Judge Fux Suspends Royalty Veto Override / by Mark Langevin

The Rio Times reports that,

“In the most recent twist in the oil royalties battle, on Monday, December 17th supreme court judge Luiz Fux granted an injunction to Rio State legislators, blocking an upcoming congressional vote to override the recent veto by President Dilma Rousseff. The president had vetoed Article 3 of the new bill, blocking re-distribution of oil royalties from existing oil concessions.”

Judge Fux’s decision was further clarified to instruct congress to act upon the 3,000 vetoes already pending in Congress before taking up the issue of overriding President Dilma’s recent veto on the royalty issue in which she reversed the congressional majority by grandfathering the current distribution among federal, state, and municipal governments for all concessions granted prior to passage of the new legislation.  Fux’s decision did not include arguments that relate to President Dilma’s claim that a reform of the royalty distribution for concessions already granted would be unconstitutional. Opponents in Congress seek a more generous distribution to non-producer states and cities, including royalties raised from current concessions.

Although Judge Fux’s decision delays the override vote, it does not change the merits of either the veto or override.  Indeed, it appears from the congressional rules vote to expedite the override vote that an absolute majority exists to achieve the override.

Currently, the President of the Senate, Jose Sarney, as organized a process through which the entire Congress will treat and vote on each of the approximately 3,000 vetoes in order to comply with the Supreme Court ruling and arrive at a vote to override the partial presidential veto on the royalty issue.  This will certainly test the Brazilian Congress in a unique way, testing both the rules (integrity) and the legislative process (efficacy).  Moreover, it will test Senate President Sarney’s political and institutional abilities to guide this process in the weeks, possibly months to come.  Already congressional representatives from Rio de Janeiro and Espirito Santo, potential losers if the override is successful, have questioned the process and requested more formal hearings to treat each of the outstanding vetoes in a campaign to shipwreck the override vote.

Without a doubt, this legislative issue raises important questions about the direction of Brazilian economic development and the impact of the oil and gas bonanza.  More importantly and as The Rio Times suggests, it may raise many more questions about how the federal government regulates natural resources and divides the growing royalties and revenues earned from exploration and production of minerals, hydropower, and oil and gas.