Brazil’s State Companies Face $5.6 Billion Deficit in 2023

In 2023, Brazil’s federal state-owned enterprises are expected to incur a $5.6 billion loss. This projection comes from President Luiz Inácio Lula da Silva’s government.

The details appear in the 4th Bimester 2023 Primary Revenue and Expense Evaluation Report.

The estimated deficit is higher than the $3 billion forecasted in the 2023 Budget Guidelines Law.

The companies haven’t faced losses since 2020, the first year of the COVID-19 pandemic. That year, the deficit was $614 million.

The government predicts Emgepron, a naval project company, will have the largest deficit of $3.17 billion. Following it is Eletronuclear, with a projected $2.11 billion deficit.

Eletronuclear, part of ENBPar, manages the Angra 1 and Angra 2 power plants in Rio de Janeiro.

The statistics exclude Petrobras group companies and state banks. These are not part of the primary result target.

Key companies face these financial challenges:

ELETROBRAS

The Bolsonaro government privatized Eletrobras in June 2022. As a result, ENBPar was formed.

It took over Eletrobras’ non-privatizable functions, like Itaipu Binacional and Eletronuclear’s nuclear assets.

Minister Esther Dweck stated on Tuesday (14 Nov) that since 2009, energy sector investments have not been included in the state-owned enterprises’ result goals.

She plans to request an exception for ENBPar in the 2024 Budget Guidelines Law.

GOVERNMENT RESPONSE

On Wednesday (15 Nov), the Ministry of Management and Innovation denied the National Treasury would cover the deficits.

They are finalizing the budget reprogramming proposal. A Thursday (16 Nov) statement also denied any deficit. It clarified that the Treasury won’t cover the losses.

CONTRIBUTIONS

From 2011 to 2022, the Brazilian government contributed $44.9 billion to these enterprises. These funds came during the Temer, Rousseff, and Bolsonaro presidencies.

SANITARY MEASURES

Gabriel Leal de Barros from Ryo Asset highlighted financial improvements by the Temer and Bolsonaro governments.

He mentioned a 13% staff reduction from 2018 to September 2022. He also called for more transparency in financial reporting for these companies.

ELETRONUCLEAR’S STATEMENT

Eletronuclear clarified its financial status. It generates about 3% of Brazil’s electricity and a significant portion of Rio de Janeiro.

Previously exempt from fiscal statistics, this changed with Eletrobras’ privatization and the 2023 Budget Guidelines Law.

A proposal in Congress seeks to restore Eletronuclear’s exceptional status. The company stressed that its primary result doesn’t reflect its financial health.

It reported a net profit of about $886.7 million until September 2023.

CORREIOS’ STATEMENT

Correios reported a reduction in its deficit since the beginning of the year. It emphasized its historical financial contribution to the Union and its healthy cash reserves.

The company is focusing on diversifying products and services, particularly in e-commerce.

DATA PREV’S STATEMENT

Dataprev anticipates a near $500 million profit and a positive $26 million primary result in 2023.

The company aims for growth in 2024, with investments in modernization and infrastructure expansion. Dataprev has never received government fund transfers.

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