Brazil Mergers on Hold as Bolsonaro Flip-Flops on Antitrust Body

(Bloomberg) -- President Jair Bolsonaro has flip-flopped on key appointments to Brazil’s antitrust regulator, leaving the respected body in a state of paralysis and subject to accusations of political interference.

The competition watchdog known as Cade, which earlier this year handled the Brazilian portion of high-profile mergers such as Walt Disney-Fox, was down to only three of its seven board members in May when senior government ministers put forward names to fill in the vacancies. But early last month Bolsonaro withdrew those appointees from Senate consideration without offering a public explanation, only to submit new suggestions a few days later.

The reversal came right after the president announced a controversial plan to appoint his own son, Eduardo Bolsonaro, as Brazil’s ambassador to Washington, a diplomatic posting that also requires Senate approval. Over 70% of Brazilians oppose the idea while only 15 of the country’s 81 Senators publicly endorse it.

The new names suggested by Bolsonaro were agreed on with senior lawmakers, including Senate President Davi Alcolumbre, according to three members of the upper house and two ex-board members of Cade, who requested anonymity to speak freely. They accused the president of using the nominations as bargaining chip to overcome opposition to his son’s nomination.

Alcolumbre said that he did not indicate nor would he indicate anyone to join the board of Cade. He said the selection of appointees was for the executive alone to decide and that the legislature’s role was to evaluate that choice.

The debate over Cade roles not only suggests Bolsonaro may be resorting to the traditional transactional politics he once pledged to shun, but also has serious business implications. Without quorum to rule on major cases, over 70 mergers are currently on hold in Brazil, according to three lawyers working on the deals.

While the presidency has declined to comment for this article, Bolsonaro has previously been forthright about his ambitions for Eduardo. “I intend to favor my son,” he said in July, when asked about the nomination. “If I can give my son filet mignon, I’ll give it to him.”

Cade and Eduardo Bolsonaro did not respond to requests for comment.

Transparency Concerns

Recent nominations to Cade’s board do “not follow transparency standards,” the National Association of Specialists in Public Policies and Government Management wrote in a statement, noting that the regulator’s continued approval by the Organization for Economic Co-operation and Development depends on greater transparency.

“The withdrawal of the qualified and experienced nominees... causes perplexity and suggests undue interference in a technical state organ,” the note stated.

Delays in approving corporate mergers is proving costly. In July, International Business Machines Corp. decided to go ahead with the $34 billion acquisition of Red Hat Inc. even without the full approval of the board, as Brazil was the last country to pass the deal. In response, Cade started a probe against IBM.

But with fines limited to $15 million maximum, more companies may decide to take on the risk.

--With assistance from Fabiola Moura and Flavia Said.

To contact the reporters on this story: Mario Sergio Lima in Brasilia Newsroom at mlima11@bloomberg.net;Samy Adghirni in Brasilia Newsroom at sadghirni@bloomberg.net

To contact the editors responsible for this story: Walter Brandimarte at wbrandimarte@bloomberg.net, ;Rosalind Mathieson at rmathieson3@bloomberg.net, ;Juan Pablo Spinetto at jspinetto@bloomberg.net, Bruce Douglas

©2019 Bloomberg L.P.