Seven of the 16 state-owned companies presented this Wednesday (20) by the Minister of Economy, Paulo Guedes, as those that the government wants to privatize by 2022 were already included in the lists of this and the previous government, that of Michel Temer. Among them, Eletrobras and the Casa da Moeda (the Brazilian National Mint).
Among the new entries of the list, Correios (the Brazilian Postal Service) and two other companies crucial to the gathering of sensitive information for the country, DataPrev and Serpro, were the ones that caught the attention of experts and financial analysts, precisely because of the intrinsic value of the activities linked to them.
On the other hand, the announcement was also considered a bit modest and of low fiscal impact by economists such as Elena Landau, the “queen” of privatizations that coordinated the program of denationalization for the government of Fernando Henrique Cardoso.
“For he who promised BRL 1 trillion with the sale of companies, this program is frustrating,” she said to the journal O Estado de S.Paulo. The Federal Government has 130 state-owned companies that include subsidiaries and directly-controlled companies–in a program of privatization only those companies with healthy accounts should be considered, so as to generate interest among investors and to reach a good value in the market.
Landau also criticized the fact that neither Valec (a public company responsible for building railways in the country) nor EBC (the official press release company of the Executive branch of government) had been included in that first list.
Regardless, the announcement stirred the financial market on Wednesday–when the names of listed state-owned companies was leaked hours before the announcement by Guedes in the website Poder360–and this Thursday (22).
The market value of Telebras, a public telecommunication company, practically tripled in two days, reaching BRL 3.06 billion during Thursday (22) afternoon. Founded during the beginning of the 1970s, the company was valued at BRL 1.4 billion at the beginning of this year. Two years ago, its market value did not surpass BRL 448 million, according to the newspaper Valor Econômico.
The reactions of the financial market act as a thermometer for what occurs in the real economy, since they always represent an outlook on the future. In fact, investors are willing to jump at any sign of good news in Brazil, and the financial market is one term, yet it is important to consider the announcement with a bit more of realism.
The list is barely the beginning of processes that will take a minimum of two years, according to Salim Mattar, the special secretary of Denationalization, Development, and Markets that is under the Ministry of Economy. A model for the privatization of Correios, for example, should only be ready in 2020, after surveys coordinated by BNDES.
Correios, as Mattar told the media outlet Estadão Conteúdo, has the monopoly of the national postal service and the military postal service as guaranteed by the Constitution. It is for that reason that its eventual denationalization, whether it be partial or total, needs to pass through Congress via the Constitutional Amendment (“Emenda Constitucional”) or PEC–a process that could take two to three years.
Despite these obstacles, the interests of investors in the state-owned company are real. In 2017 and after four consecutive years in the red, Correios registered profits of more than BRL 660 million. The losses of more than BRL 5 billion that were registered in the two years prior were due, according to analysts, to issues of bad management and also to the gradually more specialized and efficient competition of private companies. It is far too heavy a giant to modernize at the necessary pace.
On the other hand, the company also performs important social functions. It is the only access of many to benefits and documents. Such a role needs to be guaranteed during the process of privatization.
Privatization or reduction of federal funding?
Not even that which the government insists on calling “privatization” is agreed on by experts. For some, the concept only refers to cases in which there is a sale of control or the division of subsidiaries, with the money going directly to the Treasury. The government’s program, as the title of the post held by Mattar suggests, is closer to a program geared to reducing state funding, with cases in which the sale of participation generates money for the accounts of the very same state-owned companies being privatized.
What is agreed on by everyone is that not losing money with unproductive or unessential state-owned companies is a good start. Everything will depend on how the process is put into effect.
And also this Thursday (22), the government confirmed “its intention” to continue with 117 different initiatives in the PPI. Together, they could yield BRL 1.3 trillion. Hence, Wednesday’s (21) list is just the beginning.
Translated by Axel Diniz