planalto palace brazilian government headquarters
Economy

Brazil: a privatizing government?

Why the the discourse of “sell everything we have” turned into one of the mantras of Bolsonaro’s campaign and government

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The last presidential elections in Brazil were, in a manner of speaking, unexpected, to say the least. A country divided in two sides, and whoever was in the middle – which was a good part of voters – had to choose one side. In the midst of an institutional crisis, both economic and political, Jair Bolsonaro won the elections, being a candidate without the support of political parties, without any political advertisements on television, without many resources for campaigning, and without ever having occupied a position in the Executive branch of government.

During his induction as an official candidate in July of 2018, 77 days prior to the first round of voting, Bolsonaro gave a speech in which, among many of the promises made, he emphasized that if he was elected, he would “privatize the majority of public companies”– denationalizing was part of the superficial notions that he had (and has) concerning economic liberalism.

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The discourse of “sell everything we have” turned into one of the mantras of Bolsonaro’s campaign, which risked citing a specific number of companies which would be taken off the government’s hands – on a certain occasion he even spoke of 50 and, in another, of two-thirds of the total amount of public companies.

It is obvious that the candidate had no idea what would, in fact, be possible, so long as he won the elections. But it was important for him to emphasize that he would deal a final blow to “all those state-owned companies” created by previous governments, especially those public companies created during the 13 years in which the Workers’ Party (“Partido dos Trabalhadores” or PT), his biggest adversary, had remained in power.

Bolsonaro spoke of privatizations, stressing their importance, without a clear understanding of what this actually meant. However, his economic guru and current Minister of Economy, Paulo Guedes, had a respect for the market and, with careful strategy, helped turn the promises of “a leaner and more efficient State” into the new government. It cannot be denied that this point influenced the decision of many voters who were discontented with the historical inefficiency of Brazilian public services.

A study by the Getúlio Vargas Foundation (FGV) that was disclosed less than a month after the election of Bolsonaro showed that Brazil has the largest number of state-owned companies among the 36 nations that compose the Organization for Economic Co-operation and Development (OECD): a total of 418 companies controlled directly or indirectly by the State, both at the state and municipal levels – of those, 138 are Federal companies.

The week before the disclosing of the study by FGV, the National Treasury had announced that spending on state-owned companies by the Federal Government would amount to BRL 9.3 billion more than the government had raised in the year.

It is not necessary to be an expert in public funds to grasp the scale of the damage this would cause. When one realizes that most of those state-owned companies was created almost exclusively to host politicians and that many other of those companies ended up having their purpose distorted in order to respond to the interests of politicians, it is even easier to talk about privatization.

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Facing such a context, Bolsonaro became the President of Brazil – entering the Palace of the Planalto, which is the equivalent of the White House – making civil servants feel threatened by the prospect of losing their jobs. Every time they were asked about the issue, the President and the Minister of Economy – and this could not be otherwise – always confirm the tone of the campaign and treat privatizations as something set in stone for the next few years, even if their discourse still expresses those actions as promises.

The truth is that the government’s first semester ended up without the privatization of any medium or large sized company owned by the State. On the contrary, the state-owned media company TV Brazil, engorged by the PT — and hence criticized by Bolsonaro — ended up hosting the allies of the current president, who, like everyone else, went on to take advantage of the State’s communication infrastructure to self-advertise.

However, the overall balance of the first six months of public administration are echoed in the claim by Tarcísio Freitas, the Minister of Infrastructure, who has suggested that the plans to privatize the two large state-owned companies under his command are not in his hands: the Planning and Logistics Company (EPL) and Valec, a company responsible for the railroad system in Brazil. “We will not close a company, just for closing it,” explained the minister.

Bolsonaro himself – so as to calm the market’s speculations – came out in public to say that the privatizations of the two biggest public banks of the country – Banco do Brasil and Caixa Econômica Federal –, were not in the government’s radar. Concerning the giant Petrobras, the president also was forced to explain that, even if directed by an economist of the “Chicago School,” the energy company could be – that is, it no longer is guaranteed –“partly” privatized.

More recently, Bolsonaro admitted that “there will be a problem” to privatize the bigger state-owned companies and asked the special secretary of Denationalization and Divestment in the Ministry of Economy, Salim Mattar, to at least try to free the government from the “little” public companies. Mattar is the only one in the government that still openly defends “privatizing everything.”

The Supreme Court in Brazil sustained in a recent decision its veto to any privatizations without the support of Congress, which – inadvertently or not – puts the brakes on the current government’s appetite for denationalizing.

The Federal Government, however, will be able to freely sell its subsidiaries; that is, the branches of public companies – and this is exactly what, until 2022, Bolsonaro will attempt to accomplish, so that one of his primary campaign promises is not “sold” to his successors.

Translated by Axel Diniz