Introduction

In one of the most sweeping privatisation programmes in history, Brazil has transferred control of more than 100 state-owned enterprises (SOEs) to the private sector, thereby raising tens of billions of dollars in revenue, which has helped control spiralling public debt. These results are even more impressive in view of the considerable degree of mistrust that existed in both the Brazilian state and society at the time – as it does to this day – of the market's ability to foster development.

In that respect, privatisation was pursued in Brazil not for ideological reasons, but rather as an instrument of economic policy intended to solve the (mainly macroeconomic) problems that plagued the country. That is, although the privatisation process reached its peak during the administration of Fernando Henrique Cardoso, it had begun in the 1980s and evolved over time as society gained confidence in the techniques used to divest enterprises to private investors.

The privatisation process features prominently in public policy analysis in Brazil for a number of reasons: its size and duration; its structurally adverse, but conjuncturally favourable, political and economic context; and the extent to which its success hinged on the autonomy and initiative of a specific public agency, the National Economic and Social Development Bank (Banco Nacional de Desenvolvimento Econômico e Social; BNDES). As will be shown, the BNDES's role was decisive, even though to some extent fortuitous. The rather accidental way the BNDES engaged with the process influenced its own rules and mode of implementation, which in turn were fundamental in assuring the programme's survival at more critical moments.

This chapter will examine: first, how the privatisation process took place in terms of its motivations, historical process and implementation; and, second, the role played by the BNDES. It is structured into five sections. The second section discusses the historical context and how, from a policy rejected ideologically by a country accustomed to state leadership in the economy, privatisation came to be accepted as the best instrument to solve a variety of economic problems. The third section examines the macroeconomic motivations that dominated the dynamics of this process, as well as the political constraints that had to be overcome and which helped shape privatisation in Brazil.