Privatization of Sabesp and Santos Port are priorities, says São Paulo secretary

“When São Paulo goes well, Brazil goes well.”

Throughout history, the cycles of the national economy have confirmed this old maxim.

With this reasoning in mind, the state’s new Economic Development Secretary, mechanical engineer Jorge Lima, plans the future of Governor Tarcísio de Freitas’ (Republicans) main showcase should he decide to run for the Presidency of the Republic in 2026, an ambition, for now, publicly denied.

The order received by the secretary of the former Minister of Infrastructure of the Bolsonaro government is to recover and strengthen the main industrial centers of São Paulo, affected by the covid-19 pandemic.

With 46 million inhabitants, the most populous state of the federation accounts for 27% of the GDP (Gross Domestic Product) of the country, according to the latest ranking published by IBGE (Brazilian Institute of Geography and Statistics), with data from 2020.

The wealth produced in São Paulo (R$2.3 trillion) exceeds the second place in the list (Rio de Janeiro, R$754 billion) by R$1.6 trillion.

In an interview to Bloomberg Línea, made before the rains that caused landslides and deaths in the São Paulo coast, Lima said that his secretariat started a study, together with the Secretary of Finance and Planning, to evaluate all the benefits granted to the industrial poles of the state.

The São Paulo state government wants to measure the size of the returns in job and income generation.

The privatization of Sabesp (Basic Sanitation Company of São Paulo State) and the concession of Santos Port, the biggest in the country, are on the agenda of the economic priorities of São Paulo’s government, according to the secretary.

The economic area of the new management of the São Paulo state government is led by former members of the Bolsonaro government.

Besides Lima in Development, the Secretary of Treasury and Planning is commanded by Samuel Kinoshita, who was also Guedes’ former special advisor in Brasília.

The Economic Development secretary says the São Paulo state government has not given up on the privatization of Santos Port, despite the opposition of the new federal government.

During his administration in the Ministry of Infrastructure, Tarcisio highlighted the sale of the “crown jewel” of the port sector as one of his priorities.

Still, the project did not get off the paper. “There are divergences, but we will adjust this,” said Lima.

According to the secretary, investments in infrastructure improvement in São Paulo should be led by private initiative through the PPI (Investment Partnerships Program), an area of responsibility of Rafael Beni, secretary of Investment Partnerships.

The studies for the privatization of Sabesp should be ready by the end of March.

DEFENDING INDUSTRY INCENTIVES

Lima also said that industry will receive special attention in his administration due to the relevance of the sector in the composition of the state GDP.

“We are in dialogue with 16 business coalitions. We will have a strong reindustrialization in the state of São Paulo,” said the secretary.

One of the São Paulo industrial poles that are receiving attention from the folder is in the Franca region, in the northeast of the state, which is focused on the footwear sector.

The qualification of the labor force is a necessity for this segment, according to the secretary.

“In Franca, there is no design course, for example. We are going to develop a young apprentice project in this region”, he said.

He also cited the automobile industry as a priority for receiving incentives.

“We have to use our intelligence to look at what we are strong in, our vocations. It is indisputable that the best automobile pole in Brazil is in São Paulo. We have to use our creativity for it to remain so”, affirms Lima.

A review of tributes such as ICMS (state tax of goods circulation and transport services rendering”, was a sector’s claim.

The tax rate increase during the administration of governor João Doria, from PSDB, made Minas Gerais, for example, take São Paulo out of the leadership in the monthly ranking of new vehicle registrations.

Last Monday (27), the governor signed decrees reducing taxes in several sectors of the economy.

The secretary is skeptical about the success of a broad tax reform proposal in the National Congress.

He only expects the approval of specific measures, since the new federal government does not have a majority of votes in the legislature and will have difficulties approving its agenda.

According to Lima, the fiscal war, in which states offer tax incentives to attract investments, could be solved partly with tax reform.

In the last decades, São Paulo has seen some companies moving their headquarters to other states, seduced by advantages offered by other governments, as was the case of the small aircraft manufacturer Octans Aircraft, headquartered in São João da Boa Vista, which received incentives from the government of Ceará to install a factory in Sobral, a stronghold of Ciro Gomes, of PDT.

“We can enter the fight in sectors where São Paulo is strong. São Paulo has a concentration of industrial poles. We are better than other states in many segments, such as agribusiness.”

“We are preparing ourselves for a solid development vision in São Paulo, in which we will protect what we have best and attract what Brazil does not have yet, but what São Paulo can have,” said the Secretary of Economic Development.

GDP VS. THE NATIONAL AVERAGE

“We are prepared to make São Paulo become the industrial highlight again. With the 16 business coalitions created to insert all the administrative regions in the São Paulo GDP, we can direct our programs to meet the demands of each region”, said Lima.

Last January 31, Fundação Seade released that the São Paulo State GDP advanced 2.9% in the year to November, with growth in all sectors: services (3.8%), industry (0.5%), and agriculture and cattle-raising (1.6%).

In Brazil, according to IBGE data, the GDP grew 2.9% in 2022.

“The São Paulo economy has been showing good results, especially in services, especially in food and lodging, and information and communication,” said Bruno Caetano, the Foundation’s executive director, in a statement.

Based on these data, Fundação Seade projected for 2023 the following São Paulo GDP growth rates: minimum of 1.1%, average of 1.6% and maximum of 2.3%, confirming the perspective of growth accommodation at levels lower than those of 2022.

In Brazil, the most recent market projections point to a growth of 0,84% in 2023, according to the median of Focus bulletin, from Central Bank.

A recent study by Santander Brasil bank, released last year, projected a 2.6% increase in São Paulo’s GDP in 2022 and a 0.6% drop in 2023.

“After a sharp drop in 2020 and an upturn in 2021 and 2022, the industry in the Southeast is expected to contract in 2023. Lack of inputs and restrictive monetary policy should impact the industry in São Paulo and Minas Gerais in 2023. The worsening of activity should impact the service sector throughout the region,” analyzed Santander’s team.

Asked if the performance of the São Paulo economy over the next four years can become the governor’s main asset to face in 2026, an eventual electoral dispute with President Luiz Inácio Lula da Silva (PT), who admitted earlier this month the possibility of running for reelection, Lima replied:

“I’ve been with Governor Tarcísio since January; I helped in the electoral campaign, and I can guarantee that he never spoke or thought about election 2026. This is not part of any conversation.”

“The new government plan’s obsession is to grow São Paulo’s economy. It is too early to think about the 2026 scenario.”

With the information from Bloomberg