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Alckmin | Divide Responsibility and Conquer

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Game theory suggests that cartels are inherently unstable, as the behaviour of members of a cartel is an example of a prisoner’s dilemma. Each member of a cartel would be able to make more profit by breaking the agreement (producing a greater quantity or selling at a lower price than that agreed) than it could make by abiding by it. However, if all members break the agreement, all will be worse off. — WIkipedia, Cartel

The São Paulo government mulls its strategy for escaping blame in the  Siemens case — the trensalão, as local jokers call it — as opposition demonstrators prepare to hit the streets.

In introducing the strategy, Governor Alckmin reaches for the moral high ground, as he often does.  His state government will set out to tilt at the windmills that the federal government refuses to confront. A cryptopartisan ad hoc commission of inquiry full of friendly faces is more qualified than the federal antitust agency to get to the bottom of the case.

One of the reasons that the case has festered so long is that CADE has throughout most of its history been nothing more than a box on an org chart. Under Lula, it became increasingly assertive;

As to Alckmin, asserting that cartel schemes are too sophisticated to be detected by the auditors of government like São Paulo’s was, I thought, a foot-in-mouth moment.

First of all, this tends to sound rather like a confession of incompetence.

And secondly, in the past, the regulatory agencies have discovered numerous indications in investigations that were quashed for political motives. Later on, when I have time, I will tell you one or more such tales.

Source: Portal ClippingMP.

A day after going to court and gaining access to the antitrust authority’s investigation of the formation of a cartel in subway and commuter rail lines, Governor Geraldo Alckmin (PSDB) announced he would sue Siemens. Despite this, current contracts with the German firm will remain in force. Alckmin also made clear his strategy to divide the onus of accusations with the federal government, citing concession auctions in other major cities.

Aides to the governor say that the government has four contracts with Siemens that will not be cancelled so as not to delay government projects. “But they will be closely analyzed,” said a source close to the governor.

During a press conference at the Governnor’s Palace, the state prosecutor, Elival da Silva Ramos, said the contract will not be interrupted unless some new fact arises.”If the contract is being executed and is not one of those mentioned in the CADE case, it will continue.”

The governor said the civil suit against Siemens is the first step, and that others steps may be taken. One of them might be an administrative suit declaring the company unsuitable  bid on new contracts. Other cartel members may be sued.  “Siemens has confessed. The others have not, but Siemens has. It will repay us down to the last penny The other companies, if found to have taken part in a cartel, will also be sued,” he said.

The state prosecutor said that a legal action to declare the company unsuitable and prevent it from signing contracts with the government will be “pursued at the proper moment.” Asked whether the state government failed in its oversight of these contracts, the governor denied it. “Collusion among companies from all over the word is not easy to detect. CADE, responsible for this task, only managed it by offering a plea bargain,” he said, in reference to the deal Siemens made with CADE.

Share the Crisis

Along with announcing its legal battle against the company, Alckmin made it clear that his strategy includes sharing the onus of the case with the federal executive.

Alckmin referred directly to federal contracts for the purchase of trains in  Porto Alegre and Belo Horizonte In which only one competitor took part. “O [Porto Alegre] consortium was composed of Alstom (93%) and CAF (7%).  In another auction, the same consortium, only this time with the shares reversed: CAF (93%) and Alstom (7%) .”  Alckmin said. Data from the CADE investigation indicate percentages different from those cited by the governor: 87% to Alstom and 13% to CAF.

Alckmin added that São Paulo is not an isolated case. “I would like to recommend to my fellow governors and to the federal administration — because São Paulo is not the only jurisdiction with a cartel — that they conduct a rigorous investigation of transport and energy so that no single entity in the federation will be damaged by collusion among contractors.

The governor recalled his decision to delay the purchase of 65 trains by the state in 2012 because there was only one bidder and the price was deemed too high. “I am merely demonstrating the difference, the effort that São Paulo makes in strenghtening competition — we were able to reduce prices by 20% to 30%.

Questioned about the Porto Alegre and Belo Horizonte contracts cited by the governor, the Ministry of Cities  transferred responsibility for these to the CBTU  — Brazilian Urban Train Company) — and Transurb, the Porto Alegre rail authority.  Spokespersons for these companies had not responded by press time. 

Smoke Screen

Leader of the Workers Party in the state Legislative Assembly, Luiz Cláudio Marcolino, said that Alckmin’s decision to sue Siemens and demand reimbursement was nothing more than a “smoke screen” designed to mislead  public opinion

“The company is a confessed defendant in the case of a fraudulent scheme , and it confesses, moreover, that it had the backing of the state government. At this point, what society wants to know is who participated, how much was diverted from the public coffers, and how extensive the scheme was,” says Marcolino. The PT benches say that the Alckmin government signed 130 contracts with the consortium denounced by Siemens.

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