Bolsonaro’s Government Retreats from Injecting Funds Into Eletrobras

RIO DE JANEIRO, BRAZIL – The government buried once and for all its plans to inject R$3.5 billion (US$875 million) into Eletrobras, Latin America’s biggest electric power company, to make it more attractive to private investors. Instead, it decided to embrace a business-to-business strategy, in an effort to gain support for the bill that will pave the way for the privatization of the state-owned company.

In recent weeks, Mines and Energy Minister Bento Albuquerque held meetings with political parties such as PSL, Novo, DEM, PP, PL, and MDB to present a capital increase proposal for the state-owned company, which would be sent to Congress through a bill.

Eletrobras, as well as the postal service company, Correios, is on the list of state-owned companies which cannot be sold without parliamentary endorsement. In April, the government issued a provisional measure that would allow the injection of the R$3.5 billion allocated in the budget for the capitalization of the power company – an action increasing the federal government’s share in its capital.

The Provisional Measure aimed to reimburse the state-owned company for fuel expenses incurred by energy distributors that have not been reimbursed by tariffs or funds from the electricity sector. Without the measure, the state-owned company will have to pay the debts of its subsidiaries, which reduces its attractiveness in the eyes of prospective investors.

The official discourse now, however, is that the money will not go into the state-owned company. In the Ministry of Mines and Energy, the portfolio that faces the largest percentage budget cut among all departments, with only 20.7 percent of its budgeted funds being released, the money shows up as a contingency, without any possibility of execution.

According to the Ministry of Economy, the decision not to fund the state-owned company was due to the poor fiscal scenario and frustrating revenue this year.

Albuquerque said there will be no government capital contribution to the state-owned company. According to the minister, the privatization plan should include the dilution of the federal government’s shareholding in Eletrobras. It would be similar to what happened with ‘BR Distribuidora‘, control of which was sold by Petrobras in July this year in an operation that involved the launching of shares on the Stock Exchange.

The sales model, according to the minister, has already been endorsed by President Jair Bolsonaro. As a result, by the time the project reaches Congress, there will already be an understanding within the executive branch. “And we can potentially make some improvement within this discussion,” he says.

The government expects to raise up to R$18 billion with the privatization under the new model. Legislators attending the meetings said that, when introducing the proposal, the government has adopted the same rhetoric of Economy Minister Paulo Guedes, that the state company can not finance itself and that, without investments, it will be left behind by its competitors.

In Congress, the president of the Chamber, Rodrigo Maia has emerged as one of the voices advocating the sale of the state-owned company. Last Thursday, October 3rd, after a meeting with Guedes, he said he was in favor of the privatization of Eletrobras.

“The cost of personnel administration is more expensive than the average for the sector, so this ultimately generates a loss to society’s resources,” he said.

But Maia himself recalls that he does not represent the deputies’ views on the issue. The government’s face-to-face with legislators seeks to pacify the matter and reduce resistance to the issue. For the Secretary of Privatization, Salim Mattar, talks are the best way to overcome the resistance to the sale of the state-owned company.

“We prefer to spend time talking to each other now so that we can speed up the process,” he said. He stated that he is confident that Congress will be in favor of privatizations.

“We believe that, when it comes to voting, the wisdom, stability, and responsibility will be greater and we will not have much difficulty in approving laws, PEC [proposed amendment to the Constitution] or PL [draft law]”.

Mattar argued that Eletrobras be included, through a new law, in the statute governing the National Program for Privatization (PND). The state-owned company was excluded from the PND in 2004, during Lula’s administration.

Source: Folhapress