The Evolution of Privatization in Brazil: The Case of Embraer

Abstract

State participation in the economy has been intensely debated over the past three decades. In Brazil, especially after the advent of the Federal Constitution in 1988. Privatization in Brazil, however, was instituted by Law 8.130/90, which established the National Plan for Privatization, aiming at transferring to the private sector activities unduly exploited by the public sector. In this article, we investigated one of the most significant privatizations in Brazilian history, the case of Embraer, the world's third largest civil aircraft manufacturer. Key findings pointed out a complex privatization process, including golden share vetoes and institutional challenges faced by Embraer, such as the first Brazilian company to adopt the International Financial Reporting Standards (IFRS) fully. In addition, the careful analysis suggested implications for the reduction of public debt. Also, the resumption of investments in companies and activities transferred to the private sector, modernization of the country's industrial park, increasing its competitiveness, and reinforcing business capacity in Embraer's jet C-series sector and military aircraft, for instance. Also, implications for the public administration to focus its efforts on actions where the State's presence is necessary for achieving national priorities. Finally, the strengthening of the capital market, as well as the democratization of the ownership of the capital of Embraer are topics to be debated in the present article.