BRAZIL: Hopes for Privatisation to Pay off Debts

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Jan 10 1996 (IPS) - The Brazilian government will intensify the privatisations process this year, to make more this year than all of the past five, and ten times the amount made in 1995.

The aim is to raise between 10 and 11 billion dollars to balance public spending which left an alarming deficit last year.

It also answers the widespread criticisms of liberal politicians who object to the “excessive slowness” of the privatisation process.

The objectives for previous years have never been met.

In 1995, Planning Minister Jose Serra proposed raising four billion dollars by selling shares in 17 companies, but only 1.024 billion were actually made, as in the end just two companies were sold with minor shares offered in another six.

Most of these companies belonged to the petrochemical sector.

Five years of privatisation programmes have so far raised a total of nine billion dollars.

This year the government hopes to finish selling the oil companies, along with four electrical companies, starting the process in the federal railways – though most of these sales originally planned for 1995.

The novelty, the great star of the programme is the Vale do Rio Doce Company, which alone should raise between 10 and 12 billion dollars, according to its sales manager the National Bank of Economic and Social Development (BNDES).

Rio Doce includes 66 businesses, employs 17,000 people, and makes most of its profits from iron ore exports. It owns iron, bauxite, copper and gold mines all over the nation, aluminium businesses, railways and shipping lines.

The company is 51 percent state owned, and BNDES president Luiz Carlos Mendoza de Barros is expecting a profit of between five and six billion dollars.

Experts consider the sale is unlikely to happen in 1996 as the bid needs a six-month assessment by consultants to measure company viablility and work out the details of share sales.

It will be, at the earliest, the last quarter of 1996 before the plan is ready, and past going on past experience it will be quite a lot later.

The company record is a symbol of efficient State business, with profits of 64.5 million dollars in 1995.

“There is no reason to privatise it,” said opposition leader Luis Lula, former presidential candidate of the Workers Party (PT).

According to the opposition, the companies large stocks of mineral resources make it of strategic importance to the nation, and in order to calm these fears company president, Jose Schnettino suggested an arranged share package.

Company workers, including pensioners, in the Workers Investment Club, are claiming the right to buy at least 10 percent of the shares, at 70 percent of market value.

This has been the form adopted since 1991, when the first steel privatisations occured, and it could be the way to calm down the workers and unions, and prevent them obstructing the sale.

Another decisive privatisation will be that of Light, the Rio de Janeiro electricity distribution service, finally planned for March 13 after several delays last year.

The sale of 60 percent of Light’s shares should raise two billion dollars.

Elena Landau explained that this time round all the payments would have to be made in “real money,” whereas in the past 80 percent was paid in public debt bonds, or “rotten money,” in local slang.