Brazil Seeks $2.7 Billion With Postal Service Privatization

Brazil seeks as much as 15 billion reais ($2.7 billion) with the sale of its postal service next year, the first major privatization of an ambitious plan that has so far yielded limited results.

Communications Minister Fabio Faria sees some 10 companies as potential buyers, including delivery firms FedEx Corp. and DHL, a unit of Deutsche Post AG, as well as retailers Magazine Luiza SA, Amazon.com Inc. and the local unit of Mercado Libre Inc. Five of them have expressed interest in the sale, Faria said in an interview, without providing specifics.

“We are willing to evaluate how we can contribute to the privatization process to be efficient for Brazil and for our services,” Mercado Libre said in a statement. According to FedEx Corp, the company is continuously monitoring the market for opportunities to expand its business in Brazil, but would not comment further. Amazon is not in talks to acquire Correios, the companys press office said in a note to Bloomberg News. Magazine Luiza declined to comment, and DHL did not immediately respond to requests for comment when contacted.

The price tag suggested by Faria for the privatization was seen as exaggerated by two former government officials familiar with the companys financial situation, which includes labor liabilities, pension fund issues and bloated staff numbers.

Fabio Faria

Photographer: Sergio Lima/AFP via Getty Images

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The winner will benefit from access to a large market but will also be responsible for maintaining service in the countrys most remote areas, Faria said.

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“It‘s fundamental that the service remains universal,” Faria said in his Brasilia office. “The postal service reaches 95% of the country’s locations and this has to be maintained, even if the buyer outsources the service in some regions.”

Economy Minister Paulo Guedes took office in 2019 with an ambitious plan to privatize over 600 state-owned companies, bringing in some 1.2 trillion reais to public coffers. Two years later, no major company has passed to the private sector and President Jair Bolsonaro has blocked plans to sell oil giant Petroleo Brasileiro SA, as well as banks Caixa Economica Federal and Banco do Brasil SA.

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Amid a slow political process that requires congress approval for the sale of many state-owned companies, Guedes lost his privatization czar Jose Salim Mattar last month.

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Preparing for Sale

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Faria said the government intends to send congress by year-end a bill ending state monopoly in the delivery of some items, a necessary step for the privatization of the postal service. A new voluntary dismissal program to reduce costs is also under consideration to make the company more attractive to potential buyers.

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Postal service workers went on strike for more than a month during the pandemic, protesting changes in their collective work agreement that resulted in lower pay and fewer benefits.

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Management argued that the changes were necessary to ensure financial sustainability. The company has posted large losses in 2015 and 2016 that were only partly offset by relatively small profits in the following years.

— With assistance by Vinicius Andrade

(Updates third paragraph to include comment from Amazon.)