As part of the government’s efforts to restructure the financial institution, Brazil’s federal bank Caixa Economica Federal (Caixa) is expected to disclose its initial plans to privatize ‘non-core’ business subsidiaries this week.
‘Caixa Seguradora,’ the insurance company of the federal bank, is said to be the first in-line to be privatized as the government of Brazil pursues an IPO of R$15 billion (Euros 2,5 billion) for the state assets to be floated on the Sao Paulo Balcão.
President Jair Bolsonaro made no secret of his desire to ‘shrink the Caixa,’ recognized as South American politics’ largest state-owned financial property.
Pedro Guimarães, Chairman of New Caixa, has been charged with leading the privatisation directive. Last month, he reported to Brazilian media that Caixa’s units of insurance, lottery and credit agency will be put up for sale by early 2021.
This week, Guimarães will hold ‘preliminary meetings’ with potential private investors, outlining Seguradora’s IPO prospects, followed by discussions on ‘Caixa Loterias’ (lotteries) planned divestment.
Caixa has been operating the multi-state drawings of Brazil’s weekly ‘Quina’ and ‘Mega-Sena’ since 1994, providing funding for education and sports development programmes.
Yet with Brazil’s economy experiencing a two-year recession from 2016 to 2018, National Congress started weighing up the future of Caixa Loterias as a government asset, desperate to collect public funds.
In 2018, outgoing president Michel Temer sanctioned the sale of Caixa’s instant win unit ‘LOTEX,’ a mandate carried by the elected government of Jair Bolsonaro.
LOTEX’s sale was marked as an embarrassing chapter for the government and its management of BNDES, the national economic and social development bank of Brazil charged with leading tender negotiations that did not attract interest from foreign operators.
After seven consecutive failed attempts, BNDES decided to sell the instant-win LOTEX division of Caixa to ‘Estrela Instantânea’ – a 50/50 joint venture partnership created by the IGT Group and Scientific Games.
The privatization of Caixa assets is considered one of the most controversial issues in Brazilian politics, since the bank is recognized as an effective government-owned institution that finances public services and secures financial support for Brazilian communities.
Brazil will be hosting its municipal elections this November, known as a vital test of the PSL government of President Bolsonaro, which was marred by its handling of the COVID-19 pandemic and more allegations of corruption brought against high-ranking PSL leaders.