University of São Paulo Research Shows Privatization of Sabesp Bucks Global Trend
The conflict between public and private management models in Brazil has been growing in recent years. An old agenda, the privatization of services and public entities has taken on a new look. In 1990, we saw the creation of the National Privatization Plan, the PND, which rethinks the State’s position on economic issues, making the magnitude and scope of privatization significantly greater.
Measures have advanced over the years. In 1994, the steel sector passed into private administration. In 97, it was the turn of the mining company Vale do Rio Doce, now Vale SA, which years later would be involved in two of the country’s biggest environmental disasters. Arriving at the turn of the millennium, in the 2000s, the list was already extensive: the 12 main holdings, representing the transfer of the telephone sector to the private sector, Centrais Elétricas Geradoras do Sul S/A (Gerasul), the São Paulo railway network, state electricity companies in Pernambuco, Maranhão, Paraíba, Mato Grosso, Mato Grosso do Sul, Rio Grande do Norte, Pará, Rio de Janeiro, among others.
In the 90s, Brazil was aligned with the global trend, which was also towards privatization. However, recent studies indicate a widespread return to the public management model. Currently, around 90% of water systems in the world are publicly managed. The survey is from the Public Futures database, coordinated by the Transnational Institute (TNI), in the Netherlands, and the University of Glasgow, in Scotland. The study also found that, between 2000 and 2019, there were more than 1,400 cases of renationalization of public services, with most of them in Europe.
For professor Guilherme Grandi, from the Faculty of Economics, Administration, Accounting and Actuarial Science at the University of São Paulo, the European experience with privatization of essential services was negative. He exemplifies the situation with the case of the city of Paris, capital of France. “The renationalization of water and sewage services in Paris took place between 2007 and 2008. The concession of the company that managed the service was not renewed. Privatization had been going on since the 1980s and proved to be ineffective when it came to expanding and improving the service. It was also discovered that the company was much more concerned with distributing dividends than investing in its water and sewage treatment capacity.”
The professor states that the renationalization of services is society’s response to the private mode of operation. “Private capital always puts the profitability of its investment ahead of social benefits and returns. This is the basic rule of capitalist accumulation: first comes profit, then the adequate provision of services and the health of the population. Recent cases of renationalization of sanitation, transport and electricity services in European countries are responses to these market dynamics. This, and the name itself says, are essential services. Therefore, the State has to guarantee their good provision, even when the private sector is the one providing them”, he argues.
Lead to privatizations
In addition to Paris, mentioned by the professor, another 267 cases of re-nationalization of water supply services were registered in 37 different countries, affecting more than 100 million people around the world. The Brazilian agenda did not keep up with the rest of the world. In recent years, a new wave of privatizations has taken shape. The actions are now concentrated precisely in the basic sanitation services sector. The most recent case is that of Sabesp, the Basic Sanitation Company of the State of São Paulo. In turbulent sessions, the São Paulo City Council debated the privatization project, which had already been approved by the State Legislative Asse
Professor Pedro Forquesato, also from the Faculty of Economics at the University of São Paulo, explains the project. “Services considered to be of public utility can be subject to different privatization models, right? The most common is by concession, when the State’s granting authority launches a bidding notice and interested companies compete, aiming to meet the requirements contained in this notice. The law that approved Sabesp’s privatization project authorizes the state Executive to negotiate its participation in the company’s shares, giving up control of the state-owned company.” “The government’s idea is that, as a company that has a connection with the State, Sabesp would have several restrictions on operations that could generate, in this view, less economic efficiency. A private company would not need to meet these bureaucratic demands, and would therefore be more efficient,” he continues.
Forquesato states that it is difficult to predict the results of the process. “Even assuming that there will be a gain in efficiency in the company’s private service, there is no evidence that makes us believe, in principle, that this gain in efficiency would be converted into a reduction in the fare paid by citizens. This would have to be observed by regulatory bodies, after all, the company can convert these profits into internal remuneration, among other destinations for the surplus”, he concludes.