Brazil President Lula to Veto Oil Royalties Amendment


Brazilian President Luiz Inacio Lula da Silva said Tuesday that he will veto a controversial amendment covering royalties payments for the country's offshore oil deposits, local press reported.

The amendment was part of a bill passed last week by Brazil's lower house, which sets up a production-sharing regime for recently discovered offshore oil fields.

"I intend to veto [the amendment] and approve a presidential decree that restores the original law," Lula said.

The amendment would have equally distributed oil royalties throughout Brazil's 27 states. Rio de Janeiro and Sao Paulo states, however, said that the measure would cost them billions of dollars in lost revenue. The two states are the largest crude oil producers in Brazil.

Lula also confirmed that he will not make a decision on the purchase of fighter jets to upgrade Brazil's Air Force.

According to the outgoing popular president, it didn't make sense for him to approve a deal that would generate "a debt that would take years to repay" during his final days in office.

The president also defended his public works program, called PAC, against possible budget cuts under the administration of President-elect Dilma Rousseff. Earlier Tuesday, Finance Minister Guido Mantega said the government's 2011 budget would be reduced.

"I don't believe that we need to cut a single cent out of the PAC," Lula said.

Copyright (c) 2010 Dow Jones & Company, Inc.


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