Economy

Brazil's government approves state-owned Postal Service Correios inclusion in privatization program

The first phase of studies for the privatization of Correios has been completed, paving the way for the modeling of the company's sale to be completed in August

Photo: REUTERS/Ricardo Moraes
Ler em português
  • The study rules out the sale of a minority stake in the post office and also divides the company between multiple stakeholders based on regions or type of services provided;
  • The investment made by the Correios between 2015 and 2019 totaled about BRL 720 million, according to the study.

The first phase of studies for the privatization of Brazil‘s postal office Correios has been completed, paving the way for the modeling of the company’s sale to be completed in August, Brazil’s Investment Partnership Program Council (PPI, in Portuguese) said on Tuesday.

The study rules out the sale of a minority stake in Brazil’s state-owned post office. Also, it says that it won’t divide the company between multiple stakeholders based on regions or type of services provided, meaning that Correios’ control would go to a single owner.

READ ALSO: Brazilian state-owned Postal Service Correios to be privatized by the end of 2021, says Economy Minister

According to the PPI Council, minority stakes alternatives “would generate losses in economies of scale that would end up putting even more pressure on the company’s financial balance. Minority selling scenarios were also ruled out for putting pressure on the government to pay for most of the investments.”

The survey, which started last August and is coordinated by the Brazilian Bank for Economic and Social Development (BNDES, in Portuguese), states that Correios needs investments of around BRL 2 billion per year “at a time when the company does not generate enough cash for this […] there is no way for the government there to make these infusions.”

The investment made by Correios between 2015 and 2019 totaled about BRL 720 million, according to the study.

READ ALSO: Correios’ postal workers have to resume work as of Tuesday, decides Brazilian Justice

Brazil’s government expects that the bill for the privatization of Correios will be voted on Congress by the end of the year. After approval by Congress and the Federal Audit Court (TCU, in Portuguese), the auction could be held.

According to the BNDES, the study’s guideline is to “guarantee the universalization of the postal service and the quality of the service, so that the entire Brazilian population is served according to the demand and conditions of each region.”

The plan come at a time when e-commerce has grown due to the social distancing measures, with consumers unable to visit brick-and-mortar stores.

READ ALSO: Why is the Brazilian government pushing public sector reform during a historic crisis?

The PPI points out that Brazil’s Correios invested BRL 300 million in 2020 and that the investment needed for 2021 would be BRL 1.7 billion. For 2025, the account reaches BRL 2.6 billion. The company’s market share in recent years, according to the survey, fell from 48% in 2017 to 43% in 2019.

The profit before interest, taxes, depreciation, and amortization (Ebitda) of the Correios in 2020 totaled BRL 988 million, an increase of 46% over 2019. The margin grew from 3.7% to 5.7%, according to the government. Net revenue, however, decreased 6% in the period, to BRL 17.7 billion.

(Translated and co-written by LABS)

Get the best insights about Latin America market in your inbox