The government’s intention to privatize Eletrobras in 2022 challenges the history of retraction of share offerings on the Stock Exchange in years of presidential elections, especially if the operation is left for the second half of the year. The operation is one of the priorities of Minister Paulo Guedes (Economy) in the last year of President Jair Bolsonaro’s (PL) term.
Survey of Sheet based on data from B3 in the last 18 years shows that the average number of operations drops 34% in years of dispute for Palácio do Planalto. Considering only second semesters, the average amount drops by almost half (46%) in these cases.
Offers were even scarcer in more recent elections. In 2018, there were only five operations — two in the second half of the year. In 2014, there were two — only one in the second half of the year.
The research takes into account both primary offerings of shares (when the company issues new shares and sells them on the market) and secondary offerings (an operation in which shareholders sell shares they hold).
The government intends to privatize Eletrobras through two stock exchange operations, one primary and one secondary. In the first move, the company would issue new papers to sell them only to private investors. In a second move, the Union would sell part of the shares it holds.
At the end of the process, the government would relinquish control of the company and reduce the Union’s participation from 72% to 45% of the voting capital.
In April, the TCU (Union Court of Auditors) asked for another 20 days of analysis on the process and frustrated the government’s plans for faster progress. The schedule had to be adjusted, and now the Executive foresees an operation between June and August.
Government and company still seek to show optimism about the operation. Guedes says that privatization may take place “very soon”, and Minister Bento Albuquerque (Minas e Energia) says that there is “a lot of interest” from the market even with the electoral scenario. “We believe that it could happen, yes, without a doubt, until the month of July of this year”, he said.
The survey shows that election years may, in fact, have room for operations. In 2010 (last year of the Lula government), for example, Petrobras made a mega-capitalization, attracting resources for pre-salt exploration.
Despite the optimism, government and company members heard by the Sheet recognize that market conditions in 2022 may hamper the sale. Not so much because of the attractiveness of the operation itself, but because of the situation of the Stock Exchange in the coming months — which may, in the limit, make the operation unfeasible.
Ricardo Rocha, finance professor at Insper, says that the evaluation of professional investors traditionally considers variables such as risk and opportunity cost of capital. In election years, the analysis becomes permeated by uncertainty about the future government and the consequent decisions on a range of issues that include public expenditures, debt and even the tax burden.
“We are going to put ourselves in the role of the company that has been preparing for four years to be placed on the market. It will wait for the election to pass, because the investor at that moment will want a discount”, he says. “The closer to the elections, the greater the political risk,” he says.
This year, political concerns are added to the increase in interest rates (which makes fixed income more attractive, taking resources from the stock market) and problems of a global scale. “Brazil is very influenced by the international scenario, which is not pacified. Besides the pandemic, we don’t know where the war will end in Europe”, he says. “We are in an unbalanced global economy and without that, it would be challenging enough [privatizar]”, it says.
If, on the one hand, the political scenario of 2022 already brings well-known candidates in the top positions in the polls – which, in theory, reduces uncertainties about the next four years –, on the other hand, there is a climate of institutional crisis close to the elections that raises concerns.
Cristiano Corrêa, finance professor at Ibmec São Paulo, says that Bolsonaro’s attempts to question the Judiciary or the electoral process generate uncertainty in the market and fuel the refuge of resources in fixed income instead of the risk of the stock exchange.
When a president seeks or understands that disregarding a court order is the best way to solve a problem, the investor wonders if the legislation is enough to keep things in place. So this is directly reflected in the assessment of market risk and in the decision of investors
“I have a president who brings a new fact all the time, and this is reflected in the financial market. In practice, it still hasn’t resulted in anything [ainda mais grave], but it is the president speaking. This institutional deregulation increases uncertainty,” he says.
“When a president seeks or understands that disrespecting a court order is the best way to solve a problem, the investor wonders if the legislation is enough to keep things in place. So this is directly reflected in the risk assessment of market and in the decision of investors”, he says.
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