Postal privatization: good deal or announced problem?

With the election of the new government, the proposal to privatize the Correios has gained new impetus, and President Jair Bolsonaro has already given the green light for the economic team to move forward with the project to sell the state-owned company. In recent years, the quality of services provided by Empresa Brasileira de Correios e Telégrafos (ECT) has been questioned, in particular by customers of virtual stores who use the company's delivery service, which holds 66% of the market share in the segment. (according to the last survey carried out by ILOS in 2018). There is no lack of examples of situations in which the efficiency and suitability of the institution may be questioned.

According to the Reclame Aqui ranking – one of the main channels used for complaints against companies – Correios is ranked 10th among companies with the highest number of complaints regarding their services [1]. Furthermore, Correios' reputation index is among the worst on the platform.

Figure 1 – Reputation of Correios in Reclame Aqui. Retrieved from https://www.reclameaqui.com.br/empresa/correios/

The Institutional Image survey released by Correios points out that less than 80% of respondents characterize their services as “efficient” or “very efficient” and the level of trust in Correios is the lowest in the last 10 years [3].

Figure 2 – Institutional Image Survey. Retrieved from https://www.correios.com.br/sobre-os-correios/a-empresa/pesquisa-de-imagem-institucional

From another perspective, there are arguments to question whether the privatization of the company would in fact be the best way out. According to the president of Correios, General Juarez Aparecido de Paula Cunha, “Correios is a company that depends on its own results and has no government budget”. In a report on 26/04/2019, Valor Econômico informs that, of all the 5570 Brazilian municipalities in which the company operates, only 341 are profitable. That is, more than 93% of cities are losing money, but post offices cannot be closed in these locations. Cunha justifies, “it is a crossed subsidy” [4].

In general terms, this means that the Correios' operation in the most inhospitable regions of the country is financed by the operation of the state-owned company in large urban centers, where it is possible to generate profit. In fact, from this perspective, it seems unlikely to believe that the state-owned company will survive only with the least profitable portion of the operation. Valor Econômico points out a calculation by the ECT administration estimating that, if the profitable part is privatized, it would be necessary for the State to disburse R$ 8 billion per year to carry out the operation, in addition to bearing the institution's liabilities [4].

Apparently, the president of the state-owned company is not in favor of privatization itself: “We have a long way to go in terms of [adaptation to] norms [of governance]. It would be an operation more similar to that of Banco do Brasil, therefore, it would not mean privatization” [4].

Some examples for and against the privatization of the Post Office can be found around the world:

In favor:

1. Deutsche Post: Despite being seen with great caution by the market, the German post office can be taken as a successful case with regard to the privatization of the postal system. The company expanded its business with strategic acquisitions of DHL and Airborne in the US [5][6].
2. Royal Mail: the mail from England started a three-part privatization process in 2013, the year in which the first public offering was carried out, resulting in the sale of 60% of the shares. In 2015, the remaining shares were sold, including those that were retained by the British government [6].

cons:

1. USPS: The American postal service faces a dilemma very similar to most: it often has negative results. Despite this, the discussion around its privatization is not unanimously supported even by the current government, since it could run into problems of serving rural areas that are not very profitable [7].
2. Argentine Mail: The Argentine postal service underwent complete privatization in the 90s. After numerous problems, it was renationalized in 2003 [4].

Maintaining the constitutional principle of the universality of postal services, the subject becomes quite complex and requires a much greater depth of analysis than is usually the case.

Sources:
[1] https://www.reclameaqui.com.br/ranking/
[2] https://www.reclameaqui.com.br/empresa/correios/
[3] https://www.correios.com.br/sobre-os-correios/a-empresa/pesquisa-de-imagem-institucional
[4] https://www.valor.com.br/empresas/6227065/correios-nao-sobrevivem-se-parte-rentavel-vendida-diz-president
[5] https://www.dw.com/pt-br/globaliza%C3%A7%C3%A3o-dos-correios-alem%C3%A3es/a-817881
[6] https://www.mises.org.br/Article.aspx?id=2933
[7] https://edition.cnn.com/2018/12/04/politics/treasury-usps-report/index.html