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While The Post Office In Crisis Accumulates Losses And Burns Cash, The Government Prepares A Loan Of R$ 20 Billion With Sovereign Guarantee To Provide Comfort To Banks, Attempts To Shield Officials From Future Liability And Shifts The Risk Of Default Directly To The Treasury And To The Taxpayer Already Pressured By Bills
The government of President Luiz Inácio Lula da Silva is racing to structure aid to the Post Office in crisis through a loan of R$ 20 billion, backed by a consortium of five private and public financial institutions, but only viable because the Union accepts to act as the full guarantor of the operation. In practice, banks lend with almost zero risk, supported by the payment capacity of the National Treasury, while the state-owned company tries to buy time to execute a restructuring plan and avoid formally entering the list of companies dependent on the budget.
To make the politically inevitable yet technically sensitive design feasible, the economic area is preparing a presidential decree and an interministerial ordinance that create a specific legal framework to allow state-owned companies with cash flow problems, like the Post Office in crisis, to receive sovereign guarantees based not on the current picture of their accounts, but rather on future adjustment projections. At the same time, the text seeks to shield Treasury officials and other agencies that will sign the guarantee and fear being held accountable if, down the line, the state-owned company cannot honor the payments and the Treasury is called to cover the debt.
How The R$ 20 Billion Aid Was Structured
The board of directors of the Post Office approved, on the morning of November 29, the hiring of the R$ 20 billion loan presented by a syndicate of five banks: Banco do Brasil, BTG Pactual, Citibank, ABC Brasil, and Safra.
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With an investment of R$ 612 million, a capacity to process 1.2 million liters of milk per day, Piracanjuba inaugurates a mega cheese factory that increases national production, reduces dependence on imports, and repositions Brazil on the global dairy map.
The operation fully meets the amount requested by the state-owned company, which had been warning the government about the risk of a cash shortfall and loss of payment capacity.
According to interlocutors following the negotiations, the interest rate offered by the banks was slightly below the previous reference of 136% of the CDI, which is considered internally an improvement compared to the initial proposals.
Still, the financial cost remains high for a company that already accumulates billion-dollar losses and faces declining revenues in strategic fronts.
BTG Pactual, Citibank, and ABC Brasil are already creditors of the Post Office in a financing of R$ 1.8 billion contracted in the first half, which must be settled with part of the resources from the new loan.
Banco do Brasil has been participating in the discussions from the beginning, and Safra joined in the second round.
Caixa Econômica Federal, which had participated in the preliminary discussions, ended up out of the syndicate. When contacted, the banks did not comment on the case.
Sovereign Guarantee Reduces Banks’ Risk And Transfers Pressure To The Treasury
Under the approved design, the National Treasury acts as the guarantor of the contract.
If there is a default by the Post Office in crisis, it is the Union that will assume responsibility for the payments.
In practice, the risk of loss for the banks approaches zero, as the ultimate source of payment becomes the Treasury’s cash financed by taxpayers.
The granting of the Union’s guarantee has always been a premise of discussions with financial institutions.
The internal doubt was how to technically justify the guarantee to a company that today does not have sufficient payment capacity and has been accumulating recurring losses since 2022.
By September of this year, the negative balance had already reached R$ 6.1 billion.
The decree and the ordinance being drafted seek to open a legal pathway for this type of situation.
Instead of only looking at the current situation of the state company, officials can consider a restructuring plan with measures for cutting expenses, increasing revenues, and contingency actions in case of failed results.
It is a vote of confidence that allows keeping the Post Office in crisis off the formal list of Treasury dependents but increases the potential risk in the long term for public accounts.
Legal Shield For Officials, Memory Of Previous Crises
The concern with legal backing is central.
The drafting of the decree and ordinance was initiated by the CGPar, a committee that includes ministers Fernando Haddad, Rui Costa, and Esther Dweck, precisely to ensure that there is an Executive act defining minimum guidelines for operations of this type.
In the recent past, especially during the Dilma Rousseff administration, the Ministry of Finance granted the Union’s guarantees for loans to states in fragile fiscal situations, without an attached presidential decree and with more flexible rules.
Several of these entities ended up in default, forcing the Treasury to honor installment payments and negotiate lengthy recovery processes.
The memory of this movement weighs on the current decision and helps explain the concern about formalizing the exception in detailed norms.
By creating specific rules, the government intends to reduce the risk of officials being held individually accountable for decisions made within a previously established legal framework.
Still, the design does not eliminate the underlying discussion: if the plan does not work and the Post Office becomes unable to pay, the shortfall will be absorbed by the Treasury, which already faces multiple budgetary pressures.
Post Office In Crisis Tries To Avoid Status Of Budget-Dependent State-Owned Company
Without the loan, the Post Office in crisis was considered a strong candidate to enter the group of state-owned companies dependent on the Treasury, classified as such when they need to supply cash with budget resources even for current expenses, including payroll.
In this condition, all expenses would begin to compete for space with public policies and social benefits already provided for in the budget, something the government seeks to avoid.
A decree from June had already created mechanisms to facilitate the exit of companies from this condition and allow that non-dependent state-owned companies, when resorting to the Treasury for operational expenses, present a plan for rebalancing to be fulfilled within up to two years.
Now, the new act should regulate a third scenario: that of the state-owned company in difficulties, without yet receiving direct contributions for operational support, but at concrete risk of needing such support in the future.
This is exactly the current picture of the Post Office in crisis, which had been warning the Union about the possibility of cash breakdown.
According to involved officials, the decree will detail the situations in which a state-owned company can submit a restructuring plan and what minimum elements this document must contain to justify the request for a sovereign guarantee.
The idea is to tie the granting of the guarantee to measurable goals and measures, although the economic risk remains present.
What Fuels The Structural Crisis Of The Post Office
The Post Office in crisis did not reach this point merely due to cyclical effects.
The state-owned company faces a set of structural factors that erode revenues, increase expenses, and pressure cash flow.
The internal diagnosis presented to the government lists several vectors considered decisive.
One of them is the impact of the so-called “t-shirt tax.”
The taxation of low-value international orders altered the flow of goods that previously arrived in large volumes through the Post Office’s network, in a segment where the company had relevance.
With the new regulatory and market environment, the state-owned company lost exclusivity in the import of these orders and saw an important source of revenue shrink.
On the expense side, the situation has also worsened due to recent decisions.
In 2024, even in an already delicate situation, the company granted a linear adjustment of 4.11% to over 55,000 employees, resumed benevolent clauses such as a 70% additional on vacations, and held a competition for over 3,000 positions, whose approved candidates are still awaiting summons.
In parallel, it burned cash to purchase electric vehicles and technology items in a scenario of financial fragility.
Health Plan And Legal Liabilities Press Balance
The health plan for employees is another focus of pressure.
The Post Office maintains the operator, which means assuming all risks and any debts.
In 2022, the statute was even amended to allow for migration to the sponsorship model, which is less burdensome for the company, but the change was reversed in the current government.
The result is a long-term commitment that weighs on the present and future accounts of the state-owned company.
The company also coexists with a significant liability in legal actions, especially labor-related cases, which were not always mapped accurately.
The lack of detailed diagnosis led to reservations in financial statements by independent auditors.
The expenses with precursors played an important role in the losses of recent quarters, deepening the tight cash situation.
In this context, the R$ 20 billion loan appears as an attempt to gain breathing room to execute the restructuring plan, honor immediate commitments, and avoid an operational breakdown.
However, without consistent changes in the business model, cost management, and governance, the risk is that the debt guaranteed by the Union only pushes the problem forward, with a potentially greater impact on the Treasury.
Risk Shared Between State-Owned Company, Government And Taxpayer
The aid to the Post Office in crisis reveals a recurring pattern in the relationship between state-owned companies and public accounts: the combination of political pressures, loss of competitiveness, questioned management decisions, and, at the end of the line, use of the Treasury’s balance sheet to absorb extreme risk.
Banks provide high-value credit, but safeguarded by robust guarantees and a legal framework designed to reduce uncertainties.
For the government, the operation is presented as an alternative to a scenario considered worse: that of directly assuming the costs of the state-owned company in the budget, already overloaded by social, pension, and personnel expenditures.
For taxpayers, the uncertainty remains about how much of this bill will be effectively paid by the Post Office itself, through adjustments and efficiency gains, and how much will ultimately end up being socialized in the public finances.
As you follow the next steps, what kind of restructuring do you consider indispensable so that this loan saving the Post Office in crisis does not just transfer the final bill to the Treasury and the taxpayer?
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