privatized Brazil

Image: Carlos Cruz-Diez


Commentary on the book by Aloysio Biondi

This little book constitutes a publishing phenomenon, and it gives food for thought. According to the publisher, Fundação Perseu Abramo, of the Workers' Party, has already sold 110 copies, which makes it champion in the difficult category that is the essay. Launched in April 1999, it was already in 5ª reprint in August.

However, it does not appear on any list of bestsellers in the country. The explanations are varied. One list is based solely on bookstore sales, not including direct mail or refunds. Another consultation by telephone readers selected by random draw. And so on. The methodology is always impeccable, however the result, as you can see, is debatable, and may even hide a champion.

The publishing house is barely two years old. It forms, therefore, among the various small publishers that emerged in the decade, which, along with the proliferation of cultural magazines, constitutes a novelty that must be welcomed. The success of this volume led the Foundation to announce a whole collection of hot topics.

In the present case, however, the burst in the hit parade must have something to do, beyond price and size, with the subject of the book, formulated as follows: “You also buy a public company, a bank, a railroad, a highway, a port etc. The government sells it very cheaply. Or you can even donate.

The reader's curiosity is piqued by the subtitle “A balance of the dismantling of the State” and by the prestige of the author, proven in other struggles of investigative economic journalism. The text, lively and direct, alien to the ciphered jargon of Economist, is within reach of any layman, like someone who subscribes to these lines.

The general privatization movement put into practice the orders of the IMF and the World Bank, which command the process and provide the revenue. The book begins with an analysis of the brainwashing of public opinion, which a trained media orchestrates from official communiqués, promising efficiency and lower rates. Meanwhile, the contracts guaranteed the buyer the right to annual increases, based on inflation. This, when tariffs had already been dramatically increased – readjustments of up to 500% in telephone bills from the end of 1995, for example, and 150% in electricity bills – to make the company more attractive to the buyer. The poor were harmed, for whom low tariffs functioned as an incipient redistribution of income. And as for efficiency, it's not even good to talk about.

To these measures was added the accumulation of layoffs, giving the buyer a relieved payroll. To sell Fepasa, its railroad, the state of São Paulo laid off 10 employees and was left with the burden of supporting 50 retirees. Handing over the company but taking responsibility for the debt was another widespread recourse. The same state sold the steel company Cosipa for 300 million reais and absorbed debts of 1,5 billion reais.

Yet another constant is paying off in “rotten money”, as we know. That is, the buyer, instead of contributing cash, pays with old government bonds, acquiring them for up to 50% of their value. In this way, Companhia Siderúrgica Nacional de Volta Redonda was sold for 1,05 billion reais, of which 1,01 in “rotten currency”, almost nothing in cash, therefore.

In the case of a very rich company that generated high profits, such as Vale do Rio Doce, the buyer still had the right to the money in cash – because there was, and a lot of, these companies that, according to the seller, were insolvent and only losses – a total of 700 million reais. And it wasn't just Vale do Rio Doce, also Telesp, when it was sold, had 1 billion in cash, which went into the pocket of Spanish Telefonica. Sold for 2,2 billion reais, the trick reduced the price to almost half.

Aiming to get rid of the companies, the government dedicated itself to modernizing them, investing 4,7 billion reais in Açominas and 1,9 billion in Volta Redonda, among others. The champion was Telebrás, which received 21 billion reais in public money in two and a half years – contemporaneous with cuts in spending on health, education, funds for the Northeast, etc.

Consequence: worsening of the recession and a hole in the accounts, with the buyer importing what he needs and exporting profits. Factories close, unemployment accelerates, local raw materials are wasted. The book brings, to complete, detailed tables that examine case by case, giving the price in dollars and the way the transaction was (not) paid.

After all, when citizens opened their eyes, they had lost a vast heritage and the services that came from it. But in compensation they have gained a good increase in the debt, which they are obliged to pay.

*Walnice Nogueira Galvão is Professor Emeritus at FFLCH at USP. She is the author, among other books, of Reading and rereading (Senac\Gold over Blue).

Originally published in the newspaper Folha de São PauloIn 3.10.1999.



Aloysio Biondi. Privatized Brazil – an assessment of the dismantling of the State. São Paulo Fundação Perseu Abramo, 1999, 48 pages.

The pdf can be downloaded for free at

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