Brazil: Court gives green light to Eletrobras privatization

RIO DE JANEIRO, BRAZIL – Brazil’s Court of Accounts of the Union (TCU) gave the green light on Wednesday to the privatization of Eletrobras, the largest electricity company in Latin America, which will become the first large state-owned company to be sold by the government of Jair Bolsonaro.

By a large majority, the body that oversees the accounts of the Brazilian state endorsed the sale, which according to the government, could take place between mid-June and mid-August of this year.

“By seven votes to one, I declare the proposal” of the rapporteur, which authorizes the continuity of the privatization process, said Judge Ana Arraes, president of the TCU, at the end of a deliberation of more than four hours.

The privatization, which was already approved in mid-2021 by the Brazilian Congress, will be carried out via capitalization, through the issuance of new shares, so that the state participation in the capital of Eletrobras will fall from 72% to 45%, according to analysts.

The state will nevertheless retain a golden share in strategic decisions about the company, which is responsible for generating a third of the country’s energy.

The government expects to raise up to R$67 billion (US$13.5 billion), R$25 billion of which would go to the Treasury.

According to expert estimates, the rest would go to public tariff reduction and development programs.

TRIUMPH FOR BOLSONARO

With just over four months to go before the presidential elections, the TCU’s endorsement is good news for Bolsonaro, who, since coming to power in January 2019 with the promise to shrink the state and clean up public accounts, has barely been able to move forward with his ambitious plan to privatize a hundred companies.

The Minister of Economy, Paulo Guedes, estimated that R$1 trillion would be raised with the sale of companies at the beginning of his mandate.

But this goal is far from being reached without selling other state-owned companies, such as Correios (Postal Service), Dataprev, or Serpro (the latter two technology companies).

The privatization of public assets is one of the major themes of the pre-campaign, especially amid soaring inflation due, among other things, to the rise in the price of energy and fuel, which has led Bolsonaro to say that he does not rule out the privatization of Petrobras, the largest company in Latin America.

“Bolsonaro has a statist profile; he was against the privatization of large companies. The problem is that he saw that the price of energy and fuel shot up and that electorally that is hitting him,” explained the economist Alex Agostini from the consulting firm Austin Rating.

The government denies that the privatization of Eletrobras will increase electricity bills, as claimed by its opponents and some analysts.

“Electricity bills will be even more expensive. But those who don’t know how to govern are trying to sell strategic companies, and on top of that, rushing to sell at a bargain price,” former leftist President Luiz Inacio Lula da Silva said on Twitter Wednesday morning.

With information from AFP