The Correios will be offered for sale for a symbolic value, without the objective of making cash for the government, said Martha Seillier, special secretary of the PPI (Investment Partnership Program) —the folder responsible for privatizations, linked to the Ministry of Economy.
In an interview with UOL, Seillier stated that the minimum price will be much lower than the value of the company’s assets, because the buyer will take into account the costs he will have to bear. In addition to the obligation to maintain the letter and correspondence service throughout Brazil, the privatized company will start paying taxes that the state-owned company does not currently pay. “This is the calculation we are doing. There will be a small amount left, let’s put it this way, which is how much we are going to ask for at the auction,” he said.
The secretary said that it will only be possible to estimate the minimum bid for the auction after the second phase of the privatization studies, which should be completed in September, and after Congress confirms the sale. The bill, which has already passed through the House, still needs the approval of the Senate and President Jair Bolsonaro (non-party).
According to the 2020 accounting balance, Correios has a net worth of R$950 million (value of assets less liabilities). The document states that the company’s properties are worth BRL 3.85 billion, but that the value is outdated, as the process of revaluation of the properties was hampered by the pandemic.
Martha Seillier stated that the main objective of privatization is not to raise revenue, but that the government could still receive a high amount.
In the end, the value will be symbolic. It is, of course, a very large company and the trend is for us to go to the auction. If there is a lot of competition, there will be a premium [diferença entre o lance mínimo e a proposta vencedora] and we will end up having a relevant value in the sale of Correios. But that’s not the focus.
The secretary says that if the government targets the collection and charges too much, the buyer will not have money to invest in the modernization and expansion of the company. This could make the business unfeasible and jeopardize the provision of basic postal service to Brazilians.
Company will have to pay taxes and deliver letters throughout Brazil
The first phase of the studies contracted by BNDES on privatization concludes that the main factor in the depreciation of Correios will be the end of tax immunity. As it is a public company that provides essential services, it does not pay taxes such as IPTU, ICMS, ISS and IRPJ.
The study estimates that Correios fails to collect around R$ 2 billion a year in taxes.
After privatization, tax immunity ends. The text approved by the Chamber does not provide for tax exemptions or subsidies for the privatized company, which will be called Correios do Brasil.
According to the project, the company will also assume a concession contract for the provision of the universal postal service — the obligation to carry letters and correspondence throughout the national territory, as the Correios do today.
As the postal service makes losses in small towns and remote places, the project provides for a monopoly (exclusivity) for at least five years in this sector. The idea is to compensate investors with an advantage over companies with whom they will compete in other sectors, such as logistics and delivery of goods.
This is the account we are doing. We are going to price all Correios assets and remove from this amount the obligation to provide services in all cities in Brazil for a few more years. Then, let’s deduct from this amount all the obligations to pay taxes that the company does not currently have. Then there will be a small amount left, let’s say, which is how much we will ask for at the auction.
If you don’t privatize, the company will go bankrupt, says secretary
Correios does not depend on government contributions (they are independent). Although they recorded losses between 2013 and 2016, the balance of the last 20 years resulted in a profit of R$ 12.4 billion adjusted for inflation. Of this profit, 73% (R$ 9 billion) were transferred to the federal government through the distribution of dividends.
According to the secretary, the company will not be able to remain profitable for a long time if it remains under public management. She claims that the shackles of a state-owned company, such as the obligation to make a bid and the slowness in decision-making, make Correios less competitive in the area of e-commerce (sales over the internet) every day.
Due to the low capacity to invest in the delivery of goods, the company will lose space in the sector, which is the main source of profits and supports the service of letters and correspondence, says Seillier.
We will not be able to contribute resources, take money from education, security or health to make investments in the Correios. It will start to have a divestment guideline, with the cut of cities with deficits, layoffs and the closing of branches.
Postal officials and opposition parties disagree that the Postal Service tends to fail. They argue that the company appreciated during the pandemic, like others in the logistics sector, and that there is no public interest in privatization.
How was the privatization of the Post Office approved by the Chamber
- The company, which is 100% owned by the Union (federal government), will be sold in its entirety and will be renamed Correios do Brasil
- It will continue with the monopoly (exclusivity) of letters and correspondence for at least five years
- During this period, the company will be responsible for the universal postal service (obligation to take correspondence to all corners of the country), through a concession contract
- The universal postal service will be regulated by Anatel (National Telecommunications Agency) and supervised by the Ministry of Communications
- Anatel will set tariffs and readjustments for each service, including a “social tariff” for those unable to pay
- Rates may be different depending on the social indicators of each region
- Company will not be able to close branches considered essential to the postal service in remote areas
- Employees cannot be dismissed without just cause for 18 months and there will be a POS (Voluntary Dismissal Plan)
- Text does not provide tax exemptions or federal government subsidies for the postal service