In an open letter to Aécio, historian suggests radicalizing privatizations.

Minas 247 - The PSDB (Brazilian Social Democracy Party) is facing a dilemma, evident in the last presidential elections: it needs to defend the legacy of the FHC (Fernando Henrique Cardoso) government, which includes privatizations, but it also needs to guarantee that it will not sell the remaining state-owned companies. In 2006, a famous photo showed São Paulo governor Geraldo Alckmin, then the PSDB's presidential candidate, wearing stickers, a cap, and all sorts of paraphernalia with the logos of state-owned companies. Opinion polls showed that Brazilians did not want the privatization of companies like Petrobras, Banco do Brasil, Caixa Econômica Federal, Correios (the Brazilian postal service), among others. José Serra, four years later, faced the same problem.

In Friday's edition of the Folha de S. Paulo newspaper, historian Ney Carvalho published an "Open Letter to Aécio Neves." In it, the author, who wrote the book "The War of Privatizations" (Editora de Cultura), praises the former governor of Minas Gerais for the article he published in the same newspaper this week. Entitled "Courage," Aécio's article defends the legacy of privatizations during the FHC administration for Brazilian history.

If it were 2014, and the politician from Minas Gerais were the PSDB candidate to succeed Dilma Rousseff, Carvalho's article would have caused him unintentional headaches. Just like in 2010, when DEM politicians even suggested privatizing Banco do Brasil. No matter how much he denied it, the PSDB candidate of the time had to keep denying it, and denying it, and denying it…

Carvalho suggests to Aécio and the PSDB the privatization of, among others, Cemig, Copasa, Sabesp, and public banks. Regarding Petrobras, he says that it imports derivatives that are more expensive than they are sold in the country, which causes problems for the company.

In two years, faced with similar letters, the eventual PSDB candidate will be asked if he plans to sell Petrobras. Keeping an eye on the polls, he will deny it. Until another letter arrives, and he will have to deny it again. And then, and then, and then… 

Read below the article “Open Letter to Aécio Neves”, by historian Ney Carvalho, author of “The War of Privatizations” (Editora de Cultura) and “The Encilhamento: Anatomy of a Brazilian Bubble” (CNB/Bovespa):

Dear Senator Aécio,

I was pleased to read your article "Courage," published in this newspaper on April 23. It offers well-deserved praise for the privatization of telecommunications during the FHC administration.

I understand that you, like your fellow PSDB members, were encouraged to see your PT opponents adopting management methods that you previously opposed.

However, you and the other members of the PSDB party owe it to public opinion to come down from the wide ideological wall in which you take refuge. Are you, after all, in favor of greater privatization in the Brazilian economy or not?

If "ideological restrictions on privatization are now a closed chapter in the country's history," why are the governors from the PSDB party resisting privatizing the state-owned companies of Minas Gerais, São Paulo, and Paraná?

What a coincidence: his colleagues Antônio Anastasia, Geraldo Alckmin, and Beto Richa control the largest publicly traded state-owned companies in the country.

Minas Gerais has Cemig (electricity) and Copasa (sanitation), two mega-companies. Alckmin oversees the similar companies Cesp and Sabesp, both with net assets of around R$ 10 billion. In the same sectors, Richa owns Copel and Sanepar.

These six companies are mature, established, adult businesses that no longer require the protection of the womb or maternal care.

Where is "the courage to do what needs to be done," as you claim in your text?

These companies already have shares traded on the stock exchange. However, there are profound incompatibilities in the existence of companies that are simultaneously state-owned and publicly traded.

Private companies aim to maximize shareholder profits. The primary goal of public companies is to fulfill governmental objectives. This creates inconsistencies. There are very recent examples of this.

Petrobras is one example. It imports refined products at prices higher than it resells them domestically. Another example: public banks used to force down "spreads." These actions are driven by government policies, not by the interests of shareholders.

But don't worry, Senator. Household sanitation wouldn't be left to the mercy of excessive profits. Solid regulation would take care of the matter. 

Don't forget that the pursuit of profit and competition are the driving forces of efficiency, as can be seen in the telecommunications sector, which you so aptly emphasized.

Senator, it is more than time for the PSDB to offer Brazil a second leap in economic modernization, just as it did with the privatizations of the 1990s.

And you see, at that time, because of the weakness of the Brazilian stock market, it wasn't possible to disperse the capital of the privatized companies. The same cannot be said of today. The stock market is booming like, if you'll pardon the expression, "never before in the history of this country."

The successes achieved in the 1990s with the steel industry, state banks, Vale, and telecommunications can be multiplied, fundamentally altering the face of basic sanitation in the country through the creation of national mega-companies with publicly traded capital, that are competitive and non-monopolistic.

All you and your fellow PSDB governors need to do is transform the powerful state-owned companies you control into genuine "corporations," selling them to the investing public. Control can be diffuse, as is the case with Embraer.

Given your influence and position, Senator, you should naturally lead this process.