Federal state companies post R$2.9B deficit in first half of 2024

Brazil's federal state-owned enterprises are bleeding money at an accelerating pace. In the first half of 2024, these government-controlled companies posted a primary deficit of R$2.9 billion—the gap between what they spent and what they earned before accounting for debt service. That's 81 percent worse than the same six months a year earlier, when the shortfall stood at R$1.6 billion. The deterioration is even starker when measured against 2022, when these same enterprises actually turned a R$6.5 billion surplus under President Jair Bolsonaro. The swing from surplus to deficit represents a R$9.4 billion reversal in just two years, now under President Luiz Inácio Lula da Silva.

The numbers come from Brazil's Central Bank and measure the primary result—the raw difference between revenues and expenses, excluding interest payments on debt. This metric matters because it shows whether a company or group of companies is living within its means before you even account for the cost of servicing what it owes. For state enterprises, which are supposed to operate with some degree of financial discipline, a widening deficit raises questions about management and efficiency.

The government had set a target of a R$7.3 billion deficit for 2024 under the Budget Guidelines Law. But a revised estimate released in the third bimonthly report suggests the year will end with a R$4.2 billion shortfall—still substantial, but better than the original projection. That improvement comes after deducting investment expenses from the New Growth Acceleration Program, a federal infrastructure initiative. The figures exclude Petrobras and state banks, which operate under separate fiscal rules.

When you drill down to individual companies, the picture becomes more specific. The Brazilian Postal Service, Correios, alone accounts for R$1.5 billion of the deficit through May 2024—the latest month for which company-by-company data is available. That represents a deterioration of nearly R$900 million compared to the same period last year. The Naval Projects Management Company, Emgepron, posted a R$651.3 million loss. Meanwhile, the Brazilian Energy Nuclear and Binational Participation Company, ENBPar, which was created to facilitate the privatization of Eletrobras, managed a R$385.2 million surplus, though the government had requested it be removed from the state enterprise fiscal target.

Economists and business groups are divided on what the numbers mean. Fábio Pina, an economic advisor at the São Paulo Commerce Federation, argues that the deficit reflects a broader fiscal problem and that public companies must operate with efficiency and fiscal responsibility, not justify spending through appeals to social function. He contends that achieving fiscal balance is the path to reducing interest expenses, which consume the largest portion of the government's overall deficit. Ecio Costa, an economist at the Federal University of Pernambuco, frames the issue as a management problem, noting that the previous government achieved positive results in three of four years, while the current administration shows weaker stewardship.

The government's Ministry of Management and Innovation pushed back against the characterization of the results as a "deficit" or "hole," arguing that the accounting logic for state enterprises differs fundamentally from fiscal budget accounting. A deficit in cash flow, the ministry contended, does not necessarily signal mismanagement if it reflects higher investment spending aimed at long-term company strength. The ministry also noted that preliminary data from 2023 showed a year-end result far better than mid-year figures suggested, implying that first-half weakness may not persist.

Several companies issued statements defending their performance. Correios said it maintains cash reserves and does not require government injections, noting that early-year results are historically weaker and citing a decline in international parcels and messages. Dataprev attributed its negative result to timing of cash outflows and dividend payments to shareholders. Hemobrás highlighted that it has generated operating profits in recent years and paid over R$120 million in dividends to the federal government in 2022 and 2023, framing the primary deficit as a reflection of consuming previously received capital investments. Serpro, the federal data processing service, expressed confidence that second-half results would swing toward surplus, projecting a year-end primary surplus of around R$200 million.

The trajectory matters. If the government's revised estimate holds and the year closes with a R$4.2 billion deficit rather than the budgeted R$7.3 billion, it would suggest either improving performance or better-than-expected cost control. But the underlying trend—from a R$6.5 billion surplus in 2022 to a R$2.9 billion deficit in the first half of 2024—points to a real shift in how these enterprises are performing. Whether that reflects management decisions, economic headwinds, or the cost of necessary investments remains contested, but the numbers themselves are unambiguous.