Elon Musk eyes on the Amazon as Bolsonaro government tries to liquidate Latin America’s only chip factory

Original story by Maurício Angelo , translated by: Gabriela Sarmet

Literally destroying a cutting-edge technology company, a reference in Latin America and one of the few in the world capable of producing semiconductor chips with varied uses, from health to passports, to favour private sector initiative.

With no technical justification and without the slightest care, this is what the Bolsonaro government is trying to do with the state-owned Centre of Excellence in Advanced Electronic Technology (Ceitec), created in 2008 by the Lula government and based in Porto Alegre.

By pure ultraliberal ideology, as is the script openly followed by Paulo Guedes, the now new Minister of Mines and Energy Adolfo Sachsida, by the former secretary of “privatisation” Salim Mattar, owner of Localiza, and by the entire dome of the government, the current administration is trying to liquidate a cutting-edge industry.

With shady economic interests and suspicious business, at the same time, it invites Elon Musk, the “richest man in the world”, welcomed with ceremony last week in a meeting with Bolsonaro, Dias Toffoli of Supreme Court and Brazilian executives, to supposedly open a factory in Brazil to do precisely what Ceitec does with excellence.

Musk was awarded a “Medal of Honour” by the Bolsonaro government and called the “myth of freedom”. The Minister of Communications, Fabio Faria, was the master of ceremonies and made no secret of his fan-worthy admiration for the American multibillionaire.

Without signing any formal agreement and without going into details, Bolsonaro and Musk announced a supposed deal for Musk to “monitor the Amazon”, something already done with worldwide recognition by the National Institute for Space Research (Inpe), also scrapped, attacked and with a current budget that represents half of what it had in 2013.

Another invitation is for the Korean Samsung to take over the production of semiconductors in Brazil, with an eye on the 5G market, another case in which Ceitec itself could contribute.

The pattern is clear: destroy public companies of excellence to deliver strategic sectors to private initiative, compromising cutting-edge technology industries and national sovereignty.

On the board, negotiations and interests far from any transparency, as is typical in the government that puts secrecy of 100 years for everything. Jair Bolsonaro and his associates have a lot to hide.

In this long thread I did on Twitter [in Portuguese], I explained in detail Musk’s deals with Vale and the dependence of Tesla and the entire electric vehicle sector on a massive amount of “critical minerals” that put the Amazon and indigenous land in the direct target.

Oddly enough, Ceitec was not part of the official agenda of Musk’s visit. Although Fabio Faria has invited, at the end of 2021, the multibillionaire fond of coups to open a semiconductor factory in Brazil.

For Silvio Luis Santos Júnior, president of Acceitec (Association of Ceitec Collaborators) , the government’s announcements with Musk are a pure marketing since they make no sense at all, including for Musk’s companies profile. Tesla, for example, buys off-the-shelf the materials it needs to assemble its cars and does not produce each essential item from scratch, such as semiconductor chips.

In addition to deals with Vale, supposedly monitoring the Amazon – a competence it does not have – and delivering internet access to rural schools – a programme that the Ministry of Education already has – Musk is trying to open a Tesla factory in the Manaus Free Trade Zone and is counting on the extreme goodwill and generous tax incentives from politicians to do so.

“They thought it was just getting here and selling the scrap metal”

Silvio Luis is a maintenance engineer at Ceitec and is part of the restricted group of company employees who keep the factory running with all the excellent work required. Two-thirds of the 183 employees were dismissed by the liquidation. The remaining budget is only to pay essential bills, such as water, energy, and cleaning.

“The government is trying to kill us by starvation,” Silvio Luis sums up.

The privatist obsession of Salim Mattar, who commanded the botched process of liquidation of Ceitec, ran into the Federal Court of Accounts (TCU).

In a decision in September 2021, the TCU suspended the liquidation of Ceitec, determining that the Ministry of Economy interrupted the process. The reason was simple: absolute lack of reasonable technical justifications.

“The reasons that led to the liquidation of Ceitec are not sustained, lacking further grounds, since they were based on analyses that did not consider relevant losses and expenditure of public resources as immediate consequences of this course of action,” considered the minister Vital do Rego.

There is also a representation of the Public Ministry to the TCU that indicates possible “serious irregularities” in the privatisation of Ceitec. According to the document, the process serves “interests alien to the public and national interests and is conducted with arbitrary and persecutions”.

The liquidation is still suspended, and it is unlikely, but not impossible, that it will be consolidated in the Bolsonaro government.

The complete ignorance of reality and the haste to hand over the sector to friends of the market explain the “failure” of the group that follows the Pinochetist doctrine of the Chicago School.

The CEITEC installations are far from the scrap metal imagined by plutocrats who cannot live without public subsidies, such as Localiza of Salim Mattar.

Around the world, by the way, it is common for the semiconductor sector to be funded by public money, as governments understand that a strategic sector such as this needs protection and investment more than pays for itself.

A study by the OECD (Organisation for Economic Co-operation and Development) – the rich country club that Paulo Guedes is trying to join – showed that total government support to 21 major global semiconductor companies was $50 billion from 2014 to 2018. The amount includes giveaways, tax exemptions, and share buybacks at below-market returns. The 3 most prominent companies in the sector – Samsung, Intel and TSMC- receive more than half of the total amount allocated by governments to semiconductor industries.

It is precisely to one of them, Samsung, that the Ministry of Communications wants to hand over part of the semiconductor sector.

Minister Fabio Faria speaks at an event on the semiconductor chain while trying to terminate Ceitec and invites Musk into the deal

Virtual “economy” with the extinction of Ceitec is derisory

According to the minister of the TCU Vital do Rêgo in his vote, the “dissolution of the company, under the accounting-financial criterion, would represent an annual savings of approximately R$ 57.8 million per year, which means less than 0.7% of the current allocation of the Ministry of Science and Technology for the year 2021, of R$ 8.62 billion.

The value is derisory under any aspect that you look at, especially for an industry of the importance of Ceitec.

After all, we are talking about a government that spent, only with the military, $ 15 million in condensed milk and bought 700 thousand kilos of steak and 80 thousand overpriced beers .

This military government, run by military men and women who have emerged from the dictatorship and are constantly threatening our fragile democracy with new coups, seems to care little for “national sovereignty,” a theme of military interest in any country of the world.

Faced with the “Nation Project 2035” launched by the military this week, a work of fiction in which they expose their prejudices and embrace even more the ultraliberal flag, it is reasonable to conclude that, if re-elected, this government of the dictatorship scum will destroy what is left of Brazil.

As a comparison, in 2020, the Union paid the exorbitant and unjustifiable amount of R$19.3 billion just with military pensions , mostly to daughters of dead military personnel.

Far from being included in the “Social Security Reform”, which penalised only the worker, the military continued to enjoy numerous privileges.

The budget needed to maintain Ceitec is a fraction of the fraction of the money that the Brazilian government unduly spends on other unnecessary applications, to be generous.

Botched liquidation of essential industry not ruled out

Meanwhile, Ceitec is the only company in Latin America capable of developing, designing and manufacturing silicon semiconductors – also called chips – on a large scale.

Ceitec’s manufacturing structure, with some adaptations, is compatible with the production of components for 5G.

Ceitec’s employees page argues that “having a semiconductor industry is central to the country’s economic development. The main fields of advancement in the Fourth Industrial Revolution are artificial intelligence, robotics, Internet of Things, autonomous vehicles, 3D printing, nanotechnology, biotechnology, materials science, energy storage and quantum computing – and microelectronics is horizontal to all of them.”

In 2020, according to the association, the state-owned company’s product, research and development area reached the mark of 13 new products and processes developed. In the same year, prototypes of electrochemical platforms (the basis of sensors for disease detection) were also finalised.

And, even without the goal of profiting, the company recorded a profit in 2021. But the critical thing, Silvio Luís highlights, is the company’s strategic position on the Brazilian and world stage. Something totally ignored by this government.

With the liquidation process, the highly qualified workforce employed at Ceitec was summarily dismissed. Most of the workers, most with master’s degrees and doctorates, were forced to reposition themselves in the private market outside Brazil.

Knowledge and public investment are being transformed, by government responsibility, into expertise acquired ready-made by private companies.

The complications of arbitrarily shutting down a complex industry like Ceitec, including from an environmental point of view and the necessary investments – R$ 140 million – to decommission the plant safely, added to an election year and the bluffing of the Bolsonaro government makes employees believe that the liquidation will not be completed in 2022.

“At the same time, if Bolsonaro realises that in some way or another he has the political conditions to execute Ceitec, they will do it. They need an authorisation from the Federal Court of Accounts. If the TCU gives this authorisation, things can happen in a wrong way”, predicts Silvio Luís.

Remember that, even with criticism from the same minister – Vital do Rego – who suspended the liquidation of CEITEC, the privatisation of Eletrobras has just been approved in the TCU by 7 votes to 1 . Vital do Rego has been a dissenting vote and often even pointed out innumerable faults in this ultraliberal government’s flawed “privatisation” processes.

Sought to comment on the liquidation of CEITEC, the Ministry of Economy, the Ministry of Communications, and the Ministry of Science and Technology have not responded to our requests so far.