Brazilian president’s priority projects list includes Eletrobras privatization

Eletrobras

Brazilian President Jair Bolsonaro’s list of priority projects sent last week to the new leaders of congress, Rodrigo Pacheco (senate) and Arthur Lira (lower house), included the privatization of Eletrobras.

According to BNamericas, the government sent to congress a bill to privatize the electric power holding at the end of 2019. The aim is to capitalize the company via a primary offering, diluting the government’s stake and ensuring private sector control. The government would also be allowed to sell its remaining stake via a secondary offering.

The bill needs to be approved by the lower house and the senate, where the proposal faces stiff opposition.

In January, Eletrobras Chief Executive Officer Wilson Ferreira Junior resigned mainly due to the lack of progress with the privatization plan. He will take over BR Distribuidora, the fuel distribution unit of federal oil company Petrobras.

The former president of the lower house, Rodrigo Maia, had been an opposing voice to Bolsonaro. With Maia no longer in that position and Bolsonaro’s choices heading the legislature, the government is eyeing a new opportunity to advance the privatization.

However, that will not be a simple task. Both Pacheco and Lira represent the so-called Centrà£o (roughly translated as the big center), the core base of congress. Neither is seen as keen on privatizations, as legislators belonging to the group are said to rely on state companies to maintain highly remunerated posts and use them for electoral gains, BNamericas said.

Pacheco declined to confirm if he will put the privatization bill to a vote when questioned by reporters after he received the government’s priority list. “Everything there [on the list] is not a matter of an exclusive decision by the senate nor the lower house. We have a commitment with the [congress] leaders to submit the government’s requests regarding several issues. Some will be put on the agenda, some will not. Some will be approved, some will not. This is part of democracy,” he said.

At the end of January, when he was running for the presidency of the chamber of deputies, Lira said he would put the Eletrobras privatization bill up for a vote if it had majority support in the house. “What I’ve been assuring, promising to all deputies, is open discussion on all subjects without any kind of prejudice, including privatizations,” he said, according to local media reports.

Opponents of the privatization argue Eletrobras must be under federal control because it is responsible for 30% of power generation in Brazil and has strategic transmission lines and hydro dams. They also claim Eletrobras is a profitable company, having posted BRL5 billion (US$929 million) in net earnings in the nine first months of 2020, and that privatizing the holding will not necessarily result in power rate reductions because the sector has the features of a natural monopoly.

The energy crisis in Amapà¡ state last November — which saw widespread outages — stoked discussions about privatizations in Brazil’s electric power sector, with political opponents highlighting that a problem at a substation operated by a private company (Linhas de Macapà¡ Transmissora de Energia) is now being fixed by Eletrobras.

Even lawmakers from business-friendly parties have grown critical. “I am a liberal and I think we have to privatize a lot of things. But, today, honestly, [about] some strategic areas, I have my doubts,” PSDB-DF senator Izalci Lucas said during a congressional hearing.

Franceli Jodas, a partner at KPMG, believes the Amapà¡ crisis made evident the need to enhance the Brazilian power system, which, in turn, requires private resources. “The role of the state is to carry out a robust oversight and ensure requirements from the concessionaire, be it private or public. What one cannot claim is that the state must be responsible for operating the electric power system,” she told BNamericas.

In December, mines and energy minister Bento Albuquerque denied the Amapà¡ crisis could be blamed on the fact that the substation that blew up was operated by a private company. He claimed that the privatization of Eletrobras would enable the company to make investments and improve its services.

“I like to use the term ‘Eletrobras capitalization’. The state will keep a significant number of shares in this process and no one investor will have the power to dictate the future activities of the company,” he said in an interview with the senate’s news service.

On Monday, after meeting Lira, Albuquerque said the government has not yet decided whether it will push ahead with the federal bill or submit a provisional measure that has been under evaluation in recent months as part of the strategy to privatize Eletrobras. “I have made the mines and energy ministry available to the lower house so we can have the fastest possible processing when it comes to the government’s priority projects,” he said. 

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