Privatizations are one of the cornerstones of the next Bolsonaro government and it was clearly established through the creation of the “General Secretariat of destatalization“, occurred on 11/23; it demonstrates the intention of Guedes and Bolsonaro to promote a large demobilization of state assets.
Chief of the new secretary was appointed Salim Mattar, founder and president of Localiza, one of the most important Brazilian car rental companies, as well as a director of the Millenium Institute, a stronghold of neoliberal economic thought.
The government’s goal is to use resources from privatizations to reduce the state’s deficit, while at the same time eliminating clientelist management, a source of corruption and inefficient business management.
The strategy to sell assets of the State to reduce the primary deficit is certainly doubtful, if not accompanied by the approval of the pension and fiscal reforms, these are able to structurally affect the public deficit of Brazil.
As the economist Monica de Bolle wrote about a year ago, in times not suspicious, about the privatization plan proposed by Temer, to privatize to reduce the primary deficit is like “sell lunch to pay for dinner”: after dinner, the day after the hunger returns and to be feed you have to sell again, or maybe sell out in despair.
However, Guedes’ proposal is to attack the primary deficit also structurally, which is why the approval of the pension reform will be one of the first objectives of the new government.
Today in Brazil there are 138 state companies (at the Federation level, not counting those controlled by individual states or municipalities). It is estimated that 18 of these are in deficit, and require financial contributions in the order of 15 billion reais per year.
Ready to break the piggy bank and get in line for new privatization? Here is the list of the most important companies in the smell of privatization:
EBC (Empresa Brasileira de Comunicação): manages television and federal public radio (TV Brasil, TV Brasil internacional, Radio MEC, Agencia Brasil and others) and provides services to the Secretariat of Social Communication of the Presidency of the Republic, producing the NBR TV channel and the radio program “A voz do Brasil”).
Valec Engenharia, Construçoes and Ferrovias: deals with the planning, engineering, construction and management of the Brazilian railway system.
EPL (Empresa de planejamento e logística): is the state-owned company created during the Dilma government to design high-speed railways in Brazil, starting from the Rio de Janeiro-São Paulo route. The Rio-SP TAV has not been realized, but has drained 1 billion reais in projects. After this failure, the EPL went on to work on the design of freight transport systems integrated into the road transport system.
Serpro (Serviço Federal de Processamento de Dados): offers information technology services for public administration. It depends on the Ministry of Fazenda and carries out approximately 80% of its activity in the area of public finance management. They produce the software for the management of CPF (fiscal codes), CNPJ (company tax codes), ReceitaNet (tax return), RENAVAM (registration of motor vehicles) and many others.
Dataprev: is an IT company responsible for managing the social database of Brazil, which controls the issue of social benefits and pension management (INSS).
Telebras: extinct in 1998 during the government Fernando Henrique Cardoso and “resuscitated” by Dilma in 2010 to manage the National Broadband Plan, today Telebras offers internet access services to telecommunication companies authorized by Anatel, the optical fiber infrastructure for Petrobras and Eletrobras and internet access services for states, municipalities and non-profit associations.
BR Distribuidora: Bolsonaro and its economic team have repeatedly clarified that Petrobras is a strategic company and is not part of the privatization program. However, subsidiaries operating outside the “core business” (oil extraction and production) could be sold. The BR Distribuidora is one of these, since it deals with distribution and marketing of fuels and owns over 8,000 retail stores (postos de gasolina). It was the vice-president elected, General Mourão, who declared – on November 14 – that the BR Distribuidora could be one of Petrobras’ first assets to be privatized.
Eletrobras: is a state holding company that implements the generation, transmission and distribution in the electricity sector. It is responsible for 37% of the generation capacity and for 57% of the country’s transmission lines. In recent years it has lost the ability to generate cash flow necessary for the strong investments it needs to modernize his structure and now depends on state aid. Since this is a company of strategic importance, the rules of its privatization must be defined by the Brazilian Parliament.
Correios: the Brazilian Post was a model company until a few years ago, generated profit and provided services of the highest level. In a few years it has become a state bandwagon, thanks to an excess of cronyism, a bad administration and corruption at high levels. Today, despite being a monopolist in the sector, it accumulates billions in losses and offers a service that is considered increasingly poor.
Also for Banco do Brasil and Caixa Economica Federal, two major public banks, there is talk of the possible privatization of non-strategic activities, but Bolsonaro and Guedes did not specify what they could be. As in the case of Eletrobras, privatization is subject to the approval of the Brazilian Parliament, which must decide on the modalities and rules.
Yes, reform the pension system is absolutely needed. As well, privatization, true privatization (not like with Petrobras ,when many years ago shares were sold to investors on the stock exchanges even though the government retrained about 40 per cent ownership), will help to eliminate inefficiencies and waste over time in these companies.