Privatize Petrobras, Caixa, and Banco do Brasil

Conducted over more than three decades by democratically elected governments, the Brazilian privatization program has successively dismantled taboos, prejudices, and catastrophic theses.

In the lost decade of the 1980s, when the country was compelled to reform the inefficient and income-concentrating entrepreneurial state, it seemed unthinkable to sell off mighty companies like Embraer and Vale; of the telecommunications and electricity sectors; of the vast and deficit-ridden network of state banks.

All of this was done – and with great success. What is inconceivable today is that such activities and services were once at the mercy of the inefficiency of public management and the political conveniences of governments in power, instead of being regulated by autonomous agencies and competition.

Even left-wing administrations, which maintain ideological and corporatist opposition to the divestment of companies, have acknowledged the benefits of granting concessions for roads, railways, ports, and airports. Promises of renationalization, moreover, have been forgotten.

Social resistance is also dissipating. Last year, Datafolha showed that opinions favorable to privatizations already carried out or underway – from telecommunications to sanitation, from highways and airports to energy – outweigh the contrary ones.

It is astonishing that no fewer than 123 companies remain under the direct or indirect control of the National Treasury, among which it is difficult to name an example beyond Embrapa, an agricultural research company, where the public interest might justify such a condition.

In this anachronistic conglomerate, only three giants – Petrobras, Banco do Brasil, and Caixa Econômica Federal – gather around them 75 subsidiaries in Brazil and abroad. Almost two-thirds, therefore, of the universe of federal state-owned companies.

This apparatus is expensively maintained under state control, mainly due to political and union interests. Nationalist and strategic pretexts are invoked to preserve the power to allocate positions, distribute favors, and finance projects with questionable returns, not to mention integrity.

Petrobras and Caixa, especially, frequently appear in the news for cronyism and mismanagement. Legislative adjustments in recent years have indeed improved governance, but they remain under pressure from reactionary and interventionist forces on both the left and the right, vulnerable to setbacks.

The path forward is cautious privatization, with models that encourage competition and regulation that safeguards consumer interests. There is a persuasive effort to be made and a long learning process to be leveraged.

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