The Apparent Over-excitement With Signing, Announcing Memoranda Of Understanding (MOUs)


By Henrique Caine

Lately we’ve had one MOU after another being signed between GOL officials and others– mainly foreign entities. In many cases it’s celebrated in the media as if to say a deal is concluded and the benefits to the public will start pouring. We need to stop this as it sends the wrong message and sets the wrong expectations.

From my own meager experience, an MOU in many situations is usually the beginning of a long negotiation process that simply outlines that the parties have agreed to proceed in a particular direction; and normally sets forth pre-conditions that each party must meet as real talks commence towards a deal being consummated.

For example, an investor looking to develop an infrastructure project may require that a government institution does land clearing, re-settle the population from any affected communities, compensate property owners whose assets fall under eminent domain, align inter-agency policies impacting the transaction, or simply process necessary incentives to begin, etc. Likewise, the government may require that the party of interest demonstrate financial capability by providing bankable and other technical references, register a local company, secure a local JV partnership agreement, execute a corporate board resolution endorsing the project, finance feasibility studies and environmental impact assessments, and other transaction preliminaries. All of which are aimed at moving towards that agreed upon objective.

The point is that our media folks as well as public officials who know that MOUs do not mean the deal is concluded should set the right expectations in public announcements of such MOUs. We all know that deals in excess of US$10 million require legislative ratification, which is not an overnight process in LIB by a long shot and has its own ‘kata-kata.’

Therefore, I think those in the habit of celebrating too early should remember that there is a long road between an expressed interest and final conclusion or a contract. Lets educate the public to know the difference and set the right expectations so as to avoid criticisms if the deal doesn’t go through for any number of reasons.


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