On 29 January, Salim Mattar, Brazil’s new denationalisation & divestment secretary within the economy ministry, said that only Petrobras, the Banco do Brasil (BB), and the Caixa Econômica Federal (CEF) would remain state-owned companies after the government completes its privatisation drive.
Analysis:
The privatisation of state-owned companies is one of Economy Minister Paulo Guedes’ top priorities, part of the government led by President Jair Bolsonaro’s efforts to downsize the state, reduce public spending, and improve Brazil’s business environment. Yet the government’s aims for its first 100 days, presented last week, do not include any serious efforts to pursue full privatisation. Mattar’s comments come as a welcome reminder to investors that privatisation remains a priority, building on assurances made by Guedes at the World Economic Forum (WEF) last week.
- Speaking at an event organised by investment bank Crédit Suisse in São Paulo, Mattar did not outline which state-owned companies would be the first to go, although he did indicate that subsidiaries of Petrobras, BB, and CEF would be sold off rapidly. Slimmed down versions of the oil firm and these two banks will be the only structures to remain under state ownership, according to Mattar, who says “they must divest of their assets and become a bit skinnier, more lean”.
- Mattar also said he aims to get rid of the investment arm of the national development bank (BNDES), known as BNDESpar. “There is no reason for the government to have a portfolio of company shares,” Mattar said, explaining that all shares held by BNDESpar will be progressively sold off over the next four years, with the bank’s sole focus to be the financing of infrastructure projects.
- Last week, at the WEF in Davos, Switzerland, Guedes told Bloomberg that privatisations would generate revenue of US$20bn this year alone. Mattar presented a more ambitious target yesterday, saying he hoped privatisation would generate 25% to 30% more than the US$20bn promised by Guedes.
- Mattar also evoked the deadly collapse of a tailings dam in Minas Gerais state last week, saying that individuals are responsible for the tragedy, not companies. Vale, the mining company that owned the dam, has been the object of much criticism since the accident, which has also cast doubts over the government’s talk of deregulating the private sector.
- Public opinion is strongly against privatisation, a position which is now likely to be reinforced by the fact that Vale was controversially privatised in 1997 by then president Fernando Henrique Cardoso (1995-2003).
Looking Ahead: Mattar has not outlined a timeline for the government’s privatisation agenda, although he has said that he plans to streamline the privatisation process down to 120 days.
