Brazilian Congress approves bill paving the way for privatization of Eletrobras

RIO DE JANEIRO, BRAZIL – Brazil’s Chamber of Deputies approved on Wednesday a measure that paves the way for the privatization of the state-owned electricity company Eletrobras, responsible for 30% of the energy generated in the country and whose capitalization is considered one of the priorities of the government of President Jair Bolsonaro.

The so-called “base text”, which establishes the general framework of the project, was approved by a Lower House vote of 313 in favor and 166 against, after a tumultuous session. Once the discussion and analysis of some changes proposed by some parliamentarians are concluded, the bill will be sent to the Senate.

The measure, which aims to promote a capitalization model for the country’s largest electric company through the offering of shares on the São Paulo Stock Exchange, was delivered to Parliament personally by Bolsonaro last February 23, in what was interpreted as a message to the markets about the maintenance of his ambitious liberal economic agenda.

The bill proposes to promote a capital increase in which the government, which currently holds about 60% of the shares of the state-owned company, will abstain from participating, which would allow private shareholders to become a majority.

The text also includes some requirements to be met by the Brazilian state and investment commitments and contributions of resources for the sector’s regulator and social programs.

The approval of the basic text was considered a victory for the chief executive, which is counting on the economic area to expand the company’s investments and promote the privatization plans of Bolsonaro’s economic team, with which it intends to reduce the size of the State.

The sale of Eletrobras and 114 other assets to private enterprise was announced in December last year through a list disclosed by the Council of the Investment Partnership Program (PPI) of the Ministry of Economy.

According to the special secretary of the PPI, Martha Seillier, the government expects to receive up to R$60 billion (about US$11.32 billion) from the sale of control of Eletrobras.

At the time, Seiller also considered that the privatization of the power company is of interest to parliamentarians because it foresees multi-million dollar investments in the modernization of the country’s energy park, which the State is not in a position to finance.