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Brazil: Congress to vote on redistribution of oil royalties

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Felipe Dana/AP/File

(Read caption) A television news crew films from behind an exit guardrail the Transocean Ltd. offshore oil rig in Guanabara Bay in Rio de Janeiro, Brazil in April. Brazilian lawmakers are struggling over how to spread any wealth from the country's vast and recently discovered offshore oil reserves. The battle pits states close to the oil deposits against those further away.

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• A version of this post ran on the author's blog, Riogringa. The views expressed are the author's own.

On Tuesday, Brazil's Congress is due to vote on a bill that could redistribute the country's oil royalties, reducing the share of oil-producing areas and expanding the share in other states. Officials in Rio de Janeiro and Espírito Santo, two of the states that benefit from the current royalties system, bitterly oppose the bill. But evidence shows that in coastal towns and cities that earn oil royalties in these states have growing cases of corruption and mismanagement, as well as high levels of inequality and little progress in human development.

A few recent examples are illustrative of the corruption and mismanagement problem in cities with large oil royalty funds.

In March, the government of Campos dos Goytacazes in Rio proudly announced the inauguration of a new Sambadrome, large enough to hold 40,000 (10 percent of the city's population). The stadium – funded entirely by oil royalties – cost 80 million reais ($39 million), going 10 million reais ($4.9 million) over budget. Campos is the city that earns the most oil royalties of any city in Brazil, receiving 9.7 billion reais ($4.8 billion) from 2000 to 2010. But over the same period, the city dropped from 17th to 42nd in Rio state's development index. Seventeen percent of the city's schools and preschools operate in rented homes. Primary education in Campos received the worst grade in the state.

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