The volume that can be collected with the privatization program would exceed the accumulated in all previous governments since 1990.

With the approval of the Social Security reform in the House of Representatives, after almost five months of negotiations and much swinging, a new phase is beginning to take shape for the Brazilian government and the country. Although the final vote in the House and the Senate is still missing, Minister of Economy Paulo Guedes has advised that now is the time to accelerate the privatization process, which has been in slow pace to this day, not to interfere the changes in Social Security.  The privatization program is ambitious. If implemented, even partially, it promises to change the profile of the country’s economy. A survey conducted indicates that the government’s privatization program could yield up to BRL 450 billion (more than USD 120 billion).

In the financial market, the forecasts are close to these values. Bradesco BBI estimates that it is possible to raise BRL 470 billion in privatization at the federal level. For Credit Suisse, the potential for collection with privatization in Brazil was estimated at BRL 400 billion. If the program manages to earn half of what Credit Suisse and Bradesco point to – somewhere between BRL 200 billion and BRL 235 billion – the government will have already carried out the largest privatization program ever in Brazil.  According to a BNDES study, the 99 privatization operations carried out from 1990 to 2015 in the country totaled USD 54.5 billion. In Michel Temer’s term, there were another BRL 46.4 billion (about USD 12 billion) raised in 124 projects, of which BRL 28 billion were in the oil sector alone. All that has been done so far reaches a total of USD 66.5 billion, equivalent to one-third of the current government term intends to collect in the most pessimistic scenario considered above. If Guedes’ plans come true, Brazil may also qualify for the title of country with the largest privatization program in the world in the period. In financial volume, there is no news that any major emerging or even developed countries are running a program of this magnitude. Even in the Ministry of Economy, no one had realized that possibility so far. The math above had only added the amounts to be raised by the government. Together with the privatization, another great amount of funds are expected to be injected in Brazil for the development of the projects. The public companies covered by the program should cover a wide variety including transportation, oil & gas, mining and financial services. This should bring lots of opportunities for foreign investments in Brazil and an uplift in the country’s finances, with companies providing better services in a broad variety of sectors and bringing stimulus to the economy. It is also important to point out that, from our previous experiences, the investors acquiring the privatized businesses also brings opportunities for the suppliers of equipment, qualified engineering, construction, assembling, supervision, quality assurance controls, inspections, IT and communication support. Business partners, qualified personnel for the projects will also be required. Development of the privatization projects will also result in structuring financial services for funding, cash management, equity/debt structuring, collaterals, guarantees. In this sense, it is expected another wave of more international players for the development of the privatized businesses.