If you have read this blog for a while, you will
remember my deeply held belief that Mae West holds the future of Brazil in her
hands, so to speak.
Mae West, was a leading
Hollywood “femme fatale” in the 1930s
and 40s. She was also renowned for her double
entendres and quick wit. My favorite remark
of hers is: “I can resist everything except
temptation.”
Had the Royal Swedish Academy
of Sciences been more perceptive, it would have awarded her its Nobel Prize for
Economics in 1980, before she died, rather than to Lawrence Klein, the father
of econometrics. Seriously, I believe
that the above Mae West Axiom has greater potential for economic growth in
Brazil than any combination of Klein’s models.
Back in 2015, I wrote a post
in which I argued that the massive corruption scandal at Petrobras had been
facilitated by its status as government-controlled national champion, leaving
politicians too close to the levers of power and to the cash coffers. Similar instances of corruption were uncovered
at Eletrobras, the giant electric energy holding, also controlled by the government.
The Mae West Axiom, if it had
been followed, would have offered a simple solution: privatize Petrobras and
transfer control out of government hands, and you will greatly reduce instances
of corruption. Indeed, Vale (the iron
ore giant), the telecoms and the steel companies the control of which had been sold
to private investors, didn’t suffer the same corruption abuses.
Which brings us to the
present. Today, the Public Prosecutor’s
Office charged Aldemir Bendine with corruption for facilitating the business of
Odebrecht with Petrobras in return for personal payments. What is so damning, and instructive, is that
Mr. Bendine was appointed CEO of Petrobras in 2015 to clean its finances and
practices, after the huge Lava
Jato scandal had come to light!
I must confess that I totally
misjudged the man at the time, perhaps because we both are fans of the rock
band Queen (?). If one needs any further
proof of the lack of accountability at government-controlled behemoths, I don’t
know what beats that.
Also today, the stock price
of Eletrobras shot up a massive 32% to 49%[1]. What triggered such unheard movement? The news that the Ministry of Finance intends
to privatize the company. Since its
shares are already publicly traded, this means selling shareholder control to
private interests with the state retaining the equivalent of a golden share to
veto certain key decisions.
A greater no-confidence vote
in government control, I have never seen!
When Petrobras did its IPO,
popular and political resistance made it impossible to actually privatize the
company. The later discovery of massive
offshore deposits actually caused a quasi renationalization, and brought Petrobras
close to bankruptcy. It remains to be
seen if the current unpopular government will be able to also free Petrobras;
one would hope that the Brazilian people would be fed up with the scandals and pick
the obvious way out, but “black gold” elicits much stronger emotions than do
kilowatts.
Which brings us back to Mae
West:” between two evils, I always pick
the one I never tried before.”
Brazil has long had government control over its national champions, Petrobras
and Eletrobras. This did provide its politicians
with sinecures and juicy consulting contracts for them and their friends; but it
also brought prison sentences, personal embarrassment and destabilized the
country. How about trying something new,
clearly unpalatable, but safer? Maybe.
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