The situation defnes a scenario as strange as absurd, where SUSEP, an organ of the Brazilian Ministry of Finance, grants a permission to the capitalization operators and severely damages the LOTEX concession process that is being conducted by SEFEL, Secretariat for Fiscal, Energy and Lottery Accompaniment, also belonging to the same Ministry.
Even though the bidding documents have been published for the LOTEX concession last month and its auction is scheduled for next month, SEFEL has not yet expressed its views on the subject.
It is now very difficult for interested foreign companies, who have been working on their proposals for next June, to move forward as product exclusivity offered in the project can not be met and the outlook for their investment changes drastically.
Some of these companies, global giants of the market, had already expressed their irritation at what they considered a clear change in the rules of the game organized by the Government of Brazil when they were invited to participate and presented themselves on road shows promoted in 2017 and 2018 by BNDES and SEFEL . With this news, the future of LOTEX is uncertain. However, it is unlikely that current conditions will continue to be maintained. One possibility could be the reformulation of the value of the grant even though this change, like the others, will seriously delay the whole process that has already been delayed.
The Private Insurance Superintendency (SUSEP), headquartered in Rio de Janeiro, is the responsible for the authorization, control and oversight of the insurance, open pension, capitalization and reinsurance markets in Brazil. In the field of insurance, it supervises both private and compulsory audiences.
According to the publication this morning in the Journal of the Union, SUSEP decides:
Ney Brito (professor at UFRJ) and Pedro Trengrouse (FGV professor) explained in a recent article in the newspaper O Globo entitled "Great investment for the bank" that "the lottery ticket offered in capitalization bonds is a an attack on the popular economy, cannibalizes the national lottery market and occurs without control due to the old, obsolete and confused legislation of the sector. If the client invests the same amount, buying tickets himself from the Federal Lottery and depositing the rest in the savings account, he will have better profitability, liquidity and, at least, the same chances of winning."
Brito and Trengrouse claim that competition is unfair on the following grounds:
"The lotteries need legislative authorization, make social transfers, pay more prizes and are sold, passively, in only 14,000 lottery houses. Capitalization bonds are actively and insistently offered in more than 23,000 branches and almost 40,000 banking posts, pay less prizes, do not make any social transfers, and pass over Administrative Rule 41/08 of the Ministry of Finance, which has in paragraph 1 of article 20 that transactions related to capitalization bonds require authorization in accordance with Law No. 5,768 / 71 and Decree No. 70.951 / 72. Banks say that capitalization is a good investment. It really is for the bank. The built-in draw is used by the bank's sales machine as an additional carrot to a good investment, often sold in married operations, omitting the possibility of expressive losses with the interruption of payments and early redemptions, reaching mainly small savers. In 2016, the banks' gains with these redemptions and reduction of liabilities reached US$ 70 million."
In 2016, lotteries raised US$ 3.6 billion, paid US$ 1.2 billion in prizes and transferred US$ 1.7 billion to the National Treasury Secretariat, Student Funding Fund, National Culture Fund, National Penitentiary Fund , National Health Fund, Brazilian Red Cross, National Federation of Parents and Friends of Exceptional Associations, Ministry of Sport, Brazilian Olympic Committee, Brazilian Paralympic Committee, Brazilian Club Committee, National Confederation of Clubs and Football Clubs.
The collection of capitalization bonds was 67% higher, reaching US$ 6.05 billion, paying only US$ 285 million in prizes and generating net income of US$ 510 million to 17 companies, authorized by the Superintendency of Private Insurance and linked to banks: Aplap, Bradesco, Brasilcap, Caixa, Capemisa, Cardif, Itaú, Icatu, Invest, Kirton, Liderança, Mapfre, Porto Seguro, Santander, SulAmérica and Zurich Brazil.
Source: GMB
