Plan to privatize Brazil’s Correios likely to fall by the wayside in new government

In his third term, the president-elect, Luiz Inácio Lula da Silva (PT, progressive-globalist), should bet on the modernization of the Correios to increase competitiveness in strategic markets but abandon the plan to privatize the company.

The former Minister of Communications Paulo Bernardo, who was part of the government transition team, has already suggested the withdrawal of any support for the bill (PL 591/21) that provides for the sale of control of the state-owned company and draws a new model for offering postal service in the country.

The idea of the transition team is that the new Minister of Communications assumes the commitment to deepen the discussion about the future of the Correios and present to Lula da Silva a solution to ensure the survival of the state-owned company in a competitive environment.

In the last few days, there has been a growing belief that the post office will be given to a member of the PT.

The federal deputy Paulo Teixeira may be confirmed this week for the post. Besides privatization, the plans to go public may be abandoned.

“Correios has to have a competitive price to compete,” Bernardo told Valor.

The Bolsonaro government, which hired an independent consultancy to prepare the privatization studies, evaluates that the only way to ensure the survival of Correios in the long term is with more agile management and investment in more efficient processes, which the private initiative could only offer.

Preliminary surveys by the Ministry of Economy indicate that the company can invest up to R$300 (US$58) million per year, while a private investor could increase this limit to R$2 billion.

In recent years, Correios has faced competition from private logistics companies and large retailers that have grown due to e-commerce and have become increasingly efficient.

Some of them deliver long distances in the country within one day, and names like Magazine Luiza and Mercado Livre are investing in their own aircraft fleet, new warehouses, and logistics centers.

This scenario reinforces the pro-privatization arguments since the state-owned company, in the current molds, would be unable to invest in keeping up with the innovations in this market.

When talking about the privatization of Correios, specialists often cite Deutsche Post as an example.

Privatized at the end of the 1990s after a lengthy public debate, the German post office became one of the largest logistics groups in the world.

For Bernardo, improving the company’s performance under state management is possible. One of the bets is to rescue the strategy of exploring new markets from the possibilities created by Law 12,490/11.

With it, the Post Office was freed to explore the integrated logistics segment, being able to enter into partnerships with airlines in cargo transportation, enter into financial services and electronic communication, operate abroad and acquire minority stakes in strategic markets.

Bernardo, the head of Communications when the proposal was brought to Congress, recalled that Correios employees viewed the initiative with suspicion.

“Now they say the law is good, but at the time, they said we wanted to privatize the Correios.”

Correios suffered restrictions on cash availability in the following years, which affected investments.

Some reasons are the anticipation of dividend payments to the Treasury, the change in the criterion for provisioning future labor liabilities, and the freezing of postal rates.

On the other hand, the company has improved in revenue and profit in the last four years. The company’s president, Floriano Peixoto, said the state-owned company should make a profit of R$1.5 billion this year.

Marcos César Alves, a member of the board of directors of the Correios as a representative of the employees, sees room for the company to operate in new markets.

“We cannot forget that the company is the market leader and has a heavyweight brand with great potential to be explored.”

For Alves, a special advisor to the Association of Postal Professionals (Adcap), the 2011 law allows, for example, to acquire stakes in logistics companies in neighboring countries.

The current board also defends the defense of regional performance.

Peixoto mentioned in an interview with Valor that a 106,000 m2 space has already been rented at Guarulhos Airport to transform the terminal into a Latin American parcel hub.

The Correios privatization project foresees the sale of businesses, such as parcel delivery and concession, to be managed by the private sector to ensure the universalization of postal services.

The design faces resistance from the future government.

“What sense does it make to privatize to deliver the most profitable side of it and leave the obligations to another?” says Bernardo, who rejects going public to raise funds to finance investments.

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