Is IRB privatisation back on the table?

The appointment on 23 March of Luiz Appolonio Neto as the new president of Brazilian state reinsurance monopoly, Instituto de Resseguros do Brasil (IRB), has raised hopes once more that the company's long-planned privatisation may be back on track. Neto, a 56-year old lawyer, had been director of Risks and Claims at IRB since 2003. Previously he had been the president of two Sao Paulo state-owned utilities, gas company Comgas and water company Sabesp, as well as holding posts at the Banco do Brasil and the economy and agriculture ministries. At IRB, Neto replaces Lidio Duarte who had worked there for 29 years.

As president of the company Duarte had overseen a cut in IRB's workforce from nearly 1,200 in 1995 to about 400 in 2004. He resigned in February this year, the day before the Carnival holiday, only to be reinstated in March. Duarte, a member of the centre-right populist Brazilian Labour Party (PTB) was opposed to the IRB privatisation. The Federal Treasury Department holds 51% of IRB shares while Brazilian insurance companies hold the remaining 49%, each company's stake in IRB proportional to its own asset value.

The government of Brazilian president Luiz Inacio Lula da Silva (Lula) has not released details of the IRB privatisation plan. Prior to taking office in January 2003 Lula's Worker's Party (PT) was opposed to IRB privatisation and supported a series of legal actions against the sell-off claiming that it was unconstitutional. The situation changed in 2003 when the federal attorney general's office issued opinions on these proceedings and stated that the issue of unconstitutionality no longer existed. The Brazilian government has been under pressure since from the IMF as well as the governments of Germany, UK and the US to resume the IRB privatisation process. In 2004, IRB made profits of R$450m (US$164.1m) but paid US$30m, according to local sources, in commissions to a total of 23 local brokers and other intermediaries.

Incoming IRB president Neto is a member of the centre-right populist Progressive Party (PP) that has been gaining increasing political clout since the election in February of one of its leading members, Severino Cavalcanti, a well known nationalist, as the president of the lower legislative house, the Chamber of Deputies. The PP did not gain any ministerial posts in Lula's last cabinet reshuffle but was given the IRB presidency instead.