SAO PAULO – Brazilian opposition Sen. Jose Serra, the runner-up in 2002 and 2010 presidential elections, proposed Friday that the government partially break up Petrobras, which is mired in a massive corruption scandal, and sell some of the state-controlled oil giant’s businesses to private companies.
“Petrobras would have to be divided into autonomous companies, like a conglomerate. I’d have no problem with selling, listing shares, divesting, awarding or associating in different areas. The oil prospecting, extracting and production must be preserved, that heart must be preserved,” the senator with the centrist opposition PSDB party said in statements to a news portal.
The 72-year-old Serra, who was defeated by Luiz Inacio Lula da Silva in 2002 and by current President Dilma Rousseff in 2010, said Petrobras should not be involved in activities such as polyester thread or fertilizers.
Serra, who also was a Cabinet minister under former President Fernando Henrique Cardoso, said the company’s current size, including 300,000 outsourced employees, makes it “a monster impossible to govern.”
Petrobras lost its monopoly in the Brazilian oil and gas industry under Cardoso, whose 1995-2002 administration awarded concessions to private companies and also allowed more foreign capital to be injected into the state-controlled company, whose shares are listed on the Sao Paulo, New York, Madrid and Buenos Aires stock exchanges.
During his interview with the UOL portal, the senator from Sao Paulo state slammed as “megalomania” the current regulatory regime, which makes Petrobras the sole operator of each production-sharing agreement for pre-salt reserves and guarantees the company a minimum 30 percent stake in all pre-salt projects.
The pre-salt region is a massive offshore hydrocarbon frontier so-named because the oil and gas reserves it contains are located under water, rocks and a shifting, 1.2-mile-thick layer of salt at depths of up to 7,000 meters (22,950 feet) below the surface of the Atlantic.
Petrobras, which represents 12 percent of Brazilian GDP, is currently under investigation following disclosure of widespread corruption said to have cost the company billions of dollars since the mid-1990s.
The scandal, in which a cartel of construction firms purportedly paid kickbacks to the company for several years and money also was allegedly funneled to politicians, has led to the resignation of top company executives, including Maria das Gracas Silva Foster, who was replaced as Petrobras’ CEO by Aldemir Bendine, former chief executive of state-run bank Banco do Brasil.
Moody’s Investors Service on Tuesday lowered Petrobras’ credit rating by two notches to Ba2, two levels below investment grade, becoming the first of the big-three rating agencies to classify Petrobras’ debt as junk.
Moody’s said the downgrade of Petrobras debt reflects “increasing concern about corruption investigations and liquidity pressures that might result from delays in delivering audited financial statements.”
That was a reference to PricewaterhouseCoopers’ refusal to certify Petrobras’ accounts.
Moody’s also said that it expects “the company will be challenged to make meaningful reduction in its very high debt burden over the next several years.”
The downgrade also reflects “the challenges related to the corruption investigations, which create management distractions that may hinder efforts to improve operations as well as ongoing concerns about corporate governance and the need to sustainably improve internal controls,” the agency added.
As a result of the scandal, formal charges have already been filed against three of the company’s former directors and executives from several of the country’s leading construction firms.
Rousseff, who served on Petrobras’ board of directors from 2003 to 2010, said Wednesday that Moody’s ratings action was the result of ignorance about the company’s situation.
She expressed confidence that Petrobras will recover from the scandal “without major consequences.”
Brazilian hospitals and health clinics are drawing strong interest from global buyout firms after the government recently decided to allow foreign ownership of those facilities.
SAO PAULO: Brazilian hospitals and health clinics are drawing strong interest from global buyout firms after the government recently decided to allow foreign ownership of those facilities, although the suitors may find only a few promising targets.
Private equity tops a list of potential investors in a sector that represents 10 per cent of Brazil's gross domestic product and shows promise of growth but is hobbled by aging infrastructure, a dearth of qualified staff and rising costs. Since 2007, the number of hospital beds fell by 9 per cent while the base of insurance policyholders rose 35 per cent, according to government data.
The hunt for assets is already under way, but some funds want to understand the particulars of the market before making a move, said four people familiar with their plans.
Two of those sources said a proposal by Carlyle Group LP to pay as much as 2 billion reais (US$694 million, S$945 million) for a 30 per cent stake in Rede D'Or São Luiz SA, Brazil's largest hospital chain, is the only deal in an advanced stage. Carlyle and Rede D'Or, controlled by founder Jorge Moll and Grupo BTG Pactual SA's merchant banking unit, declined to comment.
Other funds such as Advent International Corp and KKR & Co LP are "walking on eggshells" as evidence of poor governance, high debt and eroding margins in some clinics and hospitals abound, one of the sources said. Beyond Rede D'Or, "only a handful" of hospital chains seem well-equipped to receive a significant influx of resources, the same source added.
President Dilma Rousseff's decision last month to end the ban on foreign ownership in the sector seeks to lure capital into Brazil's 6,800 private hospitals. Until now, foreigners could only gain exposure to the sector by buying health insurers the way UnitedHealth Group Inc did in 2012, when it paid US$4.9 billion for Amil Participações SA.
Ending the ban "was a milestone, but it's hard to see anything gaining traction in the short run," said Francisco Balestrin, president of Anahp, a group representing private hospitals. "Any new investors want to first understand the existing market asymmetries."
Curitiba-based Grupo VITA, Belo Horizonte-based Hospital Mater Dei, Recife-based Hospital Santa Joana and São Paulo-based maternity hospital Pro Matre Paulista have sparked some interest among potential investors, the sources said.
Yet the industry's crown jewels, non-profit hospitals owned by communities and philanthropic foundations, are not for sale. The most prominent, Hospital Israelita Albert Einstein, is controlled by Brazil's Jewish community and runs its own endowment.
"I don't see non-profit hospitals morphing into for-profit firms," Bradesco BBI analyst Rafael Frade said.
Einstein and peer Hospital Sírio Libanês would fit well into buyout funds' strategy of acquiring companies whose high degree of specialization allows them to charge more for services.
Mater Dei and VITA denied being involved in merger or acquisition talks. KKR, Advent and the other hospitals declined to comment.
Private equity involvement in Brazil's hospital industry could help restore profitability, Bradesco BBI's Frade said. Returns have stayed near record lows for the past two years due to accelerating inflation and strained capacity, data from industry watchdog ANS shows.
Hospitals look attractive because they stand to benefit from a growing number of elderly Brazilians in coming years. A 20 per cent slump in Brazil's currency over the past year has also made acquisitions cheaper, said Ricardo Gaillard, a partner at law firm Souza Cescon Barrieu & Flesch Advogados.
The rapid expansion in health plan membership in the last decade was not accompanied by an equivalent improvement in infrastructure, triggering a supply-and-demand mismatch that buyout firms may want to close in coming years, he added.
To ease the supply crunch, an additional 13,000 hospital beds are needed by 2017, Anahp's Balestrin said. Some funding for that increase, which could cost 7 billion reais, could come from private equity money, he added.
In addition, rising costs from the lack of scale are pushing up medical inflation. Average revenue per patient per day rose almost 2 per cent last year, Anahp estimates, well below overall inflation of 6.5 per cent.
Listen to the Talk 2 Brazil interview by Tom Reaoch with Joseph Low and Claudia Low.
This interview is a follow up to their first Talk 2 Brazil interview which aired on May 23, 2013.
Since the publication of their first book, “They Don’t Speak Spanish in Brazil,”Joseph Low and Claudia Low have jointly been working with numerous small to mid-size companies interested in better understanding the processes involved with business entity formation in Brazil. We´talk about their upcoming book to be published in August.
Listen to the Talk 2 Brazil interview by Tom Reaoch with Cliff Hoskins, Founder Hoskins Global Trade.
I met Cliff at the Atlanta City Trade mission presentation at FIESP in Sao Paulo. We talk about Cliff´s experiences in and with Brazil and challenges in Busseness Start up.
Listen to the Talk 2 Brazil interview by Tom Reaoch with Carlos Mariaca.
Carlos Mariaca, Managing Partner – Center Group Corp. and President of the Brazilian-American Chamber of Commerce of Florida.
Listen to the Talk 2 Brazil interview by Tom Reaoch with David Lavin and Lara Espirito Santo.
We´ll be talking about the Clinton Global Initiative, Latin America to be held in Rio.
Listen to the Talk 2 Brazil interview by Tom Reaoch with Avishek Nigam.
Avishek Nigam talks on business relations between India and Brazil. How to "Start Up" a business in India. He also compared Brazil and India from a business standpoint. How are they the same? How are they different? The regions of India! The regions of Brazil!"
Listen to the Talk 2 Brazil interview by Tom Reaoch with Werner Trieloff.
Rugby in Brazil. Yes Rugby! Werner talks about his role a head coach for a Brazilian Rugby team in Novo Hamburgo, as well as a South African´s view of business in Brazil.
Listen to the Talk 2 Brazil interview by Tom Reaoch with Egil Nes.
Egil Fujikawa Nes, Norwegian entrepreneur and Co Founder of The Brazil Business, where he writes on “how” to business in Brazil. Here we compare his interview on Talk 2 Brazil on August 2010 to Brazil opportunities and challenges today.
"In The Brazil Business we aim to be very practical with our information. We find many people are writing about why to do business in Brazil these days, we try to write more focused on "how" to do business. Luckily I'm getting a lot of first hand experience with problems that foreign technology companies are experiencing in Brazil trough my position as sale responsible in Connection Consulting."
Listen to the Talk 2 Brazil interview by Tom Reaoch with Egil Nes.
Egil Fujikawa Nes, Co Founder of The Brazil Business.
Listen to the Talk 2 Brazil interview by Tom Reaoch with Markus Hofrichter.
I first met Markus Hofrichter in a networking event in Sao Paulo and later interviewed Markus on Talk 2 Brazil show in July 2009, that interview is still the record holder for number of downloads among all Talk 2 Brazil interviews.
Listen to the Talk 2 Brazil inteview by Tom Reaoch with Brian Winter.
Brian Winter, Chief Correspondent, Reuters Brazil from Sao Paulo. Brian Winter was previously the foreign editor for USA Today, and is author and co-author of two books including The Accidental President of Brazil, a memoir by former President Fernando Henrique Cardoso. He has also been based in Buenos Aires, Argentina and Mexico City.
Listen to the Talk 2 Brazil interview by Tom Reaoch with David Neeleman.
This program is a special encore performance of the original interview in 2009 with David Neeleman, Talk 2 Brazil’s Person of the Year 2010.
In the interview David talks of his vision "Why Campinas" and plans for growth.
Listen to the Talk2 Brazil interview by Tom Reaoch with Caio Gouvea.
Guest Caio Gouvea, General Manager Puratos Brasil Ltda.
Listen to the Talk2 Brazil interview by Tom Reaoch with Markus Hofrichter.
Markus Hofrichter Specialist in Lean Manufacturing, German multicultural executive over 15 years of experience in the international automotive industry in Europe, the US and Brazil.
Listen to the Talk2 Brazil interview by Tom Reaoch with Adhemar Altieri.
Adhemar Altieri talked on ethanol, sugar bio mass electricity and the Ethanol Summit.
Seasoned media, news and corporate communications executive, with extensive broadcast, online and corporate experience.
Listen to the Talk2 Brazil interview by Tom Reaoch with Gabriel Rico.
The future of Brazil is Now! The 90 year history of Amcham and business opportunities in Brazil.
Gabriel Rico, CEO Amcham Brazil The American Chamber of Commerce in Brazil commented on the 90 history of the association in Brazil as well as business opportunities throughout the country.
Listen to the Talk 2 Brazili interview by Tom Reaoch with Carlos Garcia.
Carlos Garcia, Founder at Launch in Brazil was born in Brazil and immigrated to the US in 1997. He earned a Bachelors degree in Finance from the University Of Houston, in Houston, Texas and has over 10 years of financial management, financial modeling, and business development experience that includes Fortune 500 companies such as Disney and Reliant Energy.