The privatization plan for the energy company involves a large sum of money to set up a new company responsible for Itaipu and Eletronuclear
Economy Minister Paulo Guedes’ playbook has some solid pillars for the Brazilian economy. The promise is that, once the most critical phase of the Covid-19 impact is over, the focus will return to the initial agenda: structural reforms and privatizations. The plan to transfer state-owned companies to the private sector, however, seems to have started backwards. The scenario is now tragicomic: to get rid of one company, the government plans to create another. At the heart of the discussions on the privatization of Eletrobras, the executive secretary of the Ministry of Mines and Energy, Marisete Pereira, asked the Ministry of Economy for an additional BRL 4 billion in the ministry’s budget next year to create a new company. This new state-owned company would be responsible for managing the Itaipu Plant and Eletronuclear, the company’s arm responsible for operating nuclear power in the country, on the grounds that creating the new company would be “necessary to carry out the privatization process”, in line with Congress’s consideration of the matter in the discussions on the bill providing for the Eletrobras concession.
“The Bill establishes that, in the event of privatization, a state-owned company will be responsible for the equity interest in Itaipu Binacional, the current subsidiary Eletrobras Termonuclear S.A. – Eletronuclear, Federal Government assets under Eletrobras’ administration and government programs”, writes the state-owned company’s CFO and investor relations officer, Elvira Cavalcanti Presta. “We emphasize that the new state-owned company should only actually be created for the purposes set out above, if the Bill is approved by the National Congress”, she concludes, referring to the bill providing for the privatization of Eletrobras. Nonsense. In the case of Eletronuclear, the Constitution does indeed prohibit the private sector from operating nuclear power in the country. On the other hand, the Itaipu Plant is an asset shared between Brazil and Paraguay, and its privatization is also prohibited. Nothing prevents, however, the companies from having independent management, without being under any parent company.
“Considering that the two companies have their own governance structures, their boards and specific policies, it seems unnecessary to me to create a new company to manage the two”, says Giuseppe Giamundo Neto, who holds a master’s degree in State Law from the University of São Paulo. “There is no need, from a legal or corporate governance standpoint, to create a structure to manage these companies. It generates additional expenses without any such need or any benefit”, he says.
As VEJA reported, the company’s privatization is a difficult matter to move through the National Congress, thanks to long-standing interests involving political influence at Eletrobras. The latent influence of the Northern caucus in the Senate is being courted by the government to move forward with the company’s privatization plans. The demands include creating a charge added to energy bills to fund projects in the region through a fund, as well as creating a golden share — a type of share held by the government that gives the Federal Government decision-making power, even as a minority shareholder. The region’s lawmakers keep their tentacles on the company, and Economy Minister Paulo Guedes has been listening to the demands of deputies and senators so that Congress will move forward with the sale of the company. The state-owned company requires BRL 14 billion in annual investment to remain competitive, while government spending is around a meager BRL 3.5 billion.
News originally published by Victor Irajá on the VEJA website (in Portuguese), on 07/23/2020.
