Pernambuco has been experiencing the debt curse for a decade

Pernambuco has been experiencing the debt curse for a decade
Pernambuco has been experiencing the debt curse for a decade
Photo: reproduction

Debt began in the last year of the Eduardo Campos administration, continued during the eight years of Paulo Câmara, who spent six just paying off installments on the loans made by Eduardo Campos, and now in the first year of Raquel Lyra

In recent years, when economic actors within the public and private sector are asked which major projects Pernambuco is pursuing, a triple list is repeated: the Transnordestina railway, the Arco Metropolitano and the Adutora do Agreste.

Of the three, only the Aductor has a completion horizon within Raquel’s government, although it still depends on resources promised by the Union. The Metropolitan Arch, divided into two axes, has the government’s promise to have tendered only the South section, which connects BR- 232 to BR-101 and should be tendered and initiated during the Raquel Lyra government. The North axis still depends on an agreement on its route.

The Transnordestina railway has become a Pernambuco pipe dream, as it depends on the release of funds from the Union to complete the section between Salgueiro and Suape. The project’s concession company, CSN, chose to make the turn in Salgueiro (PE) on the Eliseu Martins (PI) route to Pecém, in Ceará.

This lack of structuring projects occurred after the implementation of at least three major projects announced, still during the Eduardo Campos government, when, with the support of President Lula, Pernambuco conquered the Abreu e Lima Refinery, Petroquímica Suape, both in the Suape, and the Jeep plant, in Goiana.

The Refinery, as we know, became the axis of corruption that led us to the Lava Jato scandal, at Petrobras. Only one part of it has been completed, and the second is now being announced and is expected to be ready in 2028. In addition to the R$28 billion already invested, it will cost another R$8 billion to be completed, in an investment that will require at least , 30 years to pay.

But the other two are fine, thank you. Petroquímica Suape was privatized for around R$1.5 billion (R$9 billion was spent on construction by Petrobras) and today operates within the Mexican group Alpek, which focuses on producing PET at the central unit, having abandoned the polymer yarns and polyester filaments (formerly Citepe), which was supposed to supply the textile market with synthetics.

Jeep is, in fact, our best case of success considering that the five models produced there (Renegade, Compass, Toro, Commander and RM Page) are sales successes and have consolidated a complex fed by 38 other companies (systems ) that generate 60 thousand. The complex has already received R$7.5 billion and should receive more R$30 billion within Stellantis’ strategy of producing hybrid and electric cars in Brazil.

Good promises in sight

But, apart from them, the list has no new ventures. And this worries businesspeople, association leaders, project consultants and part of the political class who ask the same question:

Where is Pernambuco going in the new scenario of the Brazilian economy, which talks about decarbonization, industry 4.0, clean energy production? Or where will we be in this new environment of integration of international logistics chains that function as a kind of global Lego, where, in each country, new parts of a product are added?

Interestingly, because it is after Bahia – the state with the largest economy in the Northeast –, Pernambuco is moving, even without a strong presence from the State government, in order to point out paths.
For example: in the renewable energy sector, Pernambuco has the largest package of projects under development with R$10 billion planned.

In the food sector, its traditional regional presence is present in almost the entire production chain (especially due to the sugar input), and also an animal protein industrial complex, the only one in the region that industrially produces beef, pork, lamb, fish, chicken and eggs, although this is not sold as an interregional differential.

We also have the sugarcane agroindustry, which, after being reduced in terms of regional and national importance, now has a group of 13 companies that have survived. At least six have a new management profile. And, finally, irrigated fruit growing, which has established itself in the São Francisco River Valley as an important and internationally competitive player.

Where is Pernambuco going?

But the question remains? Where is Pernambuco going? What do you draw for your next 25 years or 50 years? And what do the government and investors plan to include the state in the new map that is being drawn after the Tax Reform?

Perhaps Pernambuco’s problem is its economic multiculturalism. It is often said that Pernambuco is so diverse that no letter is repeated in its name. And its Carnival is so diverse that it plays to the sound of 15 rhythms.

Popular wisdom says that abundance is the twin sister of waste. And this seems to explain why Pernambuco has no focus and has not set horizon lines where it wants to go. Perhaps because its political class and its management have become accustomed to a comfortable routine of paying the bills, not taking on too much debt and remaining in a worrying comfort zone.

This led us to lose relevance within the Northeast with the growth of competition between states, improvement of infrastructure in others and aggressiveness in the search for new actors and implementation and structuring of production chains, including in segments in which Pernambuco has an important presence.

The largest economies in the Northeast

Structurally, it can be said that the Northeast has three states with the largest economies, where Bahia leads with the highest GDP, Pernambuco comes in second, with approximately two thirds of Bahia’s GDP, and Ceará is in third, with two thirds of Pernambuco’s GDP.

But, while Bahia – whose territory resembles the map of Brazil in a smaller size – evolved towards agribusiness in its western region, it improved its investments in the industrial area, added the clean energy chain and skyrocketed its growth seeking to be a national actor if cool from the Northeast due to the growth of its business; Pernambuco did not have the same dynamism.

In the same way as Ceará – recognized as the state with the highest self-esteem in the Region. The state is the largest in number of companies listed on the stock exchange. After consolidating the Transnordestina project, it aims at the green hydrogen market, where it is proud to say that it has already negotiated or has protocols for at least 12 projects that can change its economy with the export of large blocks of energy.

Bahia and Ceará are also the states where their businesspeople and the government have best supported the tourism sector, as a product to attract visitors, even though Pernambuco has a leadership in air sector operations and is the largest hub for interregional connections.

Curse of debt

But it is important to remember that Pernambuco suffered a kind of debt curse in the last 10 years, in which all it did was pay debts from loans made in the recent past. It has been a decade since we have rigorously paid the installments on loans taken for investments.

This began in the last year of the Eduardo Campos administration, with governor João Lyra, continued during the eight years of Paulo Câmara, who spent six just paying off installments on the loans made by Eduardo Campos, and now in the first year of Raquel Lyra.

It is often said that governor Jarbas Vasconcelos paid a Celpe to rebalance the state’s accounts when he took over the government succeeding Miguel Arraes, and that governor Paulo Câmara paid almost a Jeep to pay off the loans of his predecessor and political godfather until he delivered the financially balanced state for Raquel Lyra.

Despite the fact that in the last year there was such a large volume of expenses that it caused Pernambuco to lose Capag B (authorization to take loans with the Union’s guarantee), which it had regained in 2021.

It is true that Eduardo Campos, with the conditions left by Jarbas Vasconcelos, the help of President Lula in his second term with strong voluntary transfers to the state and a good collection of his own, was able to leverage investments through loans. Part of them was spent to pay for the infrastructure of the large projects he received during his government mandates.

But it is also true that Raquel Lyra, who received the state with a very low level of debt and also enjoys the support of Lula, has so far not received voluntary transfers made by Eduardo Campos and does not have a portfolio of structuring projects that she can leverage with credit.

Perhaps because Paulo Câmara has not identified and prepared bolder ventures, focusing on honoring the financial commitments and memory of his predecessor.

Or because, as a career public servant, he was content with running a government that received small businesses, paid salaries in the appropriate month and paid the debt to the National Treasury Secretariat.

The challenges going forward

This means that Raquel Lyra, the first woman to take over the government and even more so having another woman as vice-governor (Priscila Krause), has the challenge of conceiving, writing, formatting, estimating costs and raising funds for new projects. Evidently, it cannot be just about making Arco Metropolitana, Transnordestina and completing the Agreste Water Pipeline viable.

At least this is not reflected in the loans it made when Capag B was lost last year, although it can recover it in 2025. Its teams work on projects that are in the field of already existing actions and that, in fact, need attention. Something that in itself already takes up the time of their secretaries.

The article is in Portuguese

Tags: Pernambuco experiencing debt curse decade



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