Brazil reduces its stake in Eletrobras

Brazil is striving to tackle its budget deficit by increasing private sector participation in the economy

 
President Michel Temer is pushing forwards with his plan to divest state assets in order to boost the flagging Brazilian economy 
Author: Luján Scarpinelli
August 22, 2017

On August 21, the Brazilian Government unveiled a plan to curb its fiscal deficit. A key element of the plan is the sale of the government’s stake in power utility company Electrobras, according to a statement released by the country’s Ministry of Mines and Energy.

The sale of the electricity provider, which could represent one of the largest privatisation moves since the 1990s, comes at a time when Brazil’s economy is slowly emerging from a two-year recession, amid a series of corruption scandals. President Michel Temer, whose position was confirmed this year despite being investigated over bribery allegations, is focused on tackling an increasing budget deficit of around 10 percent of Brazil’s GDP.

The decision over the governance of Eletrobras is part of a wider programme to alleviate pressure on Latin America’s largest economy

Fernando Coelho, Minister of Mines and Energy, said in a statement that the transaction, in which the government will retain a minor percentage of the shares, is expected to be concluded in six months and will provide the country with around BRL 20bn ($6.3bn). Coelho added that, after years of “inefficiencies”, the privatisation would give the company “agility [and] capillarity”, highlighting successful examples of privatisation in Portugal, France and Italy.

The decision over the governance of Eletrobras is part of a wider programme to alleviate pressure on Latin America’s largest economy. The plan includes 58 projects that are estimated to attract private investment of around BRL 44bn ($13.9bn) in sales and concessions, according to local newspaper O Globo. In addition to Eletrobras, ports, airports, routes and even the Olympic Park in Rio de Janeiro will be offered to the private sector.

According to the World Bank, Brazil’s economy is forecast to grow 0.3 percent this year and 1.8 percent in 2018. This represents an underperformance according to projected figures for the wider region.