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Brazil Forges Ahead With Privatization Of State Businesses

By Julia MichaelsSpecial to The Christian Science Monitor / October 29, 1991



SAO PAULO, BRAZIL

DESPITE opposition, the Brazilian government held its first auction of a state-owned company last Thursday, a month after the original sale date.Economy Minister Marcilio Marques Moreira said Thursday that the sale "divides the waters between modernity and the archaic and old Brazil." Announced in 1990, the Brazilian privatization program was meant to sell off one company a month, but has come up against legal, bureaucratic, and political obstacles. Shaken by the prospect of economic reform, many Brazilians are suspicious of business, especially foreign business. A consortium formed by the Bozano Simonsen bank, local steel distributors, Usiminas employees, and Nippon Usiminas (the group of Japanese steel producers) says it acquired 51 percent control of Usiminas, a huge steel mill. Three public-employee pension funds bought shares totaling 30 percent of the mill. The sale price was $1.2 billion, 14 percent more than the minimum price set by the government. Foreign investors bought only 6 percent of the available shares, although the rules permit 40 percent foreign ownership. Eduardo Modiano, president of the National Bank for Economic and Social Development and coordinator of Brazil's privatization program, said potential foreign buyers had been scared off by court proceedings to stop the Usiminas sale, but should be interested in future auctions. The Rio de Janeiro stock exchange president, Francisco Souza Dantas, said the auction sent a message to privatization opponents who want to protect Brazilian industry from outsiders. "International capital does not want to take over Brazil," he told the O Estado de Sao Paulo daily newspaper. "The foreigners showed they are not very interested at all in us." The auction was held this time despite violent protests near the Rio de Janeiro stock exchange, where the sale was coordinated. Trade unionists and political activists threw stones; police responded with clubs and tear gas. About 80 people were hurt. Brazilian President Fernando Collor de Mello, who has been under steady attack by businessmen and politicians for his economic policy, hailed the Usiminas sale at the beginning of a celebratory speech in Brasilia Friday. Mr. Collor went on to demand that other countries reciprocate Brazil's removal of trade barriers. He also noted that last week he signed a bill ending in 1992 Brazil's barriers against foreign computer products, and will send a tax reform bill to Congress Nov. 1. He said he expects "posi tive" news on the debt negotiations by year end. Collor ended the speech in an odd, angry tone, calling businessmen who lay off workers because they cannot compete "cowards." He also faulted business consultants who "live surrounded by dogs, guards, by security guards in their mansions."

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