Hurdles for Bolsonaro’s privatization plan

Political scuffles have seen the government’s main privatization program transferred to the Economy Ministry, which could bring further delays to Bolsonaro’s plans for state divestment

Elected with a promise of privatizing state companies and selling off government assets, Brazil’s far-right President Jair Bolsonaro has boasted on social media about the amounts his administration has raised through privatization and concession projects in its first year. One of the main projects of his government has been the Investment Partnership Program (PPI), which aims to transfer several infrastructure works in the country—along with state-owned companies—to the private sector.

In 2019, the government raised BRL 96 billion as a result of these sales. Among them were the auctioning off of 12 airports (BRL 4.3 billion), port terminals in Santos and Paranaguá (BRL 700 million), and part of the North-South railroad (BRL 2.7 billion).[restricted]

However, many of these operations aren’t strictly privatizations, for example, the sales of natural assets such as the Enchova and Pampo oil fields and the Pasadena oil refinery. There were also the divestments of shares in Neoenergia, the Guarantee Fund of Educational Credits, the Brazilian Reinsurance Institute, as well as in Petrobras and some of its subsidiaries.

In truth, the federal government only submitted one pure privatization bill to Congress, that of state-owned electricity distributor Eletrobras, which has yet to progress.

The scenario contrasts with Jair Bolsonaro’s 2018 campaign, which created an expectation that privatizations would be easy. “This result cannot be credited to the focus on the pension reform, or Congress’ behavior. The current program needs to be reorganized, with a credible schedule. The government should admit that it will not privatize state-owned companies and that it will only be able to carry out divestments and undo the mistakes of the Workers’ Party,” says economist Elena Landau.

In August of last year, the government announced the 17 state-owned companies that would take priority in the privatizations to be carried out in the coming years—mainly Eletrobras, postal services company Correios, and telephone company Telebras. Jair Bolsonaro went so far as to state during the publication of the list that Correios would be the absolute priority, though conceding the process could take a long time.

This year, the president changed his tone and admitted the size of the difficulty to be faced with privatizing the state-owned postal company, mainly because of its large ranks of public servants. According to political scientist Magno Karl, this problem exists because of the postal workers’ union’s capacity to mobilize against these changes.

While these groups put pressure on parliamentarians and clearly state their arguments, the government does not release vital information to show the population that privatizing the company will be beneficial.

Political factor

The privatization program underwent a further twist last week as the PPI was transferred from the office of the Chief of Staff to the Economy Ministry, amid tensions between Mr. Bolsonaro and his current Chief of Staff, Onyx Lorenzoni.

One of Mr. Lorenzoni’s secretaries used a Brazilian Air Force plane to fly to India from Davos, Switzerland, in order to meet up with the presidential delegation on its official visit to that country. He was fired, then rehired at the request of the president’s son Eduardo Bolsonaro, and then fired again after pressure from Mr. Bolsonaro’s electoral base.

With the transfer of the PPI, negotiations in Congress are no longer Mr. Lorenzoni’s responsibility, moving over to the purview of Economy Minister Paulo Guedes. This changes the landscape significantly, as Mr. Lorenzoni’s background is as a member of the congressional lower house, but the head of parliamentary negotiations in the Economy Ministry, Privatizations Secretary Salim Mattar, doesn’t have the same experience.

Political scientist Sandro Cabral argues that the Bolsonaro government suffers from a lack of personnel with the ability to build political bridges and devise consistent divestment plans. “The government has sparse islands of technical and political competence and pockets of incompetence,” he said.

There is also the question of fragmentation inside Brazil’s legislative branch. The necessary horse-trading from the Executive is a much harder ask due to the sheer number of political parties represented within Congress. “It’s one thing to negotiate with five parties,” said Mr. Cabral, “but another thing to negotiate with 30.”

Chronic problems

Despite its reputation of having a large state, Brazil began its push for privatization almost 40 years ago, under the government of General João Figueiredo, the last of the heads of state of the military dictatorship. Plans were then put into practice by civilian President José Sarney, who sold off a number of state-owned firms, including paper manufacturer Aracruz Celulose.

President Fernando Collor continued, selling off steelmaker CSN, which had been created back in 1941. Even the center-left Workers’ Party governments (2002–2016), often accused of increasing the size of Brazil’s state, carried out several concessions in the area of energy and infrastructure.

But the biggest leap in privatization in Brazil occurred during the government of center-right President Fernando Henrique Cardoso (1995–2001), who opened up many industries to the private sector, including telecoms.[/restricted]

By Brenno Grillo

Brenno has worked as a journalist since 2012, specializing in coverage related to law and the justice system. He has worked for O Estado de S. Paulo, Portal Brasil, ConJur, and has experience in political campaigns.