Two years of misgovernment – ​​the dismantling of the State



We are experiencing a policy of replacing state monopoly with private monopolies.

National economic sovereignty, formally provided for in article 170, I of the 1988 Constitution, intends to enable the participation of Brazilian society, under equal conditions, in the international market, as part of the greater objective of guaranteeing national development (article 3, II of constitutional text), seeking to overcome underdevelopment. The internal market, in turn, was integrated into the national heritage (Article 219 of the Constitution), as a corollary of national economic sovereignty.

The meaning of this device is precisely the endogenization of technological development and the internalization of economic decision-making centers, following the program to overcome underdevelopment proposed by Celso Furtado and ECLAC (Economic Commission for Latin America) and incorporated in the 1988 constitutional text.

From the 1980s and 1990s, with the foreign debt crisis, neoliberalism and the state financing crisis, the autonomous or sovereign economic policy had to be abandoned for Latin American countries to be admitted to the new world order of globalization neoliberal, with adherence to the so-called “Washington Consensus” (privatization, market deregulation, liberalization of the flow of goods and capital). Latin America then reversed its development strategy, regressing from import substitution industrialization to a growth process based on primarization or reprimarization, expanding its exports of agricultural or mineral products.

If the government, at any of its levels, decides to expropriate the property of a private individual to carry out any public undertaking, such as a road or road work, the citizen who suffers the expropriation has a series of rights and guarantees. After all, in the Rule of Law, the legal system protects the private owner in his confrontation with the Public Power with guarantees and demands that must be inexorably fulfilled in an expropriation process. Compensation to the dispossessed is one of these guarantees, expressed since the first declarations of rights of the liberal revolutions of the XNUMXth (England) and XNUMXth (United States and France) centuries.

There is, however, no guarantee or legal protection for citizens when the government decides to transfer certain community assets to the private sector, such as a state-owned company, the provision of a public service or the exploitation of a public good. On the contrary, privatization is considered an absolutely free and legitimate option for governments to adopt, without any kind of challenge.

The expropriation of private property, in turn, is considered almost taboo. The mainstream media extols the privatizers and vehemently condemns those who dare to nationalize, nationalize or recover public goods inappropriately transferred to private ones. For those, the paradise of good governance and the applause of the “market”. For them, the hell of populism (or Bolivarianism, depending on the case) and the unanimous disapproval of the mass media.

What no one says is that by privatizing a state-owned company or any portion of public property, the government is expropriating the population of public goods that are in its ownership. That simple. In privatization, the government acts in the same way as in expropriation. In the same way as expropriating private property, in privatization the government alienates public property. The problem is that the private owner can contest and has guarantees, the people cannot.

Every privatization process is an expropriation of goods that should be permanently part of the public property of all citizens, decided by a political authority that exercises power temporarily. In the privatization process, the government does not sell what belongs to it (the government). In privatization, the government sells what belongs to all of us. And without consulting us about it.

We can illustrate the situation with the example used by the Italian jurist Ugo Mattei[1]: authorizing a government to freely sell everyone's property to meet its contingent and conjunctural economic policy needs is as irresponsible as consenting, at the family level, for the caretaker to sell the most valuable property in the house, such as silverware, the car or household appliances, to meet your particular needs, such as traveling on vacation or paying off a personal debt.

The government is a trustee, that is, it acts only under mandate. You cannot dispose of public goods as you please. The government does not own state-owned companies, it just manages them. The government must be the servant of the sovereign people, not the other way around.

Public goods are not easily recoverable. Investments of immense amounts, applied in a planned way in the long term, the sacrifice of millions of Brazilians cannot be dissipated just like that, to cover a short-term deficit in public accounts generated by mismanagement and occasional incompetence of government officials.

Instead of providing Brazilian state-owned companies with greater operational capacity and reinforcing public control and transparency over their resources, the Fernando Henrique Cardoso Government opted to dismantle them, cut their investments and disrupt their finances, in order to justify the privatization of the most of them. The privatization of state-owned companies meant the disruption of integrated energy and communications systems, which were fundamental for maintaining an internal market of continental dimensions, like the Brazilian one, and a competitive, non-subordinated international insertion. The fragmentation of state-owned infrastructure companies replaced, in most cases, the state monopoly by private monopoly or oligopoly, in addition to breaking with the strategic and integrated planning of the basic services network and with an interconnected system of cross tariffs[2].

The Brazilian policy for exploiting mineral and energy resources, for example, was disrupted in the 1990s, with the privatization process of Companhia Vale do Rio Doce, in 1997. With the decision to privatize the company, the Government of Fernando Henrique Cardoso ignored the role it played in the country's regional development. Companhia Vale do Rio Doce had the autonomous capacity to attract investments and partnerships, in addition to being internationally competitive. Its policy was not exclusively focused on mining and exports, but also spatially articulated the various areas covered by its activities, being, in the expression of Maria da Conceição Tavares, a “vector of economic dynamism and national productive integration”. The main argument used to justify privatization, the need to obtain resources to reduce the country's internal debt, has no truth whatsoever.

The Brazilian State has lost part of its autonomous capacity to decide on economic policy, an essential undertaking for national development planning and its major instrument of action in the mineral sector, in addition to disseminating strategic information on subsoil mineral resources to competitors. foreigners from Companhia Vale do Rio Doce who qualified to participate in the privatization auction. With privatization, multinational companies were left alone in mineral research and exploration in Brazil.

Dominated by commercial logic, the privatized mining company began to act in order to maximize production, incurring in failures and omissions that could cause major environmental and human disasters. Predatory exploitation borders on legality, with Vale operating at the limit of maximum production capacity – or beyond it. The result was two of the greatest environmental tragedies in Brazilian history: the collapse of dams in Mariana and Brumadinho, both in Minas Gerais, on November 05, 2015 and January 25, 2019, respectively.

Privatization brought with it the creation of “independent” regulatory bodies, which would replace the state's inability to efficiently regulate the various economic sectors. Ensuring competition and defending the rights of consumers (not the general population, of course) would be the main objectives pursued, both in the regulation of economic activities per se and in the regulation of public services. It proposes as a solution the replacement of the democratic State, at the mercy of undesirable “political influences”, by a technocratic and oligarchic structure, without popular legitimacy or any other more incisive form of political and democratic control of its acts. These bodies would be legitimized by their “technical neutrality”, which would consecrate their independence from the State, but not from the market. The State thus seems to have renounced its sovereignty in economic matters.

The adoption of orthodox fiscal adjustment policies and the implementation of measures to reduce the State's role in the economy and to attract foreign investment made it necessary to guarantee certain economic policy measures even against political majorities, generating a process of reforms constitutional laws in several countries, whose objective was to “constitutionalize economic globalization”. With the constitutional guarantee of investments and the rhetoric about “legal security”, “clear rules”, “respect for contracts”, “rule of law” (or “rule of law”) being used against any state action that goes against the dominant economic interests, a phenomenon that I called “shielding of the financial constitution” was instituted, that is, the preponderance of the rules linked to the fiscal adjustment and the maintenance of the orthodox monetary policy that privileges the interests private economic interests on the economic constitutional order and distributive and developmental policies.[3] The best example of this is Constitutional Amendment No. 95 of 2016, which instituted the “New Fiscal Regime” (the “spending cap”) and, in practice, suspended the 1988 Constitution for twenty years.

In their eagerness to please the markets, the Brazilian governments established after the 2016 coup sought, in addition to an excessively rigorous policy of guaranteeing the payment of the public debt service to the detriment of any and all public spending, to implement a policy of denationalization of the that remained in the power of the State extremely fast and aggressive. Since the withdrawal of Petrobras as the sole pre-salt operator (Law No. 13.365 of November 29, 2016), the assets of the state-owned company have been sold without bidding, as determined by Brazilian legislation (National Privatization Plan – Law No. 9.491 , of September 9, 1997 and article 29 of Law No. 13.303, of June 30, 2016).

Petrobras does not need to sell assets to reduce its debt level. On the contrary, as it sells assets it reduces its ability to pay its debt in the medium term and disrupts its production chain, to the detriment of future cash generation, in addition to taking on unnecessary business risks. Petrobras' current business plan has a very short-term bias and ignores the essence of an integrated energy company that uses chain verticalization to balance its revenues, offsetting the inevitable variation in the price of oil, its derivatives and electricity, essential feature to minimize business risks. To the extent that Petrobras is sliced ​​up, the private agent tends to seek the maximum profit per business, increasing consumer costs, which restricts the growth of the domestic market.

As if the absence of bidding were not enough, the sale of Petrobrás assets has been taking place at prices well below market prices. This type of “sale” can be equated with the crime of receiving. A public asset was subtracted from public assets illegally, without bidding, and sold at a low price, for a price lower than the market value. The buying company obviously knows that it is acquiring a very valuable asset for a value below the market price and without public bidding. That is, there is no bona fide third party involved in this type of business. In this type of situation, the obligation of the Brazilian State and public property defense bodies is to annul the transaction, recover the property without compensation and seek the accountability of those who promoted the business.

We are also experiencing a policy of replacing the state monopoly with private monopolies, which is absolutely prohibited by the Constitution, in Articles 170 and 173, §4. What happens in gas pipeline infrastructure is exemplary. A typically monopolistic activity, the gas pipeline networks in the Southeast and Northeast, incorporate a huge historic investment by Petrobras, are integrated into the company by the very nature of the service they provide. Likewise, refineries, a constitutional and legal monopoly of the Union, after a totally unconstitutional intervention by the antitrust agency, will be transferred to the constitution of private monopolies.

Still in relation to the distortion of competition policy to favor private monopolies, another form of dismantling Petrobras, employed from the Jair Bolsonaro government, was the use of the Brazilian competition defense body, CADE (Administrative Council for Economic Defense). ) to make it unfeasible for the state-owned company to operate in various sectors of the production chain, particularly refining, a constitutional monopoly of the Union as determined by article 177 of the 1988 Constitution.

Not only does CADE not have the authority to impose restrictions or sanctions on activities constitutionally and legally monopolized by the Union, such as the attempt to impose the sale of assets to Petrobras as part of the Commitment Term of Cessation of Practice signed on June 11, 2019, it is a clear violation of legality by CADE and Petrobras. The second clause of the aforementioned Term stipulates that Petrobras undertakes to fully sell by the end of 2021 at least eight refineries, half of its installed refining park.[4]

However, this sale of assets could never have been imposed by CADE through a Term of Commitment to Cessation of Practice, much less accepted by Petrobrás. This is an express violation of the National Privatization Program Law (Law No. 9.491/1997). Article 3 of that law determines that activities under the exclusive competence of the Union pursuant to Article 177 of the Constitution, such as oil refining, are excluded from the sale or transfer of assets provided for in the National Privatization Program. That is, the privatization or disposal of assets of companies that carry out activities under the exclusive competence of the Union provided for in article 177 of the Constitution, in this case, refining, are expressly prohibited by law. If Law No. 9.491/1997 prohibits it, a Term of Commitment to Cessation of Practice signed between an autarchy linked to the Ministry of Justice and a government-controlled company linked to the Ministry of Mines and Energy cannot authorize. An administrative act cannot prevail over a law.

In the present case, we are facing an explicit violation of the provisions of the Constitution and of various laws in force in the country. The actions of CADE and Petrobrás violate the law, signing null and void documents that could have serious economic impacts not only for Petrobrás' shareholders, but for the entire Brazilian society. In short, there is no legal provision for the initiation of an investigative procedure with the purpose of sanctioning Petrobras for having exercised its constitutional and legal competence to develop the activities of the Union's monopoly in the oil refining sector (Article 177 of the Constitution).

As if that were not enough, Law No. 9.491/1997 expressly prohibits the alienation or transfer to the private sector of state-owned companies that carry out activities within the exclusive competence of the Union, which are dealt with, among others, in Article 177 of the Constitution. Any act tending to impose restrictive measures on the exercise of the constitutional monopoly of refining, including the sale of assets, is abusive and, therefore, void, as it is outside the limits of competence of the antitrust bodies.

Another sector that is the target of privatization and dismantling attempts is the Brazilian electricity sector, largely managed by the state-owned company Eletrobrás, a mixed-capital company whose creation was authorized by Law No. subsidiaries. Forwarded to the National Congress by the Michel Temer Government and maintained by the Jair Bolsonaro Government, the proposal to privatize Eletrobrás is absolutely incompatible with the universal public service model intended by the 3.890 Constitution.

The constitutional text requires greater generation of electricity with less cost to society, observing sustainability, the principle of reasonable tariffs and the lowest socio-environmental impact. The Public Administration must promote an increase in the supply and access to electricity. Expanding access to electricity is essential to guaranteeing a dignified life and combating exclusion. In this way, every policy in the electricity sector is concerned with the universalization of access to energy, a concept that is diametrically opposed to the dismantling of the electricity sector promoted by the governments of Michel Temer and Jair Bolsonaro.

The policy of the Brazilian governments established in 2016 is to make the country completely unfeasible as an entity capable of exercising its sovereignty, it is a policy of dismantling the national State. The widespread opening to foreign capital and control of mineral resources and the oil sector, with the consequent dismantling and disruption of Petrobras, is accompanied by the possibility of losing national control over water (new basic sanitation law, Law No. of July 14.026, 15, which facilitates the privatization of water and sewage services) and on land (the so-called “land grabbing”, that is, foreign control over land, supported with paradoxical enthusiasm by the ruralist caucus).[5]

In terms of industrial policy destruction, adherence to the GPA (“Agreement on Government Procurement” – Government Procurement Agreement), sponsored by the World Trade Organization (WTO), announced by Jair Bolsonaro’s Minister of Finance, Paulo Guedes, in January 2020, is another step towards the complete destruction of all the State’s capacity to act Brazilian. One of the central elements of any country's industrial policy is government purchasing power. The state is the biggest buyer in any economy. Public procurement has the capacity to induce and stimulate a range of sectors, from the textile industry to the defense or high technology industry.

In Brazil, legislation has always sought to provide parameters for the State, at all federative levels, to use its purchasing power in order to stimulate and induce strategic sectors of the national economy. Brazil's adherence to the GPA makes the use of the State's purchasing power unfeasible as a policy for the development and stimulation of industrial sectors in the country. By submitting to the agreement, Brazil loses the ability to dispose of this instrument and is prohibited from making any distinction between Brazilian companies and economic groups and companies and economic groups from the signatory countries, allowing the free operation of foreign companies, even without headquarters in the Brazil, in virtually all sectors of the economy, without any limits.

The possibility of giving preferential treatment to Brazilian companies so that they could develop areas, techniques or sectors is prevented by joining the GPA. Differentiated treatment for small and medium-sized companies also suffers from a series of limitations and impediments. In other words, what the Brazilian legal system allowed, the agreement forbids, imposing yet another severe restriction on State action in Brazil.

The financial liberalization policy has been successfully implemented. In February 2021, Jair Bolsonaro managed to approve the so-called autonomy of the Central Bank, a measure proposed, so far without success, since the Fernando Henrique Cardoso government. Under the new legislation, the president and directors of the Central Bank now have fixed mandates that do not coincide with the mandate of the President of the Republic, who loses the power to appoint and dismiss the occupants of these functions whenever he sees fit. Thus, a “Frankenstein” entity was created in the Brazilian administrative structure: an autarchy not subordinated to the President or any Minister, a body that hovers in the air, without ties, without controls.

The question that must be asked when adopting this measure is: Central Bank independent of whom? Apparently, independent of the political system and any and all democratic control. The so-called independence of the Central Bank is nothing more than another measure aimed at guaranteeing the privileges of the financial system in relation to democracy. Regardless of who the polls elect, monetary policy will always privilege private interests to the detriment of any development and income distribution policy.

Another example of the Bolsonaro Government’s policy of destruction is Law No. 13.874, of September 20, 2019, entitled the “Law of Economic Freedom”, celebrated by the mainstream media and its associates as a welcome liberal change in Brazilian economic legislation. However, this law is not liberal or neoliberal, it goes further: it is anarcho-capitalist. It brought disorder, the imposition of the law of the fittest, brutal economic domination. It consists of a break with the Brazilian legal tradition, as it does not intend to regulate or organize the economic system, but to create a new extreme capitalist (dis)order. This law aggravates the dismantling of Brazilian society, following in the footsteps of Michel Temer's ill-fated labor reform, which disorganized the work environment in Brazil and generated millions of unemployed or underemployed people.

The “Law of Economic Freedom” is an ideological manifesto that claims to be superior to the Constitution itself. She defends a “only possible interpretation” of the State's economic performance, as if her text had instituted a “pure” market economy. There is, here, the intention of trying to force the adoption by the Judiciary of this single interpretation, consisting of a form of imposition of a certain ideological vision over all the others. Brazil, thus, offers one more jabuticaba to the world: the Constitution must be interpreted as determined by law.

The central problem is the fact that the sovereignty of the Brazilian State, like the sovereignty of a peripheral State, is a “blocked sovereignty”, that is, it faces severe external and internal restrictions that prevent it from manifesting itself in all its fullness. In this way, the constant pressure from popular political forces is fundamental for the State to act in the sense of taking popular sovereignty to its ultimate consequences and overcoming the barrier of underdevelopment.

To rebuild the country after the devastation caused by the neoliberal governments of Fernando Henrique Cardoso, Michel Temer and Jair Bolsonaro, it is necessary to renationalize and renationalize strategic sectors to overcome underdevelopment, such as oil, energy, water and mineral resources. We are facing, perhaps, the last chance to have effective and concrete conditions to overcome underdevelopment. Nationalization is the reassertion of economic sovereignty, which in a true democracy is synonymous with popular sovereignty.

Economic sovereignty and popular sovereignty not only mean that power emanates from the people, but also that these people have the right to the land, the right to the fruits of their labor and the right to the surplus produced by the exploitation of natural resources, which are public, therefore, ownership, as well as the right to decide for yourself about your present and your future.

*Gilberto Bercovici Professor of Economic Law and Political Economy at the Faculty of Law of USP. Author, among other books, of Applied economic law: studies and opinions (Countercurrent).


[1] Ugo MATTEI, Beni Comuni: A Manifesto, 3rd ed., Rome/Bari, Laterza, 2011, pp. V-VII.

[2] Maria da Conceição TAVARES, Uncreative Destruction: Memoirs of a Popular Mandate against Recession, Unemployment and Subordinated Globalization, Rio de Janeiro, Record, 1999, pp. 125-126, 128-134 and 136-138 and Aloysio BIONDI, Privatized Brazil: A Review of the Dismantling of the State, São Paulo, Perseu Abramo Foundation Publishing House, 1999, pp. 19-29.

[3] Gilberto BERCOVICI & Luís Fernando MASSONETTO, “The Inverted Ruling Constitution: The Armor of the Financial Constitution and the Agony of the Economic Constitution”, Bulletin of Economic Sciences, vol. XLIX, 2006, pp. 69-77 and David SCHNEIDERMAN, Constitutionalizing Economic Globalization: Investment Rules and Democracy's Promise, Cambridge/New York, Cambridge University Press, 2008, pp. 3-17, 25-108, 208-213 and 223-237

[4] They are the Abreu e Lima Refinery (RNEST), the Shale Industrialization Unit (SIX), the Landulpho Alves Refinery (RLAM), the Gabriel Passos Refinery (REGAP), the Presidente Getúlio Vargas Refinery (REPAR), the Alberto Pasqualini Refinery (REFAP), Isaac Sabbá Refinery (REMAN), Lubricants and Petroleum Derivatives of the Northeast (LUBNOR) and their respective transport assets.

[5] Today, several bills are being processed allowing the acquisition of land by foreigners. Among these projects, the most advanced in the National Congress is Bill No. 2.963, of 2019.

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