Brazil bailout rumor

R.Magellan magellan at
Sat Oct 10 16:32:29 PDT 1998

Doug Henwood wrote on 7 Oct 1998:

Latest rumor out of Washington, based on an overheard phone conversation at the World Bank/IMF meetings, just reported to me. A Brazilian banker, fresh from meetings, says they've almost got a $50 billion bailout package ready - a package that would be backed by anticipated privatization revenues. Is there that much left in Brazil to privatize, or is this just some confidence trick?


Dear Doug and list members:

The anticipated privatization revenues refer to installments payable of the Brazilian telecom Telebrás and some of its branches, which were bought by both the Spanish and Portuguese telecoms. It has been developed a complicated scheme to anticipate them at a discount, since the law forbids reduction of the bidding price. Though It is deemed of being the world biggest sale ever for a state-owned company, the amount involved is far less than US$ 50 billion.

There are still some privatizations in course, as the water company of the state of Rio de Janeiro, that has been hampered by a law suit. They are minor ones, however. What is now really at stake are two jewels of the crown: Petrobrás (the federal oil corporation) and Itaipu (a binational company that holds the largest hydroelectric dam in the world, in the frontiers of Brazil, Argentina and Paraguay). Let me write a little about both cases.

Petrobrás ************ Any attempt to privatize Petrobrás outrightly is very sensitive and risks to be politically disastrous.

Petrobrás is a corporation quoted in the stock exchanges, a blue chip. A little more than half of its shares belongs to the Federal Union and so it is deemed to be a state-owned company. Petrobrás is one of the largest and most profitable oil companies in the world. Last year the neoliberal President Fernando Henrique Cardoso (the winner again) signed into law a bill that opened the petroleum industry to foreign bidding, thus breaking up the federal monopoly held by Petrobrás.

The national campaign for the creation of Petrobrás was the hottest political issue of the fifties in Brazil and the ensuing anti-imperialist sttrugle led President Getúlio Vargas to kill himself while in office (1954) for not bearing the pressures from the right wing opposition and from abroad. His death mobilized millions of people into the streets, what stopped the ongoing coup d'état, that could only win ten years later, with the help of both Kennedy and Johnson governments.

It is quite bitterly ironic that one of the uncles of President Fernando Henrique Cardoso was the late lieutenant-general Felicíssimo Cardoso, a brilliant leading member of the old Soviet-line PCB and the main responsible for the creation of Petrobrás in 1953 (up to 1964 communists had an important foothold in the Armed Forces, specially in the Army, and in several crucial occasions they were successful into driving the miltary to support progressive political stands). The junior Cardoso then worked as a secretary to the senior one in the federal oil agency.

Now the "young" Cardoso fears the very sensitive reaction of the Armed Forces, though there are not communists harbored therein anymore... The former Air Force commander-in-chief, who runnned as the presidential candidate for the little nationalist party PMN, when speaking by TV and radio bluntly called Cardoso a traitor to the fatherland for having been privatizing almost all the state-owned infrastructure companies at reduced prices. By the way, the air general also "accuses" Cardoso of being an atheistic... :>)

Itaipu Hydroelectric ************************* The problem here entails internal politics too, but the main one is that Itaipu belongs on a fifty-fifty basis to two countries, Brazil and Paraguay, since it had to be built just in the frontier.

Argentina should be consulted either since the dam is very near to the common frontier of these three countries and the water downstream leads directly to Buenos Aires through the river Plate. For this reason the Itaipu dam was once properly called a "water bomb" aimed against Argentina's main city in the event of a rupture of the walls. When it was built, in the seventies, it also raised another hot political issue that for a brief while ignited high tension in the otherwise traditional amicable relations between Argentina and Brazil. Juan D. Perón, then in his third term, was the main responsible in removing the tensions successfully.

In solidarity, Roberto

1848 / 1998: Proletarier aller Länder, vereinigt euch !

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