Since 2017, Alexandre Barreto de Souza is President of the Administrative Council for Economic Defense (CADE). He has a master’s degree in public administration from Universidade de Brasília and is currently pursuing a doctorate in political science at Universidade de Lisboa. A civil servant since 1993, he has worked in bodies of the Federal Government of Brazil such as the National Treasury, the Internal Revenue Service, the Senate, and the Court of Accounts. In this exclusive interview, President Barreto discusses the main objectives and initiatives of his administration, the latest regulatory developments and trends shaping Brazil’s competition market, CADE’s landmark cooperation agreement with the Central Bank (BC) and much more.
Leaders League. What are your main objectives as President of the Brazilian Competition Authority (CADE)? Which initiatives, implemented during your administration, would you highlight?
Alexandre Barreto de Souza. In the two and a half years since I took office as President of CADE, we have made significant progress. Before I discuss this, however, I would like to highlight that CADE already enjoyed widespread recognition for its excellence before my administration so I can affirm that it already operated in a very adequate manner to achieve its main objective, which is generating benefits for society via the defense of competition.
As president, I am clearly aware that my role is to collaborate towards this mission and maximize the gains for society. In order to do that, we operate on many fronts. Firstly, an objective often forgotten is the pursuit of an enjoyable work environment that motivates everyone towards a common goal. In this sense, I am pleased to affirm CADE does offer such an environment.
A second point refers to our budget, which was a major challenge from a legislative standpoint. Despite generating an annual revenue of hundreds of millions of Brazilian reais and securing billionaire gains for society, CADE’s budget was quite limited. In the very first year of our administration, we secured a considerable budgetary increase, and now we operate under appropriate conditions, but it is important to keep in mind that CADE generates benefits that are at least ten times what it costs to society.
The increase in financial resources made available to CADE has mainly gone towards technology and the training of professionals. The people which make up CADE are, undoubtedly, its greatest asset and I am convinced that every real invested in the development of our staff will be exponentially repaid to society. We have the best team in Brazil’s public administration system and we are very proud of it.
Another important initiative, related to the aforementioned issues, was a successful staff recruitment campaign. Bear in mind that CADE is a relatively small autonomous public agency with headquarters in Brasília but which holds nationwide jurisdiction. As such, the recruitment of professionals was, and in fact, remains necessary. Still regarding legislative initiatives, we recently secured CADE’s inclusion within the General Law of Regulatory Agencies, Law no. 13.848/2019. As a result, we now have complete administrative, financial and budgetary autonomy, as recommended by the OECD in its latest evaluation.
It is also important to emphasize our belief in the positive outcomes which may result from partnerships with other agencies and governmental institutions. In this regard, we have celebrated Technical Cooperation Agreements (ACT) with the Public Prosecutor’s Office in every state, thus allowing us to count on their expertise and local anti-cartel operations. Moreover, we have also been carrying out joint actions, such as the drafting of technical studies and an important collaboration with the Central Bank of Brazil, which ended a conflict over jurisdiction which had dragged on for years.
On the international scene, we secured Brazil’s adhesion as an associated member of OECD’s Competition Committee and received explicit acknowledgement from the world’s leading competition authorities regarding CADE’s efficiency and effective cooperation with them. Lastly, we signed cooperation agreements with authorities from other countries and adhered to the International Competition Network’s (ICN) instrument for the adoption of more effective competition practices.
Which main regulatory developments have taken place in the Brazilian competition market over the last 12 months?
Regarding regulatory issues, I would first like to emphasize that the motor of development is the private sector. However, as the market has some flaws, state intervention can be useful to increase the market’s efficiency and ability to generate benefits for society. The State, however, also has its flaws, and thus it is necessary to discuss the appropriate limits and forms of intervention.
It is my understanding that, in 2019, Brazilians began to realize that government intervention was excessive, and thus, was harming the economy. In light of this, several measures are being adopted to reduce government intervention in the economy, such as the sale of state-owned companies and the deregulation of economic activity, for example, with the enactment of the Economic Freedom Act, Law no. 13.874/2019. I believe this trend is very beneficial for Brazil and will provide politicians and civil servants from all three branches of government with a new perspective on the need for a legal framework which favors investments and the efficiency of markets.
What have been the main trends in the Brazilian competition sphere over the last 12 months? What new trends can we expect in 2020?
Regarding the defense of competition in Brazil, in general, we have already adopted the best international practices, based on both economic theory and practice. Of course, sometimes disagreements occur, as in any part of the world, but the fact remains that political ideals and personal opinions have very limited effect on competitive analyses.
What I can mention is that, nowadays, there is a focus on increasing competition in sectors which are relevant for the Brazilian economy, such as oil and gas. For instance, an agreement signed with CADE resulted in major divestments being imposed on Petrobras. CADE will be responsible for monitoring the execution of this agreement.
Moreover, we have been practicing competition advocacy before other government bodies so that state intervention works towards maintaining or increasing competition, as far as possible. I am certain that this new culture of greater economic freedom will be positive for competition and, consequently, for the country.
In February 2018, CADE and the Central Bank (BC) signed a memorandum of understanding to cooperate in cases involving the finance sector. Why is this memorandum important and what will its practical impact be?
The agreement between the Central Bank and CADE is certainly an excellent example of how the public sector can perform efficiently when its institutions work in a cooperative manner. The discussion over who had jurisdiction to carry out competitive analysis in cases involving the finance sector had dragged on for years, reaching the Supreme Federal Court (STF) and leading to legal uncertainty, as well as a low level of cooperation between these two important economic agents.
The problem, however, turned into a solution. Not only did we end the existing legal uncertainty – as companies from the financial sector now know how to act during mergers – but both entities also established norms for cooperation. Taking full advantage of each institution’s respective expertise, the analysis of mergers and of sanctioning processes will now be improved in a sector full of peculiarities.
Between July 17th and October 8th 2019, CADE’s tribunal was left without a quorum, leaving it unable to rule on cases. What was the impact of this situation?
CADE’s tribunal was without a quorum for nearly three months and, obviously, there were negative repercussions which resulted in two main kinds of damage. Regarding mergers, several companies were forced to wait longer in order to implement their operational integration proceedings. The second kind of damage relates to a delay in the ruling of administrative cases which, for example, could reduce the deterrent effect of sanctions applied in case of conviction.
Despite this, it is important to emphasize that CADE did not come to a halt. The Superintendent General, the Prosecutor’s Office, the Department of Economic Studies, in short, all of CADE kept working. We have a robust structure with which to support new councilors, which, undoubtedly, are excellent professionals and will give continuity to the great work being done.
What new initiatives can we expect from CADE in 2020?
CADE will continue on its path of excellence and obtaining important results for society. Regarding procedures, several cartel cases which are still under investigation should to go to trial, many of which originated from Operation Car Wash. 2020 will also be an important year for monitoring the agreements signed between CADE and Petrobras regarding the oil and natural gas refining markets. In this particular case, it is worth remembering that the agreements represent a historic landmark in Brazilian antitrust, seeing as they will effectively result in the breaking up of a monopoly in the aforementioned sectors and will thus generate considerable benefits for the Brazilian economy.
Throughout this year, CADE will keep paying attention to the major economic debates in Brazil regarding increased competition. I believe that an increasingly present advocacy of competition, especially in the regulated sectors, is the next great institutional frontier for this agency.