Sovereign funds and quality of life

View of the sea from Praia do Itaguá, Ubatuba, North Coast of the State of São Paulo. Photo: Heraldo Campos
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By HERALDO CAMPOS*

What these funds are about, where their resources come from and how they can improve the lives of Brazilian men and women

The tripod education-health-sanitation is a right of the population. The values ​​existing in the “Universal Declaration of Human Rights” of the United Nations (UN), proclaimed by its General Assembly, in Paris, on December 10, 1948, highlight and reinforce this right.

Articles XXV and XXVI of that “Declaration” read as follows, respectively: “Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing, medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond their control” and “Every human being has the right to education. Instruction will be free, at least in the elementary and fundamental grades. Elementary education will be mandatory. Technical-professional instruction will be accessible to all, as well as higher education, which is based on merit”.

Although, apparently, Brazil is starting to administer sovereign wealth funds, it is understood that they could be directed towards improving the daily life of the population and start to reduce the great deficit in this fundamental area for the well-being of people, who are often neglected by a quality public service.

But, after all, what are sovereign funds about and where do their resources come from? “Created and administered by the federal government, the Sovereign Fund, in English, Sovereign Wealth Funds (SWF), is a category of investment fund that has a predetermined objective. Generally, its resources come from earnings in royalties, tax collection surpluses, state-owned profits and gains in royalties.

However, this category of fund is not traded in the market, therefore, the investor cannot simply invest in it. The country's federal government determines the type of risk management of the fund, which can vary from very conservative to a high degree of risk tolerance, it all depends on the objective you have for the Sovereign Fund”.[1]

“The Fundo Soberano do Brasil (FSB) was a public fund linked to the Ministry of Finance, created by Law No. 11.887, of December 24, 2008, and extinguished by Law No. 13.874, of September 20, 2019. Law No. 11.887, of 2008, was created with the following objectives (art. 1): (i) mitigate the effects of economic cycles; (ii) form public savings; (iii) promote investments in assets in Brazil and abroad; and (iv) promote projects of strategic interest to the country located abroad”.[2]

Os royalties oil and natural gas are a type of fee paid for the right to use and exploit these energy resources in a given producing region. The municipalities of Niterói (RJ), Maricá (RJ) and Ilhabela (SP) have their sovereign wealth funds from these royalties and, in theory, they should be used to meet one of its main objectives, such as investing in investments that provide a better quality of life for its inhabitants.

Thus, in this scenario, remember that one of the main goals of government officials and public administrators is related to the supply of good quality water and basic sanitation, which must be provided to the people of all nations, so that we do not lose sight of “ Goal 6” of the “United Nations 2030 Agenda”.

“Objective 6” of this “Agenda” points in the following direction: “By 2030, improve water quality by reducing pollution, eliminating dumping and minimizing the release of hazardous chemicals and materials, halving the proportion of wastewater untreated and substantially increasing recycling and safe reuse globally.”

In the 80s, some city halls in Brazil adopted the “Participative Budget” as a mechanism to enable citizens to participate in discussions and deliberations in the search for the best way to apply investments by local administrators. Who knows if this experience of the “Participatory Budget” of direct popular participation could not once again become a political practice, aiming at the adequate application of the economic resources generated by sovereign wealth funds from the royalties of oil and natural gas.

Finally, it is never too much to repeat the phrase of João Guimarães Rosa, writer, diplomat and doctor Brazilian, which continues to be very current for these difficult times that a large part of the Brazilian population has been going through, with regard to their quality of life, mainly in terms of the tripod education-health-sanitation and often left aside: “The water of good quality is like health or freedom: it only has value when it ends”.

* Heraldo Campos, a geologist, is a postdoctoral fellow at the Department of Hydraulics and Sanitation at the School of Engineering of São Carlos-USP.

Notes


[1] https://exame.com/invest/guia/fundo-soberano-o-que-e-e-qual-o-seu-objetivo/

[2] https://www.gov.br/tesouronacional/pt-br/ativos-da-uniao/fundos-governamentais/fundo-soberano-do-brasil-fsb/sobre


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