Latinnews Archive
Brazil and Southern Cone - 21 October 1993
BNDES's Arida to speed up sell-offs; LEFT FIGHTS PROPOSAL TO ABOLISH STATE MONOPOLIES
Finance minister Fernando Henrique Cardoso would be announcing 'at any moment' new rules for privatisations, which were expected to speed up with the appointment of Persio Arida as the new president of the Banco Nacional de Desenvolvimento Economico e Social (BNDES), a government official said in early October.
One of the objectives of the new rules, the official noted, was to prevent the formation of private monopolies. In early September the local press had reported on claims that Aldo Narcisi, whose company, Brastubo, had headed a consortium that made a winning bid of US$ 331m for 68% of the shares of the Companhia Siderurgica Paulista (Cosipa) when it was auctioned in August, had been a 'front' for the Banco Bozano Simonsen, which had headed the group that had acquired a controlling share of Usinas Siderurgicas de Minas Gerais (Usiminas) when it was privatised in October 1991. If true, the press pointed out, this meant that the group led by the Banco Bozano Simonsen now controls the entire Brazilian production of heavy steel plates. It would also have acquired a near-monopoly of non-rolled products had a consortium led by Usiminas succeeded in taking a controlling share of Aco Minas Gerais (Acominas) at the privatisation auction held at the Belo Horizonte stock exchange on 10 and 13 September.
* Troubled Agominas auction
The first day of the Acominas auction was marred by violent confrontations outside the stock exchange between the military police and anti-privatisation demonstrators belonging to the Confederacao Geral dos Trabalhadores (CGT) and the Uniao Nacional de Estudantes (UNE). More than 30 people were injured and 50 arrested, the latter including the UNE's president, Claudio Mendonca, and the leader of the CGT in the state of Minas Gerais, Gerson Faria Lima.
Inside the stock exchange there was a tough bidding battle between three consortia headed by Mendes Junior, Usiminas, and Acesita. The first to drop out was Acesita. Usiminas took longer to quit but, by the end of the first day of the auction, when 59% of the 139,000 lots (1,000 shares each) on offer had been sold, the Mendes Junior consortium, which included Villares, White Martins and the state-owned Companhia Vale do Rio Doce (CVRD), had effectively gained control of Acominas. Having signed an agreement with the Acominas workers, giving them the right to acquire 20% of the shares on favourable terms, on 10 September the Mendes Junior consortium purchased 40% of the shares for a total of US$ 433m, while it said it planned to acquire the remaining shares still on offer at the resumption of the auction on 13 September.
Noting that the total being paid for Acominas, which he estimated at about US$ 555m, was more than US$ 200m above the reserve price of US$ 346.6m set by the government's privatisation committee, the committee's chairman, Andre Franco Montoro Filho, said the success of the auction 'strengthened' the privatisation programme and contributed towards its 'acceleration'.
* Now the 'most attractive'
Persio Arida promised to speed up the privatisation process when, in mid-September, he was installed as president of the BNDES, which has played the leading role in shaping and implementing privatisation policies. He said he proposed to include in the programme the 'most attractive' state-owned companies, which, analysts have noted, means those in the oil, telecommunications and electricity sectors.
'This will be the great test of the privatisation convictions of the President (Itamar Franco),' commented Eduardo Modiano who, as the then president of the BNDES, headed the privatisation programme until late 1992. Modiano himself had come under fire from nationalists for suggesting early last year that even the state oil company Petrobras was not 'sacrosanct' and that, sooner of later, its privatisation would become a 'viable proposition'. He had also said he favoured the sale of Telebras, the state telecommunications company. But he had acknowledged that, because of constitutional impediments, in both cases privatisation would take time. He anticipated a 'very long debate' over the necessary constitutional reform (RB-92-02,03).
Long and ferocious, analysts said in early October when it was still thought that congress would start the revision of the constitution on the 6th of the month (see Front page). It was noted that the Left, which firmly opposed any revision, rejected out of hand the proposed abolition of state monopolies and the provision of facilities for foreign investment, both of which minister Cardoso considers fundamental to the success of the privatisation programme.
* Uncertainty about CVRD
Meanwhile, uncertainty continues about the privatisation of the Companhia Vale do Rio Doce (CVRD), the mining conglomerate that is the world's biggest iron ore exporter.
In early August the executive secretary of the finance ministry, Clovis Barros Carvalho, said that the CVRD, of which the government owns 51% of total equity and 66% of ordinary shares, would be privatised before Franco hands over to the winner of the late-1994 presidential elections. But another high ranking finance ministry official said the official position 'should only come out at the end of September' -- it was still awaited at the time of writing --, adding that 'the rest is just talk'.
Former finance minister Eliseu Resende had included CVRD in his privatisation plans before being replaced by Cardoso in May. Foreign interest had apparently been strong, this despite the constitutional restrictions on majority foreign ownership in Brazilian mining operations, which Cardoso also wants removed.
In early October a member of Cardoso's team suggested that the CRVD and the BR Distribuidora, the subsidiary of the state oil company Petrobras responsible for the distribution of oil products that Modiano wanted to sell off (RB-92-06), would not be included in a new privatisation list. 'The sale of these two companies is controversial and implies a high political risk,' he noted.
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