Brazil’s Economy Minister Says Second Semester Could Have Three or Four Privatizations

RIO DE JANEIRO, BRAZIL – The Minister of Economy, Paulo Guedes, says we cannot fall again “into the trap of low growth and increased indebtedness. This may be achieved if the increase in budget spending is perceived as extraordinary in 2020, rather than something permanent.

“We have three sources of spending: welfare is under control and interest is low. Now, we are witnessing the fight against the increase [in values] of public service that has grown above inflation,” the Minister says on a live broadcast promoted by Itaú BBA.

Guedes has been adamant on this point: He proposes freezing civil service salaries in 2020 and 2021. “If the President [Jair Bolsonaro] vetoes the readjustment as he announced he would, it may be that we will continue to work toward fiscal balance,” he says.

According to the Ministry, it is still feasible for the economy to regain its vigor. The baseline scenario is still a “V” shaped rebound because it is a flexible economy: Brazil has lost only one million jobs, while the United States has hit its highest unemployment rate in history.

The economic rebound will be the “classic case” of recovery with growth in double-digit credit – real estate credit, for consumption and for companies. This will occur as interest rates are low. In addition, private national and international investments in the oil and gas, electrical and infrastructure sectors will return.

“To achieve this, we need regulatory frameworks,” he says. “To raise the GDP only through public investments is to want to be raised by your suspenders or belts. It can’t be done.” Guedes recalls that the sanitation bill is in the Senate and that the gas bill is ready too.

In that respect, if there is a “V” shaped rebound, the markets should regain their appetite in the second half of the year. “We have surveyed 159 companies and subsidiaries that may be privatized. Rather than privatizing them all, we are going to choose three or four large companies to privatize in the second semester,” he says.

The Minister mentioned Eletrobras – which last year was valued at R$16 (US$2,790) billion – the Correios [Postal Service] and Pré-Sal Petróleo (PPSA), which operates on the fronts of production sharing contract management, oil, and natural gas sales management and in production individualization agreements. “We have estimated this at R$200 billion.”

“The private sector will be the driver of growth; the public sector has done this for the last 30 years and the end is looking melancholic.”

Source: Exame