Privatization and growth

It is a challenge to address certain issues in a country with so many problems of social inequality, which are already manifesting in cases of crime and extreme violence. Measures that structurally confront poverty, lack of education and health, urban organization and public transport, among others, are essential. Other issues may seem disconnected from the serious reality, but in fact, they are part of a whole, where a huge deficit of information prevails.

The word "deficit" has been practically hijacked by the financial narrative, where public accounts remain under the emblematic spending cap. However, translated into cost, the lack of public policies forms a frightening sum.  

Any positive sign can only come through economic growth, which, in addition to creating jobs, would reduce the public deficit by lowering interest rates, a topic of the moment.

In discussions about solutions, privatizations stand out on the agendas of the mainstream media. Certain criticisms are classified as ideological positions, but it is the press itself that frequently puts the issue in the spotlight. This discourse has been maintained for over thirty years, without acknowledging that, from 1990 to 2022, Brazil privatized 150 companies, making it the world record holder. If there is genuine concern for the country's future, the least that can be done is to examine the results of this long experience. This is the analysis presented here.

During the Sarney administration (1985-1990), privatizations are considered timid compared to other periods that began in the 90s, but according to BNDES data, 18 state-owned companies were privatized, including Aracruz Celulose, Sibra, Caraíbas Metais, and Companhia Brasileira de Cobre (CBC).

The Collor government (1990-1992) focused its sales on three sectors: steel, petrochemicals, and fertilizers. Usiminas, Piratini, CST, Acesita, Petroflex, Copesul, Álcalis, Nitriflex, and Fosfertil are some examples. And what was the performance of the Brazilian economy during this period? According to data from the IMF or the World Bank, Brazil's GDP fell by 3,7%, while the world average expanded by 4,7%.

The Itamar Franco government (1992-1994) sold Embraer and Companhia Siderúrgica Nacional, and during that period Brazil grew 6,14% compared to 1990, but the world was already growing at 12,5%.

The Fernando Henrique Cardoso government (1994-2002) privatized 80 companies across many sectors. These included Vale, Telebras, Embratel, banks, several ports, many state-owned energy distributors, and Gerasul (a subsidiary of Eletrobras). During those eight years, Brazil's GDP increased by approximately 20%, but the average global GDP grew by 32%.

The Lula government (2003-2010) changed the way privatizations were conducted, using a concession model. The hydroelectric plants on the Madeira River (Jirau and Santo Antônio) and Teles Pires were granted concessions with Eletrobras holding a minority stake. Several highway concessions were implemented. The same process was used for some airports, such as Galeão and Viracopos. During those eight years, Brazil's GDP grew by approximately 43%, while the world's GDP grew by 34%. However, this additional 9% growth was not enough to offset previous losses.

The Dilma government (2011-2016) maintained the policy of granting concessions for road transport and transmission lines, but privatized IRB-Brasil Resseguros and continued the concession of existing airports, such as Guarulhos, Confins, and Brasília. During this period, Brazil's GDP practically did not grow while the world grew by 25%.

The Temer government (2016-2018) resumed privatizations in the style of the 90s. Power plants, ports, airports, and highways were privatized, but most projects were not completed during its administration. Eletro Acre and Ceron were sold. Brazil's GDP grew by less than 1%, while the world grew by 8,8%.

Finally, the Bolsonaro government (2018-2022), under a completely privatizing discourse, sold Eletrobras, Companhia Docas do Espírito Santo, BR Distribuidora, and Liquigás. Brazil grew 2,6% and the world grew 13%.

If this data isn't enough to warn us that something very wrong has gone wrong in this process, we certainly haven't deciphered public entities' access to private capital. In fact, these results shouldn't even surprise us, since the sale of ready-made assets doesn't necessarily imply growth. If new investments aren't required, capital shrinks. After all, financial resources aren't unlimited, and if part of the capital is used only for property transfer, nothing new is built.

Among all these examples, some sectors should indeed be privatized. For many reasons, the state has been forced to intervene in many sectors that, if they did not exist, would seriously compromise the economy.  

However, some others involve issues of geography, water, land use, transportation, and other demands. The case of Eletrobras is an extreme example of this misstep, as even the planet tries to teach us. No country with a significant share of hydroelectric power has fully privatized its electricity sector. The United States, Canada, Russia, India, China, Sweden, and Norway are members of this select club of geographical privilege from which Brazil has just left.  

A privatized Eletrobras is inconsistent with its own history, since only 8% of our hydroelectric plants originated from private initiatives. The vast majority were acquired from state-owned companies.  

In terms of value, a comparison with Duke Energy in the United States, which has the same installed capacity, reveals a significant loss, as Duke is worth US$82 billion and the privatization of Eletrobras cost R$33 billion, less than one-tenth of Duke's value.

Since the adoption of the market system, which imposed a great deal of mimicry of predominantly thermal systems, the evolution of Brazilian electricity tariffs shows an increase that has been more than double the inflation rate since 1995.