Brazil to sell stake in national electric utility

THE BRAZILIAN government is aiming to sell part of its stake in Eletrobras, the hydroelectric power generation company that produces 40% of Brazil’s electricity and is Latin America’s largest power utility company.

The ministry of mines and energy justified the plan by claiming the government would “democratise” the company on the stock exchange, making it more competitive and agile.

Critics denounced the move as another part of the government’s attempt to tackle its public spending deficit of almost $50 billion (R660bn) by cutting social welfare and privatising public assets.

The leader of the opposition Workers’ Party in the Senate, Lindbergh Farias, denounced the sale of Eletrobras as “a crime against the nation”.

Eletrobras is the 10th biggest electricity utility in the world. Through its subsidiaries it owns almost half of Brazil’s generation capacity, most of it from hydroelectric power plants, and it controls 69% of the country’s electricity distribution.

The company was set up by former president, João Goulart, in 1962. The Brazilian state owns, directly and indirectly, just over 56% of its shares. The rest are traded on the Sao Paulo, New York and Madrid stock exchanges.

The ministry of energy has not said how much of the government’s stake it wants to sell. It did say the sale would follow the pattern set in selling state shares in Brazil’s leading aircraft manufacturer, Embraer SA, and the iron mining giant, Vale Limited. It insisted the government would retain some shares and a power of veto.

According to the ministry, the problems at Eletrobras result from 15 years of inefficiency, and have cost almost a quarter of a trillion dollars in losses.

After winning a vote in Congress early this month to block corruption charges against him, Brazil’s President Michel Temer promised to accelerate his programme of reforms. These include reductions in labour and pension rights, cuts to anti-poverty programmes, and the rolling back of land rights for Brazil’s indigenous and Afro-Brazilian communities.