Third version. For discussion only. Not to be quoted. Comments are welcomed. BENEFITS AND COSTS OF PRIVATIZATION: EVIDENCE FROM BRAZIL FRANCISCO ANUATTI-NETO, MILTON BAROSSI-FILHO, A. GLEDSON DE CARVALHO AND ROBERTO MACEDO 1 I. INTRODUCTION The Brazilian privatization program has been a major one by international standards. From 1991 to July 2001, the state transferred the control of 119 firms and minority stakes in a number of companies. In the case of companies where the government had a majority participation in control (hereafter, state owned enterprises, or SOEs), and in those where it had a minority participation in control (hereafter, state owned minority participations, or SOMPs), the auctions produced US$67.9 billion in revenues, plus the transfer of US$18.1 billion in debt. The government also sold US$6 billion of minority participations in firms that remained as SOEs, obtained US$10 billion from new concessions of public services to the private sector, and sold US$1.1 billion in scattered non-control participations of BNDES, the National Social and Economic Development Bank, in various private companies. This dimension, one of the largest in the world, makes the Brazilian program worthy of special attention. Nevertheless, the Brazilian experience has been largely ignored by the international literature. For instance, a recent survey by Megginson and Netter (2001) recognizes the Brazilian program as “likely to remain very influential”, because of its size and the largeness of the country. 2 However, their survey does not cover any specific study of the Brazilian program. This is due to the paucity of studies, and also to the fact that most of existing literature was published in Brazil only, and in Portuguese. Even in this case, however, the existing studies have their shortcomings, as will be clear from a review that will be made in this paper. Therefore, there is room for adding to the literature, both Brazilian and international. It is also important to bring conclusions to the Brazilian public at large. The performance of the economy was very disappointing in the nineties. Some groups, among them politicians and journalists, have often expressed their frustration with privatization and other policies of the so-called Washington consensus, which are thus blamed for the sluggish growth of the economy. In part because of this, the program stalled since 1999. Thus, it is crucial to show the results of the 1 Anuatti-Neto, Barossi-Filho and Gledson de Carvalho: University of São Paulo and FIPE-Foundation Institute of Economic Research. Macedo: also Mackenzie University and FAAP-Foundation Armando Álvares Penteado, São Paulo. This paper was developed with the financial support from FIPE and from the LACRNP-Latin American and Caribbean Research Network Program of the IDB-Interamerican Development Bank. The assistance of Economática, in providing the main data set used in the analysis , and of Renata Domingos and Alan de Genaro Dario, in processing the data, is gratefully acknowledged. All remaining errors are the authors´ alone. 2 Megginson and Netter (2001), p.326.