Brazilian Supreme Court ruling facilitates Caixa Loterias' initial public offering.

The plenary session of the Supreme Federal Court (STF) decided, last Thursday (6), that the government can sell subsidiary companies of state-owned companies without needing approval from the Legislative Branch.

The Court also ruled that the operation can be carried out without the need for bidding, provided that it follows a procedure that observes the principles of public administration, as set forth in Article 37 of the Federal Constitution (CF), always respecting the requirement of competitiveness.

With this decision, the government will be able to sell assets of state-owned companies to private capital without authorization from the National Congress, such as Lotex and Caixa Loterias, in the case of Caixa Econômica Federal; and BB Cartões and BB DTVM, in the case of Banco do Brasil.

The Spbancarios portal reveals that the decision could represent a loss not only for public companies, but also for society. In 2017, Caixa Lotteries collected almost R$ 13,9 billion, transferring almost R$ 5,2 billion (37% of the total) to social programs in the areas of social security, sports, culture, public safety, education, and health. With the handover of the lotteries to private capital, this percentage will be reduced to less than 17%.

The trial originated from Direct Action of Unconstitutionality (ADI) 5624 filed by the National Federation of Associations of Caixa Econômica Federal Personnel (Fenae) and the National Confederation of Workers in the Financial Sector (Contraf/CUT) to challenge the State-Owned Enterprises Law (Law 13.303/2016).

According to Economy Minister Paulo Guedes' plans, 134 state-owned companies, 88 of which are subsidiaries, will be privatized. Petrobras, for example, has 36 subsidiaries, Eletrobras has 30, and Banco do Brasil has 16.