SAO PAULO – I recognize that private initiatives work much better than government sponsored ones, at least in Latin America. So, don’t take me wrong as you read the title of this article and hopefully the rest of it.
What is wrong, then, with private enterprises taking over Brazilian companies, their heritage as well as publicly owned property, among other things?
A lot.
The current initiative to privatize Brazilian property is nothing else than the center-right government led by a small group of corrupt pawns telling Wall Street that the door is open and that they are free to come in and take anything they want.
Just in case you wonder about Temer’s public justification for selling Brazilian property, that is, empty government coffers and rapidly growing deficits, let’s remember that Brazilians pay on average 50% tax on almost all they purchase. Imported goods alone are taxed by 300%.
No, the leftist political parties are no better than Temer and his Wall Street cohorts. Actually, they are worse. However, there is not really a choice when people need to decide whether having a country led by 5th Avenue comunists is better than leaving it to Wall Street controlled mafia Dons.
Brazil does not need more money in government coffers. The government here already has enough money to realize every single dream. There is no need to reform public pension funds.
There is enough money being collected to pay retirees. What Brazilians want to do is get government out of their lives and government’s hands out of their pockets and their pensions.
Giving away Brazilian property to international bankers is certainly not part of the solution to get Brazil back to development.
Giving away publicly owned property, is like eating the seed you have in your barn for next year’s plantation, like killing the cow that provides milk, or the chicken that gives you eggs.
Nonetheless, the economic team of President Michel Temer has announced the biggest privatization program in the country in two decades in order to, according to Temer, make cash and reduce the fiscal deficit.
More than 50 state assets, the juiciest ones, will be put up for sale or its management will be transferred to the private sector, including Eletrobras, the largest electricity company in Latin America.
Outside the announced program, which includes a dozen airports and the Mint, are the oil giant Petrobras and the Caixa Economica Federal, Brazil’s public bank.
As expected, the program to privatize those 50 state assets lacks details, at least publicly. Those details, the fine print written on the contracts are written in corporate board rooms and only seen by mafia bosses.
No information has been provided by Temer on how much cash the government will get out of the deals he wants to have completed.
The Ministry of Energy has stated that the sale of Eletrobras can result in about 5.4 billion euros.
The Brazilian public deficit reached 8.97% of GDP in 2016, a figure comparable to that of Kenya or Niger.
“The Temer package is undoubtedly the biggest since Cardoso. It includes airports, sanitation systems, the electric sector, issues that will contribute to changing the structure of the economy in the next two years,” explains Alexandre Galvão, a professor at the Don Cabral Foundation business school.
Some of the assets for sale also have a strong symbolic charge, such as Eletrobras itself, the jewel in the crown of the proposal, created in 1956 at the height of President Getúlio Vargas’ state development policy.
The plan is a further escalation in the right turn that Brazil lives after the impeachment that last year ended the presidency of Dilma Roussef and ended the PT. But it is also a consequence of the political weakness of a president involved in corruption scandals.
Temer’s ambitious reform program – from the labor market to pensions – has been tempered by congressional resistance. But let’s remember that this is the same Congress that invalidated Temer’s prosecution by stopping the Attorney General’s accussation against him for collecting bribes.
These economic concessions by Temer to the regions to save his butt represented an increase in public spending and forced the government to lower its fiscal adjustment targets for this year.
Public debt in 2016 amounted to 4.8 trillion reais, comparable to that of India or Canada and equivalent to 78.3% of GDP.
Now, one of the objectives of the privatization program is precisely to raise money to alleviate the state’s accounts, together with reactivating, as far as possible, an economy that, in medical terms, is dying a painful death.
“The whole motivation of the program is the need to raise resources for the national treasure. Eletrobras was no longer playing a strategic role in the electricity sector, largely because of its financial problems,” says Nivalde de Castro, a specialist at the Institute of Economics at the Federal University of Rio de Janeiro.
What Castro does not detail is that Eletrobras’ financial problems stem from the same root as every other problem – corruption – and that nothing in Temer’s program tackles corruption.
The Executive affirms that its objective is to return the efficiency to a company that accumulates a debt of more than 6 million euros.
The Ministry of Mines and Energy details that in the last 15 years, Eletrobras has absorbed public resources for about 65,000 euros that “could be invested in safety, education and health.”
The economic crisis has punished the accounts of Eletrobras, which is not free from the multiple corruption scandals uncovered in the country.
Evaporating its profits also contributed to Rousseff’s decision to reduce electricity rates by 20%.
Rousseff, who was the energy minister of President Lula da Silva, immediately criticized the announcement of privatization:
“This means leaving the country at the mercy of the blackouts, as it happened in 2001 with Cardoso. The consumer is going to pay for a stratospheric light bill. “
Cardoso privatized 80 state companies only in its first term, including mining giant Vale do Rio Doce and Telebras, which had a monopoly in the telecommunications sector.
As now, the Government was trying to contain the increase in public debt. There is some consensus among specialists that privatization of telecommunications was a success, but that the urgency to raise led to selling companies like Vale below its market value.
With the arrival of Lula, privatizations were stopped and successive PT Governments focused their relations with the private sector on agreements for temporary concessions, mainly of highways and hydroelectric plants. These partnerships rendered no benefit, as Brazil’s roads and bridges are in appalling state.
Rousseff continued that model and, shortly before impeachment, had announced a program that included the concession of ports, airports and railways with the expectation of raising more than 5 billion euros. But almost nothing came out of the paper.
Today, the unemployment rate in Brazil, according to official figures, stands at 13.3%, with about 14 million unemployed. But the real numbers are more alarming. There are at least 20% of Brazilians unemployed. Conservatively speaking, that is about 24 million people.
Inflation reached 6.3% last year; again, according to official numbers, which usually underestimate the cost of living. In 2015, the government estimated that inflation had risen by 10.67%. In two years, and if you trust official figures, Brazilians saw they cost of living rise by 17%.
The Brazilian public deficit reached, according to government numbers, 8.97% of GDP in 2016. In absolute terms, it registered a deficit of 549,513 million reals in the same year, a number only lower than the the deficits seen in the United States and China.
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