Brazil: Bolsonaro and Guedes Oversee a Wave of Privatization of State Companies

Bolsonaro's economic adviser, Paulo Guedes, has proposed widespread privatization of various Brazilian state-owned assets.

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The Brazilian government is selling off billions of dollars of state-owned assets (Flickr).

The Minister of Economy of Brazil, Paulo Guedes, announced on Wednesday, August 21, a list of 17 state-owned companies that will be privatized. Eight were already in the privatization program and nine more have now been added. They range from terrestrial and maritime transportation to information services and infrastructure, to postal services.

Amid the controversy over forest fires in the Amazon region, the Bolsonaro administration chose to move forward with its agenda.

While there are massive campaigns against “capitalism,” the Brazilian government is committed to its strategy of offering more free markets and less state control of the economy.

“The new Brazil will focus on privatization as an anti-corruption measure that will also generate income and employment for the population,” Bolsonaro announced.

Through a privatization program overseen by Salim Mattar, a Secretary of State specializing in the Privatization, Divestment, and Markets Division, in the first half of 2019 the sale of assets (particularly in the oil sector) produced USD $20 billion.

Among the new companies that will be privatized is Serpro, the Federal Data Processing Service. It is a leader in the information technology market for both the public and private sectors. It has 9,083 employees and the company earned USD $113 million in 2018.

In anticipation of the privatization announcement, Telebras shares rose 40% 

Telebras, which is linked to the Ministry of Science, Technology, Innovations and Communications (MCTIC), and is involved in information and communication technology, will be privatized as well.

It is listed on the stock exchange. Given the expectations of privatization, Telebras shares rose 40%.

While under state administration, the company experienced a loss of USD $55 million in 2018.

Partial privatization does not need parliamentary approval

Bolsonaro announced that the privatization process will begin with the post office, although he has not yet announced the start date of the transfer.

However, privatizing the postal service requires congressional approval, given that the company has a monopoly on postal services and national air mail (military postal service), fully guaranteed by the Constitution.

Within the government there are proposals to create a kind of hybrid, where the service would not be completely private. There has been discussion of alliances with the private sector in which the state would hold a minority stake.

In any case, the approval of a Constitutional Amendment Proposal (PEC) is not necessary, which would require the support of three fifths the legislators in two rounds of voting.

Since the Temer administration, electricity privatization has been discussed

The same applies to the electricity supplier, Eletrobras; it is on the list, but its privatization must be approved by Congress.

This Wednesday there was a meeting to discuss the privatization of Eletrobrás: the Minister of Mines and Energy, Bento Albuquerque; the Minister of Economy, Paulo Guedes; and various leaders of the House of Representatives leaders, including its president, Rodrigo Maia (DEM-RJ) were present.

During the administration of former President Michel Temer, parliamentarians had sent a bill to Congress on the subject. UP until now it has not yet been presented for a vote. Now, the current administration is considering sending another bill.

Albuquerque on Tuesday, in a conversation with investors, said it is necessary to make improvements to the text of the bill and if privatization is achieved, it should begin this year.

Privatization of trains

Privatizations in the land transport sector involve the Brazilian Urban Train Company (CBTU), which serves the metropolitan areas of Belo Horizonte (MG), Recife (PE), Maceió (AL), João Pessoa (PB) and Natal (RN). In this regard, on June 21, 2018, after the Extraordinary General Meeting, CBTU became a public company. This process would be reversed.

Also included in the list of privatizations is Empresa de Trenes Urbanos de Porto Alegre S.A. (Trensurb), in southern Brazil. 99% of its shares are owned by the federal government. The trains runs on 43.8 kilometers of track on the northern side of the Metropolitan Region of Porto Alegre, with 22 stations and a fleet of 25 trains (with another 15 integrated) and serve six municipalities: Porto Alegre, Canoas, Esteio, Sapucaia do Sul , Sao Leopoldo and Novo Hamburgo.

Maritime industries will also be privatized

The Company of the Holy Spirit Pier (Codesa), in Espirito Santo state, will also be put up for sale. The Holy Spirit Pier comprises a port with public and leased facilities, which handle various types of cargo, including service to vessels on the high seas.

Currently, the port receives a flow of 46 ships per day, and it has five anchored and eleven others at the dock.

In turn, the local port infrastructure of the Port of San Sebastián would be in charge of the São Sebastião Docas company.

Reduction in the Ministry of Agriculture, Livestock and Supply

Regarding the Ministry of Agriculture, Livestock and Supply, the government is proposing to alleviate budget shortfalls by privatizing the General Warehouse Company of São Paulo (CEAGESP), which is the largest source of fruits, vegetables, flowers, fish, potatoes, and eggs in Latin America.

On a daily basis it receives an average of 50,000 people and 12,000 vehicles. CEAGESP controls the largest public network in the state: warehouses, silos, and bulk carriers in Sao Paulo.

In parallel, Ceasaminas supply centers, in Minas Gerais state, will be privatized. This government company operates in conjunction with the federal government, under the supervision of the Ministry of Agriculture, Livestock, and Supply.

The remaining companies range from telecommunications and information technology to the national lottery: Emgea (Asset Management Company), ABGF (Brazilian Agency for Guarantee Funds and Guarantee Fund Management), Dataprev (Information and Technology Company of Social Security), EBC (Communication Company of Brazil), Ceitec (Center of Excellence in Advanced Electronic Technology) and Lotex (Instant Lottery).

Last but not least, is the Mint of Brazil. It has the capacity to produce approximately 2.6 billion bills and four billion coins per year.

Bolsonaro also announced that before the end of his term he will privatize the state oil company Petrobras.

Guedes and Bolsonaro are taking a clear stand against state intervention and in favor of market liberation; and with these policies they will reduce the tax burden on the citizens of Brazil.

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