Bolsonaro approves controversial privatization of Brazil’s Eletrobras

RIO DE JANEIRO, BRAZIL – A few hours after the text was approved by Congress, President Jair Bolsonaro on Tuesday, June 22, sanctioned into law the bill approving an MP (Provisional Measure) that will allow the privatization of Eletrobras, a state-owned company that supplies 30% of the energy generated in Brazil and largest power utility of Latin America.

According to the Presidential Office, the approval comes at the limit of the 190-day period and brings significant benefits to electricity consumers. The Ministry of Mines and Energy estimates that privatization will lead to a 6.3% reduction in electricity tariffs for all Brazilians. For specialists, however, the scenario will be the opposite.

The measure represents a historic moment for the country and comes 26 years after the first attempt to privatize the company in 1995, the government said. According to the text of the sanction, the approval has the potential to represent a profit of R$100 (US$20) billion to the public coffers with the sale of shares of the state.

Last week, defending the approval of the text, President Bolsonaro said that without the privatization of the energy company, Brazil would live in what he called an “energy chaos.” “Almost everything public is considered corruption. […] The people who are against privatization are joking,” he said, speaking to supporters.

According to the text approved by Congress, it will authorize the issuance of new shares to be sold on the market without the company’s participation, resulting in the loss of voting shareholder control currently held by the state.

Nevertheless, the government will have a special share, called the Golden Share, that will guarantee a veto over some shareholders’ meeting, to prevent any individual shareholder or group of shareholders, from holding more than 10% of the voting capital of Eletrobras.

According to the approved text of deputy Elmar Nascimento (DEM-BA), the same mechanism could be used to privatize other public companies. “The process will allow Eletrobras to recover its investment capacity,” he said.

For the full picture, see our Brazil Tax Reform: Complete Guide.

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