On August 28th, answering a complaint from BTG-Pactual, the financial services corporation founded by Jair Bolsonaro’s Finance Minister Paulo Guedes, the independent media site GGN was ordered to pull down 11 investigative stories about the connection between right wing politicians and big data mining operations.
In solidarity with GGN, it’s editor, Luis Nassif, and journalist Patricia Faermann, Brasil Wire is publishing all of their 11 censored articles in English.
In the first, Nassif and Faermann describe a flawed public bidding process involving São Paulo Mayor Bruno Covas (PSDB) and BTG which, if allowed to continue, will increase the corporation’s customer base 10-fold. – Editors
The Brazilian press promises to resist Bolsonaro. But is there enough press freedom to resist BTG-Pactual’s corporate power and dirty tricks?
By Luis Nassif and Patricia Faermann
Part 1 – Zona Azul: a defective licitation
The licitation process for São Paulo’s Zona Azul parking meter system has reached a curious stage, with the contract going to BTG-Estapar. It is important to note the following:
1. There were a series of factors that suggest that the process was manipulated to favor BTG-Estapar. One of these factors was the minimum bid value. The correct thing to do would have been to tie the bid requirement to the income estimated in the tender. This would have guaranteed equality in the bidding process and avoided favoring the company with the most capital.
2. A second factor was a requirement that any company placing a bid have parking experience. BTG was the only company that met these first two conditions, financial capacity to raise large sums and ownership of a parking company.
3. A third factor was lack of specification of ancillary revenue in the tender, namely access to a database of 2.6 million automobile owners who would become users of a new parking card – with a billing potential many times greater than the that of the sale of the parking cards themselves.
4. São Paulo’s Municipal Auditing Court found 32 irregularities in the tender. One of the most relevant was the lack of forecasting ancillary revenue. The Court ordered the city government to correct it and a few cosmetic changes were made, but the central irregularities were left untouched. Despite this, two Auditing Court councilors, Edson Simões and João Antônio, voted in favor of releasing the tender.
5. The São Paulo State Attorney General’s Office entered the fray and filed administrative misconduct charges against Mayor Bruno Covas, Secretary Mauro Ricardo and the Directors of Estapar.
On Wednesday, Auditing Court Counselor Maurício Farias will publish the court analysis of the Zona Azul licitation process. The Auditing Court is legally required to inspect all revenue, but there is an enormous amount of influence in play from BTG and Secretary Mauro Ricardo, who are, apparently, pressuring court councilors.
Part 2 – The value of the ancillary revenue
This week Globallpark, one of the current operators of Zona Azul, filed a complaint with the Municipal Auditing Court, once again raising the issue of ancillary revenue.
Currently, 15 concessionaires operate the parking system.
According to a Globallpark representative:
“The future, single concessionaire of this service will have an exclusive and permanent digital channel where users will have to keep the application on their smartphones. From then on they will be susceptible to permanent solicitations of offers for bill payment services, credit and debit cards, insurance policies, bank accounts, car sales and all sorts of products. They will receive advertising
for financial, commercial, administrative and all sorts of other products and services. All of this will be possible without the need for formalization with City Hall of a new business because it will be contained, inserted in and already part of the permanent, unique and exclusive digital relationship between user and dealer.”
According to Globallpark, “the most conservative estimate of ancillary revenue is R$ 3.086 billion/year, which is over double the value cited in the tender.” As an example, it cites Banco Inter, which took over part of the electronic parking meter services in Brazil’s 3rd largest city, Belo Horizonte. Banco Inter’s parking app offers a menu of different client services. Due to this increase in customers, Banco Inter now has a market value of R$16 billion. Last August, the Japanese company Softbank purchased 8.1% of Banco Inter’s stock for R$790 million.
Part 3 – Municipal Auditing Court Risks
The first risk related to the visibility of the process. In other bids, illicit gains would be impossible. The case of the Zona Azul contract differs in that sales will take place on users’ smartphones.
The second risk is administrative misconduct complaint filed against Mayor Bruno
Covas, Secretary Mauro Ricardo and Estapar, made to force an investigation over bidding irregularities.
The third risk is related to competition in the fintech market, which could cause competitors of BTG-Estapar to file complaints with CADE and other control agencies, against undue advantages given by City Hall and the Municipal Auditing Court. BTG currently has 300,000 customers. The Zona Azul contract would add another 2.6 million, which will cause unfair competition with other banks.
The fourth risk relates to the unbridled expansion of paid parking spaces, aimed at increasing the subsequent public private partnership revenue.
All of this will occurs during a period of great political changes and possible alternation of power in São Paulo’s City Hall.
In short, if the Municipal Auditing Court caves to pressure and relinquishes its cautionary function it will be vulnerable to investigations and legal actions.
Piece 4 – Shielding the Financiers
BTG has already been mired in controversy. The Sete Brasil scandal saw senior partner André Esteves arrested as part of the Lava Jato Operation, based on a complaint first filed during the beginning of the Lula government. At the time, I wrote several columns in Folha de São Paulo about his involvement with then-Finance Minister Antônio Palocci, involving problems with the CARF (Conselho Administrativo de Recursos Fiscais/Tax Resources Administrative Council). One day this story will be told in full. Since that time, BTG’s shielding strategy consists of participating in some major shareholdings and positioning as a potential investor in others. That’s how it became a partner at UOL, took over Exame magazine and now maintains influence over Veja through acting as the main financial agent for the sale of it’s holding company Editora Abril.
There are now rumors that BTG rival XP is trying to take over IstoÈ magazine.
Regardless of whether this rumor plays out, the fact is that these big financial interests are shutting down one of the country’s control instruments – which is a press committed to the common interest. Evidence of this is the very little media coverage of an obvious scandal in the Zona Azul tender.
Weeks ago, after I started writing about this case, I was the target of a lawsuit from BTG-Pactual, an institution whose senior partner, Nelson Jobim is the former Minister of Justice Supreme Court Justice. Evidently, their intention is to shut me up.
It makes you wonder. Today the press promises to resist against Bolsonaro. Is there enough press freedom to resist BTG Pactual’s power and dirty tricks?