President Jair Bolsonaro recently issued Provisional Measure (PM) No. 955/2020 authorizing Caixa Econômica Federal (CEF) subsidiaries to set up other subsidiaries and to acquire corporate control or minority interest in private companies.
The objective of this PM is to initiate CEF's asset sale plans. The government understands that there are areas of activity for the bank that are highly attractive in the market and that could be better explored by the private sector. Thus, through private capital, the intention is to create value and monetize assets, the first step for this project being the corporate reorganization, followed by the possible realization of IPOs of CEF's subsidiaries.
In this context, doubts arise about which CEF assets will enter this divestment process, especially if Caixa Loterias S/A will enter this process. This is CEF's wholly owned subsidiary that was set up to allow the privatization of LOTEX (scratch cards), but ended up remaining with CEF and became responsible for the operation of all lottery games. The President of the Bank stated at the beginning of 2019 that the objective of his management was to sell non-strategic services and stressed that Caixa Loterias would be the most prepared for this process.
There are uncertainties and questions about how private fundraising for Lotteries could happen, but, from the outset, we can imagine three main hypotheses.
The first would be for the government to carry out the IPO of Caixa Loterias S/A, with the sale of part of the subsidiary on the Stock Exchange. In this scenario, the ownership and execution of the service would remain with the society, gradually increasing the proportion of public and private participation in its share capital. In other words, in principle, there would be no change in the performance of services by the State, but it could decrease its participation, to the point of becoming a minority shareholder and the society would have greater private participation.
This seems to be the most likely hypothesis, because in addition to being mentioned in the justification of the Provisional Measure, it makes it possible to raise private funds without necessarily having to privatize the company or the operation. In this sense, it is envisaged that it is possible to pulverize social capital by expanding the company's non-voting shares, which would maintain the Union's control power, ensuring that its monopoly on the exploitation of Lottery services is not violated.
The second possibility would be for the government to carry out the full privatization of Caixa Loterias S/A, transferring control of the company or even directly its goods and services to a private agent. Unlike the previous model, this movement would depend on a law changing the rules for lottery services, which provide that they are exclusive to the Federal Government and authorize only Caixa Econômica Federal to carry out the forecasting contest (Decree-Law 204/1967 and Law 6.717 / 1979 ).
Indeed, although it is possible to sell CEF assets, PM 955/2020 did not bring authorization for the transfer of legal powers attributed to the financial institution. Hence why full privatization would still depend on legislative changes
The third hypothesis that we can imagine would be the granting of lottery services by Caixa Loterias, without changing the subsidiary's control power. This was the path chosen for LOTEX and would undoubtedly be the easiest way to be adopted to privatize the provision of lottery services in the country. The concession could be structured in different ways, covering several operators in competition or just one operator with a monopoly on services. The possibilities are innumerable, which allows the design of a sophisticated legal model that meets the wishes of the government and the population, while having market attractiveness. This alternative, however, also depends on legislative changes, since Decree-Law 204/1967 prohibits, in principle, the concession of lottery services. For this reason, the concession of LOTEX was preceded by a legislative amendment expressly permitting its concession (art. 28, §1, of Law 13.155 / 2015).
In any case, regardless of the model chosen, it is important to avoid confusion and immediately correct any false problems that can be pointed out.
The first is that none of these measures should affect the management of social programs by CEF or the social allocation of resources obtained with the prizes of lottery games.
The execution of social programs by Caixa Econômica has no direct relationship with the lotteries. That is, programs such as “Minha Casa, Minha vida”, “Bolsa Família” and other social programs are operated by CEF by its own regulations. Therefore, the privatization or concession of lotteries has no direct relationship with the permanence or not of these programs. On the contrary, the declared intention of the government and the President of Caixa is to sell these CEF assets to concentrate the bank's activities in sectors considered strategic, including social programs.
Another false problem regarding the privatization of lotteries would be the change in the allocation of resources. This, because the destination of the proceeds from the collection of federal lotteries is provided for in Law 13.756 / 2018, so that the modification of this collection can only be carried out through legislative change and not by decision of CEF. The sphere of freedom of the Ministry of Economy is restricted to the amounts intended to cover the cost of expenses and maintenance of the operating agent of the federal lottery, which varies between 17.39% to 19.13%, depending on the lottery modality.
In summary, in the event of a possible privatization of Caixa Loterias S/A or concession of lottery games, the social allocation of the amounts collected from lottery games cannot be changed. Changes will only be made to operator and maintenance costs.
Hence, in fact, the advantage of implementing a process to withdraw this activity from CEF. The operation of lottery games by a private operator, as it seeks to increase efficiency, generating better results, tends to produce, as an effect, two main results for social programs, namely: (1st) decrease in cost and increase in collection for social destination; and (2nd) increase in sales of lottery games and, consequently, in the revenue generated by the activity.
Therefore, the privatization of lotteries, whether through the sale of Caixa Loterias S/A or the concession of lottery services, seeks to increase the efficiency of the sector and increase collection; instead of having negative impacts on the distribution of social resources, it tends to generate better financial results and benefit these programs.
Thus, for all that has been said, privatization is considered beneficial, which deserves to be carried out.
Ricardo de Paula Feijó
Lawyer and partner of Vernalha, Guimarães and Pereira, specialist in public law and master's degree in State law (UFPR)
