted, some 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 reach tens of billions of Reais and unemployment for 13 millions of workers.
While the dismantling of Brazilian engineering by Operation Lava Jato is taking place, the Bolsonaro government takes the decision to allow foreign companies to compete in tenders and be government suppliers without the need to have a Brazilian branch in infrastructure works. Currently, the country’s legislation requires that a company or even an individual legally represent the foreign company, in order to participate in public bidding. The Bolsonaro government’s decision to open Brazil to the entry of foreign companies contributes to destroying the already weakened engineering companies and favoring the employment of engineering professionals from abroad to the detriment of the jobs of many Brazilian engineers. The damage to Brazil and to Brazilian engineering is undeniable. Bolsonaro’s attitude shows the antinational character of his government.
The argument that competition is healthy for Brazil is fallacious because it brings losses to the country. If the infrastructure works are carried out by foreign companies, the profits from their activities are remitted abroad, not staying in the host country (Brazil) and a large part of the qualified labor is contracted abroad to the detriment of national workers. With this measure, the Bolsonaro government collaborates with the strategy of the great capitalist powers, especially in the United States, which strengthen their own engineering and their largest companies and seek to sabotage the companies and engineering of other countries as is the case today in Brazil. Brazilian Engineering was impaired by Lava Jato Operation and is being annihilated by this last measure adopted by the Bolsonaro government. Brazilian engineering is being destroyed thanks to the surrender to international capital and the current government’s neoliberal economic orthodoxy.
In any minimally advanced country, engineering is protected and respected as a synonym for prosperity and a factor of development. There is no country that has reached a high level of development without sovereign and decisively supporting its engineering. Without engineering, the Soviet Union would not have sent the first artificial satellite, Sputnik, to Earth’s orbit, nor did Yuri Gagarin’s feat as the first man to travel through space and the United States would not have promoted the expedition to the Moon. Without engineering , the United States would not have built its bridges and skyscrapers and Brazil would not have built its gigantic hydroelectric plants like Itaipu, implanted its industrial park and developed oil exploration in deep waters like the Pre Salt. There are no nations worthy of the name that be able to answer questions like where to go, how to go, when to go, without the help of your engineering.
In the face of all this, we cannot do more than communicate the annihilation of Brazilian engineering, famous for having built works all over the world, from highways to railways and irrigation systems; going through the drilling of galleries and tunnels under the Andes mountains; for the development of continuous concrete cooling systems for the construction of Itaipu; or for the construction of huge hydroelectric plants and for the development of technology for oil exploration in deep waters without which the Pre Salt would not exist. Brazilian engineering is being destroyed, with the closure of its project detailing offices, its goods industry capital, its shipyards for assembling ships and oil platforms, the rising cost and cutting of its credit lines, the sale of its assets in the Souls Basin and the abandonment of its construction sites.
The current moment is serious. In order to overcome it, there is an urgent need for a great mobilization of the entities representing engineering professionals under the leadership of the CONFEA / CREA System, Engineering Clubs and Institutes in order to build a great alliance in defense of national engineering in which engineers, workers in general, the union movement participate, as well as universities and technological centers.
* Fernando Alcoforado, 80, awarded the medal of Engineering Merit of the CONFEA / CREA System, 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 author of the books Globalização (Editora Nobel, São Paulo, 1997), De Collor a FHC- O Brasil e a Nova (Des)ordem Mundial (Editora Nobel, São Paulo, 1998), Um Projeto para o Brasil (Editora Nobel, São Paulo, 2000), Os condicionantes do desenvolvimento do Estado da Bahia (Tese de doutorado. Universidade de Barcelona,http://www.tesisenred.net/handle/10803/1944, 2003), Globalização e Desenvolvimento (Editora Nobel, São Paulo, 2006), Bahia- Desenvolvimento do Século XVI ao Século XX e Objetivos Estratégicos na Era Contemporânea (EGBA, Salvador, 2008), The Necessary Conditions of the Economic and Social Development- The Case of the State of Bahia (VDM Verlag Dr. Müller Aktiengesellschaft & Co. KG, Saarbrücken, Germany, 2010), Aquecimento Global e Catástrofe Planetária (Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, São Paulo, 2010), Amazônia Sustentável- Para o progresso do Brasil e combate ao aquecimento global (Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, São Paulo, 2011), Os Fatores Condicionantes do Desenvolvimento Econômico e Social (Editora CRV, Curitiba, 2012), Energia no Mundo e no Brasil- Energia e Mudança Climática Catastrófica no Século XXI (Editora CRV, Curitiba, 2015), As Grandes Revoluções Científicas, Econômicas e Sociais que Mudaram o Mundo (Editora CRV, Curitiba, 2016), A Invenção de um novo Brasil (Editora CRV, Curitiba, 2017), Esquerda x Direita e a sua convergência (Associação Baiana de Imprensa, Salvador, 2018, em co-autoria) and Como inventar o futuro para mudar o mundo (Editora CRV, Curitiba, 2019).
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