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Brazil to push for billions in privatizations

Petrobras CEO says Brazil should end subsalt production-sharing

- Development bank BNDES to be in charge of feasibility studies
- Government wants to improve auction model and save money

By Simone Preissler Iglesias / Bloomberg

Petroleumworld 08 23 2019

Brazil is readying a plan to accelerate the sale of state-controlled assets as well as partnerships with private companies, as part of President Jair Bolsonaro's push to shrink the public sector and spark investments.

The federal government will put state development bank BNDES in charge of organizing and paying for feasibility studies, which are mandatory for asset sales and auctions and are crucial for their success. BNDES will also be able to hire outside consulting companies based on technical capacity and not just price.

“The bank will use its own resources," Martha Seillier, the special secretary for the government's Investment Partnerships Program, said in an interview in Brasilia. "If the auction succeeds, it will collect a fee to pay for the services.”

Brazil expects to raise 1.3 trillion reais ($323 billion) over the next several years through auctions of licenses to operate infrastructure including airports, oil wells, and ports, and also through the privatization of state-owned companies such as the postal service and the mint. Those sales represent a centerpiece of both Bolsonaro's economic policy and efforts to boost the private sector, and local media has reported that he's demanding faster results in this area.

“The change will make the privatization process more agile,” Sergio Lazzarini, a professor of management at Insper business school, said in a phone interview. “BNDES' technical staff knows a lot about infrastructure and processes, and the bank operates separately from the government.”

Seillier, 35, took over the special secretariat with the mission of improving auction models and encouraging investments in Latin America's largest economy. She was previously the president of Brazil's state-run airport operator Infraero, and helped former President Michel Temer draft reforms of Brazil's labor market and social security system.

“We should be investing 5% of our gross domestic product in infrastructure,” and not the current 1.7%, Seillier said. She said the only way the government can increase investments is through partnerships with the private sector.

“Today the Brazilian state is totally incapable of investing," she said. “Our investment capacity is being strangled by recurring expenses.”

Brazil's government is expected to unveil later on Wednesday a list of 17 state-controlled companies that will be sold off in upcoming months.

Seillier added that she's working on a pilot project for a public-private partnership involving 4,000 daycare centers around Brazil which were left unfinished due to lack of resources. The plan is to rely on a private company to complete construction, the furnishing and the operation of the daycare centers.

Once the centers are finished, the government would compensate that firm based on the number of children who attend. If the pilot project succeeds, it can be replicated in public clinics and emergency rooms, she said.

— With assistance by Fabiola Moura

Operations At A Port Terminal Ahead of Trade Balance Figures

Story by Simone Preissler Iglesias from Bloomberg. / 08 22 2019


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