Brazil: Privatisations – back again?

The undoubted success of the privatisation of Brazil's three largest airports – offerings were held on 6 February with an average premium of 348 per cent – raises the question whether privatisations, some strenuously opposed during Lula 's eight years in office and President Dilma Rousseff's first, are back to stay.

In fact, the airport tender was a special case, and the winning consortia will have the sweetest of deals, since the Brazilian Development Bank (BNDES) will finance 60 per cent of the works required for modernisation of the terminals and runways. The auction was also special in that the winning bidders were supported by the deep pockets of the pension funds of Brazilian state enterprises. But the issue remains, will the Workers' Party (PT) government permit other privatisations to take place – ports, for instance – now that the taboo has been broken? It all depends on Rousseff's capacity for leadership and her will to defy the entrenched interests of PT.

By road, sea, or rail

The government will propose tenders for 10-year concessions for the maintenance of federal highways. The Ministry of Transport intends to launch the initial tenders before the end of this year, under the public–private partnership (PPP) regime. Some 9,000 km of federal highways may be privatised, with new requirements for quality control. In the ports area, the government will have to tender at least 77 terminals whose concessions will expire by 2013. They are distributed over 15 ports.

As for the bullet train ( TAV ), the government decided to reformulate the terms of the tender, now scheduled for November, in order to absorb two risks pointed out by investors: foreign exchange and demand. It has been decided that the concession period will be 40 years, the internal rate of return of the project 6.32 per cent, and – for a total cost variously estimated at R$34 billion (by the government) and R$50 billion (by the builders) – the ceiling for public financing will be R$22 billion. (BNDES will not finance any imported equipment.) All of that, however, may still change.

For more news and expert analysis about Brazil, please see Brazil Focus.


© 2012 Menas Associates

Lula's illness brings uncertainty into Brazilian politics

On 28th October, former president Luiz Inácio Lula da Silva (Lula) was diagnosed with cancer of the larynx and immediately underwent chemotherapy treatment at the Syrian-Lebanese Hospital in São Paulo. According to his doctors, Lula has a 90 per cent chance of making a full recovery. All of Lula's official commitments including a loaded speaking agenda were cancelled through to the end of January 2012.

Lula's illness has a series of political implications. He has lately been travelling around the country, giving speeches and trying to build local alliances for his Workers' Party (PT) with a view to the municipal elections, which are to take place in October 2012. But for now his political campaigning has to cease, which will give other campaigners a chance to redouble their efforts. The importance of these elections is that the mayors of large cities usually have a great deal of influence over the process of nominations of candidates for presidential and legislative elections, and could therefore have an impact on those of 2014.

While it is still an open question whether Lula or President Dilma Rousseff will be PT's candidate for the presidency in 2014, and Dilma is quietly asserting her own credentials, the emotional factor raised by Lula's illness cannot be discounted. The Brazilian voter characteristically has sympathy for the underdog, and Lula has become one by virtue of his cancer. He is also a legent in the minds of the poor and the downtrodden, and they constitute the majority of the electorate, especially in the populous northeast, while the ascending middle class elsewhere in the country also ascribe their economic and social progress to Lula's policies. Should he therefore decide to run in 2014, and be physically able to do so, he would most likely win the election by a landslide. And so somewhat rather unexpectedly, an element of uncertainty has been introduced into Brazilian politics.

For more news and expert analysis about Brazil, please see Brazil Focus.

© 2011 Menas Associates

Brazil: Fissures in the ruling coalition

A watershed vote on the Forest Code on 25th May in the Chamber of Deputies revealed both the internal divisions of Workers' Party (PT) and the unity of Brazilian Democratic Movement (PMDB). The result frightened the Workers' Party, which now has grounds to fear a possible alliance of PMDB with PR and PP.

Together, they amount to 179 votes, more than enough to deter any PT aspirations to succeed Marco Maia (PT-RS) as president of the Cham­ber of Deputies. PMDB covets the job and will almost certainly get it. This election will take place in 2013, and will be strategic with a view to the presidential ballot in 2014.

PT has been counting on a coalition with PDT, PCdoB and PSB, but these parties have given indications of pursuing their own goals. It remains to be seen whether President Dilma Rousseff, with or without Lula's help, will be able to bring her contentious allies into line.

For more news and expert analysis about Brazil, please see Brazil Focus.

© 2011 Menas Associates