Man Behind 2,400% Rally Now Wants to Sell Brazil's Crown Jewels

(Bloomberg) -- An investor darling who oversaw the 2,400% stock price surge of Latin America’s largest car rental company is now leading one of Brazil’s biggest privatization efforts in its history.

Former Localiza Chief Executive Officer Jose Salim Mattar is on a mission to sell over 100 state-controlled companies from electricity generators to the postal service as the ministry of economy’s privatizer-in-chief. In that role, he is even going as far as fighting for the sale of the government’s crown jewels -- the nation’s largest public enterprises including Petroleo Brasileiro SA and Banco do Brasil SA.

While he knows lawmakers would quash attempts to sell those emblematic companies, his intentions show the pro-business drive he brings to the job in an administration that has made privatizations a focus of its economic agenda. President Jair Bolsonaro needs that kind of push to deliver on his promise to sell assets in order to spark much-needed investments and boost public accounts.

Mattar, a 70 year-old millionaire who likes to travel in his own private jet even when conducting government affairs, is often celebrated as a business guru with the appropriate views for the task despite lacking public sector experience.

“Mattar has the perfect profile for the role that he’s in,” said Marcel Zambello, an analyst at Eleven Financial Research. “He was a pioneer. When you talk about Localiza with investors, their eyes gleam because it has brought bigger returns than competitors.”

Since Brazil’s massive privatizations of phone utilities and miner giant Vale SA in the 1990s, recent administrations have made limited headway in shrinking the public apparatus that runs a range of companies from airports to water utilities. That was expected to change after Bolsonaro’s election on a business-friendly ticket, as well as a Supreme Court decision easing rules for the sale of state-owned subsidiaries. Privatizations of parent companies, on the other hand, still need to be approved by Congress, the court ruled.

Rising Stakes

Now, over six months into his role as special secretary for privatization and divestment, the stakes are rising for Mattar. So far, Petrobras’ subsidiaries were sold for 37.1 billion reais ($9.8 billion) this year while Brazil also divested another 14.9 billion reais worth of company stakes, though some of those sales were already under way before he took over. The long-awaited privatization of electricity company Eletrobras has faced delays and now depends on express approval from lawmakers. Meanwhile, business confidence and investments remain weak, contributing to Brazil’s plummeting growth expectations.

Long accustomed to private sector work, Mattar has at times shown impatience, a lack of understanding of bureaucratic processes and frustration over public sector worker competence, according to an economy ministry official who asked not to be named to avoid clashing with the secretary.

Mattar declined to comment on specific criticism of his style, but said his goal is to shrink the size of the state. “The Brazilian state is gigantic, obese, slow, bureaucratic and expensive for taxpayers,” he said in an interview. “It turns the life of citizens and companies into hell.”

Business executives who transition to the government have difficulty adapting to a pace of work that’s oftentimes slower and must follow a political rite, according to Rafael Cortez, a partner at political consultancy Tendencias.

“Mattar has been advancing more slowly because of that shock and also due to mixed signs from Bolsonaro and his political circle,” Cortez said.

In a recent bank event in Sao Paulo, Mattar shared his secret to cope with Brasilia’s tough environment: meditating every morning.

Poor Immigrants

The grandson of poor Lebanese immigrants, Mattar’s childhood dream was to become a pianist. But, after bowing to pressure from his father, he changed course and went on to study business administration. In 1973, he founded Localiza in Belo Horizonte, a city in Brazil’s southeast that he calls home and regularly travels to.

Roughly two decades ago, his path crossed that of Brazil’s now powerful Economy Minister Paulo Guedes, who at one point served on Localiza’s administrative board. That connection helped to give Mattar an in when he reached out to Bolsonaro’s campaign last year after his preferred presidential candidate, business executive Joao Amoedo, failed to rise in polls.

Mattar flashed his pro-market credentials early on in Bolsonaro’s administration while commenting on Vale, which Brazil privatized in 1997. He said the government intended to make the company “private again” by selling shares it still owns in the miner through its development bank BNDES and pension funds of state-owned firms.

To help facilitate privatizations, Mattar argues that the government must first clean house to make public companies more attractive for investors, which usually entails layoffs.

In recent interviews, he acknowledged that the bulk of privatizations will only occur in 2021. For now, Bolsonaro’s administration has been absorbed by efforts to approve a pension reform in Congress, a priority that’s overshadowing other economic policy proposals.

For Victor Mizusaki, an analyst at Bradesco BBI, Mattar has both the personality and professional background needed to overcome those challenges. He cited how he was innovative in luring private equity investments while at the head of Localiza, and how the company was the first in its industry to be brought public.

An investor who bet 1,000 reais during Localiza’s first trading day in May 2005 would have about 24,100 reais by the time Mattar resigned as Localiza Chairman on December 13 to join Bolsonaro’s government, according to data compiled by Bloomberg.

“Mattar has the ability to execute, and he is a problem-solver,” Mizusaki said. “He is the right man for the job.”

--With assistance from Vinícius Andrade and Felipe Marques.

To contact the reporter on this story: Rachel Gamarski in Brasilia at rgamarski@bloomberg.net

To contact the editors responsible for this story: Juan Pablo Spinetto at jspinetto@bloomberg.net, ;Walter Brandimarte at wbrandimarte@bloomberg.net, Matthew Malinowski

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