FOREWORD

The privatization program is an integral part of the reform of the Brazilian State. Its objectives are to: achieve a lasting fiscal adjustment, to reduce government debt, to concentrate government activities on the social area, to stimulate the national industry's modernization and to strengthen capital markets by broadening their popular base.

The government has promoted the sale of state enterprises in the industrial sector and especially steel, petrochemical and fertilizer companies. The privatization of the electric sector began with the sale of ESCELSA in july, 1995. The Brazilian Privatization Program (PND) has yielded receipts of $ 9.2 from the sale of state enterprises plus $ 400 million from the sale of government minority corporate shares. In addition, the private sector has accepted responsibility for $ 3.6 billion in outstanding debts. One must also consider the indirect benefits resulting from the privatizations: increased investment by the new private sector owners (including for environmental protection), more tax receipts, as companies that had previously lost money began to generate profits, new employment opportunities and, finally, improvements in the economy's overall productivity.

The Cardoso government improved the PND's decision process by creating the cabinet level National Council on Privatization (CND) and by making it directly accountable to the President. The CND has already taken important decisions to complete the privatization of the petrochemical sector and, before the end of this year, to consolidate the privatization of the electrical sector and begin the privatization of the railroad and financial sectors. The privatization process of the Companhia Vale do Rio Doce has also been initiated and should be completed during the coming months.

The privatization program has entered a new and, more dynamic phase. It is looking for private sector partners to overcome major infrastructure bottlenecks, notably in the electric energy, transportation and communications sectors. Opening these areas to new entrepreneurs will enable the State to dedicate itself more effectively to its regulatory functions. The government will be able to provide investors with clear regulations and greater security, guaranteeing the quality and continuity of public services.

The privatization process is a fundamental instrument in building a more prosperous and just Brazil in which the State focuses its attention and scarce resources on its traditional functions and on its regulatory obligations. Given a context of regulatory stability and of wide business opportunities, the private sector will certainly contribute decisively to the country's development.

 

JOSÉ SERRA
MINISTER OF PLANNING AND BUDGET