The approval of the project that allows the government to privatize Eletrobras and the discussion about the sale of Correios have generated debates about the impact of privatizations on the consumer. In the cases of these companies, those who are against the sale allege negative effects such as the increase in the electricity bill and the lack of coverage for distant areas when delivering orders. Those in favor argue that the service will be more efficient and that there will be fewer losses from corruption.
Brazil has a history of privatized companies, which allows us to look back to draw lessons from these experiences. Two factors are essential for consumer benefits, according to experts. The sales conditions need to be well defined after a broad debate and, after privatization, the regulatory agencies must act intensely to guarantee the smooth functioning of the services.
Remember below some important cases of privatized companies and see what the effects were for the consumer.
Telephony: wide access and complaints
The case of the Telebras system is one of the most relevant in the recent history of privatizations in Brazil. In July 1998, during the Fernando Henrique Cardoso government, the federal government sold companies responsible for fixed, long-distance, and cellular telephony, raising R$ 22 billion in values at the time (corresponds to R$ 88.1 billion today).
The main positive point of the sale of these state-owned companies was the expansion of the offer of telecommunications services in the country, making access cheaper, according to Marco barber, lawyer and doctor in law by UFPR (Federal University of Paraná). But there were also problems.
At that time, the telephone system worked well, but it was difficult to access. Today there is much broader access, everything is simpler and easier [depois da privatização]. On the other hand, there are many complaints, not only for the quality of service provision, but for the way in which the user is treated.
Marco Berberi, from UFPR
Cell phone services are one of the champions of complaints in the country, behind banks, according to data from the federal government’s National Consumer Defense Information System. In 2021, the system has registered 124,097 complaints related to these companies, the majority (54,158), for charges considered improper or abusive.
Wanted by UOL, a Connected Brasil, the union that brings together the telephone companies, said that, since privatization, the telecommunications sector has already invested more than R$1 trillion in values adjusted for inflation. “High investments have if reflected in a drop in the number of complaints,” he said.
Light was sold before the creation of Aneel
There are examples of privatization of companies in the electricity sector. Companies such as Light, from Rio de Janeiro, were part of the privatization package of the late 1990s and early 2000s, also under FHC’s government.
The sale of Light took place through an auction on the Stock Exchange, in May 1996. Today, 20% of the company’s shares belong to the Samambaia fund, 10% are in a Santander fund and the remainder is spread among other shareholders.
Fernando Filardi, a professor at Ibmec-RJ, says that Light’s privatization process “was poorly done” because the sale of shares took place before the creation of the sector’s regulatory agency, Aneel (National Electric Energy Agency), in December of 1997.
In the first year [depois da privatização], it was as if there was no inspection. This was very bad, because there was no control over performance indicators, mainly related to the consumer.
Fernando Filardi, professor at Ibmec-RJ
Filardi says that the creation of Aneel was fundamental to improve the company’s performance, but complaints persist about interruptions in energy supply.
Light occupies the 22nd position, out of 29 companies, in Aneel’s continuity performance ranking, which measures the duration and frequency of interruptions in energy supply.
The problem we still have is that the regulatory agency does not have the strength to enforce its guidelines. Fines, for example, drag on for decades. In Light’s case, the duration and frequency of power outages still occur at unacceptable levels for a privatized company.
O UOL he sought out Light and Aneel, but the company and the agency did not want to manifest themselves.
Highways: corruption and high tolls
The government also makes concessions, where the state does not “sell” a company or service, but transfers its management to the private sector for a specified period of time.
The best known concessions are those for highways, and the examples in this area “are very heterogeneous”, according to joelson Sampaio, professor at the FGV School of Economics (Fundação Getúlio Vargas). “There are highways where the service is better, but at a much higher cost,” he says.
In Paraná, for example, at the most expensive toll plaza in the state, in Jataizinho (400 kilometers from Curitiba), the fare is R$ 26.40 for cars.
Corruption cases involving highway concessionaires are also common.
In São Paulo, for example, Ecovias, which administers the Anchieta-Imigrantes system, signed an agreement with the State Public Ministry recognizing that concession contracts signed by the state government during the administration of Mario Covas, Geraldo Alckmin and José Serra, all of the PSDB , were defrauded by the action of a cartel.
Under the agreement, the company pledged to return R$ 650 million to the state. At the time, Ecovias released a relevant fact to the market, saying that it has a “commitment to integrity”. The state government stated that it participated in the agreement to “define the allocation of resources to works of public interest”.
Wanted by UOL to comment on the report, Ecovias declined to comment.
In Paraná, former governor Beto Richa (PSDB) was arrested in an investigation into the concession of federal highways. At the time, the toucan stated that the arrest was based on “inferences and facts lacking proof”. Richa was released soon after, and lawsuits on the case are still pending in the Electoral Court.
Airports have more investments, says ITA professor
Airport concessions provide further positive examples, according to Alessandro de Oliveira, economist, aviation specialist and coordinator of the Air Transport Economics Center at ITA (Instituto Tecnológico de Aeronáutica).
Fortaleza, Porto Alegre, Recife and Guarulhos (SP), for example, have airports that are benefiting a lot from the new management and investments.
Alessandro de Oliveira, from ITA
The concession auction for Guarulhos airport took place in 2012, under the management of Dilma Rousseff (PT). The airports of Fortaleza and Porto Alegre were granted in 2017, by the Michel Temer (MDB) government. In the case of Recife airport, the process already took place under the Bolsonaro government, in 2019.
The professor cites, however, a problematic case, that of Viracopos Airport, in Campinas. It was granted to the private sector in the Dilma administration. Six years later, the concessionaire Aeroportos Brasil, which managed the structure, filed for bankruptcy protection. According to Oliveira, this delayed investments, but did not affect fares because, “when an airport has poor performance, it is penalized and cannot get more expensive”.
The judicial reorganization process ended in December 2020. Now, the federal government forecasts that the airport will be tendered again in the first half of 2022, and that the concession will go to another company. According to the Ministry of Infrastructure, the notice foresees investments of R$ 4.2 billion.
The Anac [Agência Nacional de Aviação Civil] it is who must inspect the good quality of the service. In theory, if the regulation is adequate, the airport will have a private entity providing better service and making investments that the public sector was unable to carry out.
Alessandro de Oliveira, from ITA
The ITA professor says that ANAC regulation has good regulations, considering factors such as productivity and quality. But, according to him, the government could standardize concession contracts, establishing standardized incentives.
Focus should be on the consumer, not raising money
Berberi says that it is not possible to “demonize or praise” privatizations in general, as there are positive and negative aspects to the sale of several state-owned companies.
The fundamental thing, he says, is that the processes are widely discussed, with studies on their impacts and arrangements that benefit the consumer. After the sale, it is crucial that the sector has a strong state regulatory agency, which mediates between citizens and companies, he says.
Often, when it comes to privatization, there is a lot of hurry to increase the government’s cash, but it is always necessary to think about the model and the final recipient of the service, which are the citizens. The only objective must be to improve service delivery. If there is another goal, there is a deviation from the purpose.
Marco Berberi, from UFPR
Sampaio says that, in general, there is an improvement in services, but with a price increase.
The great challenge of privatizations is design: what the private company will have to offer to maintain the quality of service with the public at a fair price.
Joelson Sampaio, from FGV
Carlos Lopes Rodrigues, professor of economics at the Federal University of Vales do Jequitinhonha and Mucuri, in Minas Gerais, says it is essential to recall previous examples in order “not to repeat the mistakes of the past”. He criticizes, for example, the fact that the government made large investments in Telebras before privatizing it.
If the government makes this financial restructuring and the company becomes profitable, why transfer it to the private sector?
Carlos Lopes Rodrigues, from UFVJM