The cycle of monetary tightening underway in the United States will reduce the availability of resources for Brazil and require the country to offer higher returns to attract investors, assesses Diogo Mac Cord, Special Secretary for Privatization, Divestment and Markets at the Ministry of Economy, arguing that this scenario demands an acceleration of privatizations, especially of Eletrobras.
In an interview with Reuters, Mac Cord acknowledged that the arrival of the summer vacation in the northern hemisphere could reduce the appeal of the operation with international investors in the coming months, but stressed that the government’s main concern is with the tightening of US interest rates.
“The most worrying thing is this curve of increase in American interest rates. Every half a percent that they raise, drains a lot of money, gives a good squeeze of liquidity. So the race against time is why,” he stated.
Earlier this month, the US central bank raised its benchmark interest rate by 0.50 percentage point, the biggest increase in 22 years, and signaled further tightening ahead to address persistently high inflation.
The Federal Reserve’s next monetary policy decisions are scheduled for June 15 and July 27.
Last Tuesday (17), the CEO of Eletrobras, Rodrigo Limp, said that the company wants to carry out the operation “as soon as possible”, possibly in June.
The most audacious bet on the until now timid privatization menu of the Jair Bolsonaro government, the Eletrobras operation was being planned for May, with the expectation that the TCU analysis would be completed in April, which ended up not happening amid questions about the potential transaction value.
Mac Cord also came out in defense of the privatization of Petrobras while oil still has significant global relevance, although he emphasizes that his secretariat has not received formal command to study the operation after Adolfo Sachsida’s appointment to the Ministry of Mines and Energy.
The secretary was in meetings on Tuesday to discuss the issue of Eletrobras with the Minister of Economy, Paulo Guedes, and the head of the Mines and Energy portfolio.
Saying that Sachsida has “extraordinary” economic thinking and is 99% in line with his own, Mac Cord pondered that Eletrobras’ capitalization process depends little on the new minister’s performance, and is now in the hands of the TCU (Union Court of Auditors).
The government expects the TCU to approve the privatization of the state-owned company later this week in a trial scheduled to resume this Wednesday.
Mac Cord pointed out that the high interest rates in Brazil also contribute to a scenario of lower liquidity.
“There has been a lot of money left over in recent years because (domestic) interest rates have plummeted, so investors have started looking where they can find returns. Now, with interest rates going up, this money is being drained, it is being channeled into fixed income again, mainly into Treasuries (US public debt securities)”, he said.
“We want the money to come here, so we have to speed up. Every time you have less money you need to offer more return. Today, we are still in a positive scenario and we have identified excess liquidity”, he added, noting that a delay in the sale of assets can make operations unfeasible.
Despite the more restrictive scenario ahead, the secretary said that the rise in interest rates in Brazil is conjunctural and that investors who invest in projects linked to privatizations and concessions make long-term analyses.
Mac Cord assesses that the country is in better condition with the approval of legal frameworks in recent years to stimulate private investment.
In office since August 2020, after then-secretary Salim Mattar resigned, complaining about the delay in the sale of Union assets, Mac Cord said that the government is now ready to privatize a list of public companies, which can go to the sale this year.
According to him, in addition to Eletrobras, the government is very close to offering to the private sector the Companhia Brasileira de Trens Urbanos (CBTU) in Belo Horizonte, the Empresa de Trens Urbanos de Porto Alegre (Trensurb), Ceasa Minas (Centrais de Abastecimento de Minas Gerais) and the ports of São Sebastião and Santos (both in São Paulo).
Properties
Despite Guedes having mentioned a few times throughout the government that the Union has more than R$1 trillion in real estate, in defense of the sale of these assets, the secretary said that the government currently has about R$100 billion that are actually liable of sales.
In an attempt to make this agenda take off, the government launched a program for real estate and Union properties to be pooled in real estate funds, which would be traded on the São Paulo stock exchange. The idea is to increase the liquidity of these assets through the negotiation of shares in the funds.
According to the secretary, each fund must gather assets with a total value of up to R$ 500 million. The implementation of the program depends on validation by the TCU, but the government has already conducted market surveys.
“In the coming weeks, the expectation is that we will launch the first four funds”, he said.
Source: CNN Brasil
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