Brazil has seen a wave of privatization in the past month of April: a series of auctions held by the Ministry of Infrastructure – an event named Infra Week – brought in R$ 10 billion in new investments (approximately 1.8 billion USD) during the span of three days. It served as a thermometer for the country’s long-term investment attractiveness, especially given the current climate with the Covid-19 crisis.
The auction of 22 airports, which culled in R$ 3.3 billion (about half a billion USD), merits attention, along with the concession of five port terminals and a 537 km-long railroad segment in the state of Bahia. The Brazilian government considers the auction of success for bringing in the expected sum of investments, both of national and foreign origin.
Building on that momentum, the government took a substantial step in its privatization plans: on April 13th, the President issued a decree including Empresa Brasileira de Correios e Telégrafos(“ECT” or “Correios”), the national postal service, on the National Destatization Program (the “PND”). The decree expressly conditions the privatization efforts to the passing of a parallel bill, sent by the Executive to Congress in February (Bill no. 591/2021). The bill is crucial to ECT’s privatization, by effectively breaking the state monopoly and allowing the private sector to engage in the postal market and provide services currently reserved to Correios.
Besides the postal services, it is worth pointing out that Correios has a strong logistics infrastructure – serving the increase in digital commerce (Brazil has nearly 80 million digital consumers) – and also is engaged in several other activities, such as postal banks in small cities. The net revenues in 2020 reached almost R$ 18 billion (3 billion USD) with positive net margins, and the state-owned company has the expressive number of 115,000 direct employees.
Should these efforts move forward in 2022, the government expects to raise R$ 15 billion (approximately 2.7 billion USD). The sale would represent the first major state-owned company to be sold in the current administration in its ambitious privatization plan and would likely attract sector giants such as FedEx and DHL, and retailers alike, including Magazine Luiza, Amazon, and Mercado Livre.
Emerenciano, Baggio e Associados – Attorneys at Law has notably provided legal assistance in past concession operations including, among others, airport concessions in Campinas (Viracopos Airport) and São Paulo (Guarulhos Airport), as well as energy and infrastructure projects, and is prepared to provide legal assistance to foreign investors as the Brazilian government continues to offer investment opportunities.