under Lula, federal companies return to deficit

State-owned companies returned to the red with the government of Luiz Inácio Lula da Silva (PT). The rapid deterioration of the accounts of federal companies in just one year of office is noteworthy.

According to the latest report from the Federal Budget Secretariat (SOF) (see in full), published on November 22, the estimated loss for a group of 22 companies controlled by the Union in 2023 is R$4.5 billion. The value is R$1.5 billion above that authorized by the Budget Guidelines Law (LDO) for 2023, which is R$3 billion.

As the deficit will be greater than authorized, the government will have to compensate for the surplus – with public resources – for the first time in eight years.

For economists heard by the People’s Gazette, the increase is revealing. “The overrun of accounts was very quick. It is very clear to everyone that management was carried out, to say the least, not very responsible”, says Juliana Inhasz, economist at Insper.

The list of companies with projected deficits this year – according to government calculations based on results up to October – includes names such as Correios, NAV Brasil, Hemobras and Indústrias Nucleares do Brasil (INB).

The worst primary results expected for 2023 are those of Emgepron (Naval Project Management Company, linked to the Navy, with a deficit of R$3.7 billion) and Eletronuclear (responsible for the Angra dos Reis plants, with a negative balance of R$1 .4 billion).

The report also has companies in the positive, with emphasis on Infraero (expected surplus of R$732 million for the year) and ENBPar (controlling company of Itaipu and Eletronuclear, with R$642 million).

The R$4.5 billion gap projected by the government itself does not include the results of Petrobras or companies in the financial sector, such as Caixa and Banco do Brasil. Some companies also have accounts excluded from LDO calculations, due to strategic investment criteria.

Economists claim that the poor results of all companies are mainly due to the high weight of personnel expenses. “There is a political kidnapping of part of the state-owned companies, with an increase in non-technical staff”, says Inhasz.

Murilo Viana, a specialist in public accounts, highlights that some of these companies have chronic management problems, such as Correios, which has the third worst result projected for the year (deficit of R$274 million, according to the SOF report). “Over the years there has been a deterioration in finances and management”, says Viana.

The government of Jair Bolsonaro (PL) intended to privatize the state-owned company and obtained approval from the Chamber, but the proposal stalled in the Senate and then, with Lula taking office, it was abandoned once and for all.

For Marcelo Farias, president of the Instituto Liberal de São Paulo (ILSP), the current failure should not be surprising because it reflects the essence of the use of public services by those sponsored and the wasteful nature of the PT administration.

“The government has already started its mandate with the prospect of spending more, as was clear with the Transition PEC. It started its mandate in deficit”, he states.

State-owned companies had a surplus in 4 of the last 5 years; deficit returned in 2023

According to the Central Bank, they show that federal state-owned companies were in surplus in four of the last five years. The BC’s accounting does not include companies from the Petrobras and Eletrobras groups.

From 2018 to now, the only primary deficit in the statistics compiled by the BC was recorded in 2020, the year of the pandemic, when the balance was negative at R$614 million.

Previously, these companies had deficit balance sheets in 11 out of 12 years – in the period from 2006 to 2017, there was only a positive primary result in 2011.

The most recent data from the BC indicates that federal state-owned companies accumulated a deficit of R$263 million from January to September this year. In the same period of 2022, they showed a surplus of R$6.1 billion.

Primary result of federal state-owned companies (does not include Petrobras and Eletrobras groups). Source: Central Bank

Deficit will have to be compensated by the government for the first time in eight years

As the SOF report admits, the companies’ 2023 deficit will have to be refunded by the government. This compensation occurs when companies’ losses are greater than expected.

In recent years, however, this compensation was not necessary, as state-owned companies had positive results or possible deficits did not exceed targets.

“With the end of the mandate of the [ex-presidente] Dilma [Roussef]state-owned companies have gained a lot of efficiency thanks to management improvements and, above all, to the stagnation of political influence for appointment to positions”, says Inhasz.

The governments of Michel Temer (MDB) and Jair Bolsonaro (PL) also promoted actions for the financial restructuring of state-owned companies, including a 13% reduction in staff between 2018 and September 2022.

State companies claim investments to explain deficit

With a projected deficit of R$3.7 billion, Emgepron denies mismanagement and says that the “apparently negative” result refers to investments that will be covered with its own cash.

“The resources will be effectively allocated to the payment of contractual milestones that will be executed throughout 2023, in the construction of 4 Tamandaré Class Frigates”, stated the company, according to the Poder360 website.

Eletronuclear, with a negative result of R$1.4 billion, states that “the primary result of a non-dependent state company, such as Eletronuclear, does not reflect its financial situation”.

Last decade, the company made headlines because of the sentencing of its former president Othon Luiz Pinheiro da Silva to 43 years in prison by federal judge Marcelo Bretas, as a result of Operation Lava Jato, for corruption in the construction of the Angra 3 plant. Last year, the Federal Regional Court of the 2nd Region reduced the sentence to 4 years and 10 months, replacing imprisonment with two restrictions on rights.

Minister Esther Dweck, of Management and Innovation, attributes Eletronuclear’s results to investments in energy. Her Ministry issued a note stating that there was no “hole”, but rather “investments with resources that companies already have in cash”.

“The deficit is a measure calculated with income and expenses from each year, so it does not consider the resources that exist in cash from previous years”, says the ministry.

“Since April 2022, a state-owned company deficit of R$3 billion had already been forecast. And the review carried out in May this year was to incorporate the ENBPar group, because it had not been done by the previous government, after the privatization of Eletrobras” , the note continues.

From Juliana Inhasz’s perspective, the minister tried to “soften” the discomfort with the numbers and the government’s wear and tear, but the justification is not convincing.

“There aren’t that many investments. Investment levels in the country are very low. All signs are of poor management due to a nationalist government that gives the signal that, regardless of the operational result, the Treasury will cover the loss”, he states .

Murilo Viana, a specialist in public accounts, highlights that, whether or not the results are included in the target of federal state-owned companies, the impact on the government’s accounts is the same. “At the end of the day, it’s all public money and it’s just one. In a scenario of such a short time to meet a fiscal target, any amount will be missed by the government”, he says.

Numbers turn on warning lights about state-owned companies

For experts, the numbers released raise warning lights about state-owned companies. They see a lack of transparency regarding the management of companies and their investments. “Companies’ balance sheets need to be better investigated”, believes Viana.

The Lula government stopped publishing the Federal State Companies Bulletin, which was prepared by the State Companies Coordination and Governance Secretariat (Sest).

The newsletter contained quarterly data on federal state-owned companies, including budgets, investments and contributions from the Union, in addition to the evolution of personnel and expenses. The latest available on the Sest website is the report for the 3rd quarter of 2022, still under the Bolsonaro government.

“Without reliable data, it is difficult to establish the necessary surveillance. There may be no interest in publicizing so as not to show the deterioration”, says Inhaz.