Brazil’s new government launched a comprehensive privatization plan on Tuesday, including auctioning operating licenses for oil, gas, power and infrastructure projects, hoping to boost investment and lead the domestic economy out of the worst recession in 80 years.
The Brazilian government plans to sell airport operating licenses in several cities by March next year, and plans to sell federal highway operating rights in the central, western and southern regions later next year.
In addition, this plan also includes the sale of national railway operating rights, and plans to auction related operating rights to oil fields and hydropower dams in the first and second half of 2017.
Brazil’s new President Michel Temer is trying to reduce a record budget deficit and control debt by selling assets. The country’s fiscal problems have cost it its investment-grade rating and undermined investor confidence in the country.
At the end of 2015, Brazil’s external debt balance was US$665 billion, a nearly 90% increase from US$352.7 billion in 2014.
In 2015, Brazil’s GDP fell by 4%. In the second quarter of this year, Brazil’s GDP shrank by 0.6% month-on-month and 3.8% year-on-year. This was the sixth consecutive quarter of negative growth for the Brazilian economy, the worst performance since 1996. The current number of unemployed people in Brazil reaches 11.6 million, and the unemployment rate is as high as 11.6%.
“We need to open up to the private sector because the state cannot do everything,” Temer said in discussions with ministers.
Wellington Moreira Franco, who is responsible for increasing private participation in the privatization plan, said that government authorization will bring "real and reliable" rates of return and ensure that private capital can obtain long-term loans from state-owned banks or raise funds in the capital market through bond issuance.
While attending the G20 Summit, Brazilian President Temer also held talks with Chinese investors to discuss infrastructureinvestment opportunities in Brazil. Pakistan and relevant Chinese units have signed 9 agreements, which can be described as fruitful results. These agreements include: building a US$3 billion steel plant in northern Brazil, investing US$450 million in building a terminal in Maranhao state, establishing a US$1 billion agricultural development fund, etc. The two sides also reached an agreement on evaluating China's participation in Pakistan's infrastructure projects.
The Temer government has always hoped to promote Brazil's economic development through measures such as infrastructure project auctions and privatization of state-owned enterprises, and these agreements signed with China can help implement its policy plans.
