Brazil’s federal bank Caixa Economica Federal (Caixa) is expected to disclose its initial plans to privatise ‘non-core’ business subsidiaries this week, as part of the government’s efforts to restructure the financial institution.
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‘Caixa Seguradora’, the federal bank’s insurance unit, is reported to be first in-line to be privatised as Brazil’s government pursues a R$15 billion (€2.5bn) IPO for the state assets to be floated on the Sao Paulo Balcão.
President Jair Bolsonaro has made no secret of his desire to ‘shrink the Caixa’, recognised as the largest state-owned financial property in South American politics.
New Caixa Chairman Pedro Guimarães has been charged with leading the privatisation directive. He confirmed to Brazilian media last month that Caixa’s insurance, lottery and credit agency units would be put up for sale by the beginning of 2021.
This week, Guimarães will hold ‘preliminary meetings’ with potential private investors, outlining the prospects of Seguradora’s IPO, which will be followed by discussions on the planned divestment of ‘Caixa Loterias’ (lotteries).
Since 1994, Caixa has operated Brazil’s weekly ‘Quina’ and ‘Mega-Sena’ multi-state draws, providing funds for educational and sports development programmes.
However, with Brazil’s economy tracking a two-year recession from 2016-to-2018, National Congress began to weigh-up Caixa Loterias future as a government asset, desperate to raise public funds.
In 2018, outgoing President Michel Temer sanctioned the sale of Caixa’s ‘LOTEX’ instant win unit, a mandate carried by the elected Jair Bolsonaro government.
The sale of LOTEX was marked as an embarrassing chapter for the government and its management of BNDES, Brazil’s national bank for economic and social development charged with leading tender negotiations which drew no interest from foreign operators.
Following seven straight failed attempts, BNDES agreed on the sale of Caixa’s LOTEX instant-win division to ‘Estrela Instantânea’ – a 50/50 joint venture consortium formed by IGT Group and Scientific Games.
The privatisation of Caixa assets is regarded as one of Brazilian politics’ most controversial issues, as the bank is recognised as an effective government-owned institution funding public services and securing financial support for Brazilian communities.
This November, Brazil will host its municipal elections, recognised as a critical test of President Bolsonaro’s PSL government, which has been marred by its handling of the COVID-19 pandemic and further corruption charges brought against high ranking PSL members.