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No to privatization of eletrobras

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Brazil needs many investments in the expansion of the electric system. Everything indicates that the privatization of Eletrobras will mean the delivery of the Brazilian electric sector to foreign capital. Once privatized and denationalized, it is quite possible that the labor and equipment destined for Eletrobras are imported from foreign countries to operate the system. This process will certainly result in the scrapping of the Brazilian electrical equipment industry, in addition to the precariousness of working conditions and the rise in long-term unemployment rates. No to privatization of Eletrobras.

Publicada em: Notícias e política
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No to privatization of eletrobras

  1. 1. 1 NO TO PRIVATIZATION OF ELETROBRAS Fernando Alcoforado * For many years, notably those prior to the 1990s, Brazil has experienced what can be called the state monopoly of the electric sector. That is, it was the responsibility of the state-owned companies with virtually the exclusive production, transmission and distribution of electricity. However, from the beginning of the 1990s, there was a substantial transformation with the privatization policy of the electricity sector. This privatization process began during the Fernando Collor administration with the adoption of the neoliberal economic model, but extended by the subsequent governments of Itamar Franco and Fernando Henrique Cardoso. This process took place through the guidelines drawn up by the National Privatization Plan (PND), which aimed to transfer the management of activities to the private sector based on the premise that the public sector did not act efficiently. Almost 20 years have passed since the beginning of privatizations of electricity distributors, the balance of what has been promised and what is really happening in the country, shows the existence of many failures in electricity supply in several regions of Brazil. Since then, the distribution of electricity has been operated by the private sector. The distributors manage the concession areas with the obligation to maintain, expand and provide adequate infrastructure, and its revenue comes from the collection of tariffs from its customers. The promises that the private sector would bring improvements in the quality of services and the adoption of affordable tariffs for all citizens were misleading promises. The practice has not demonstrated that the management of the electricity sector by private companies is superior to that of public companies. Since 2006, the majority of companies in the sector have shown a declining trend in service quality indicators due to their deterioration, reflecting negatively on the consumer. The Michel Temer government announced a few months ago, in a decision that surprised the market, the privatization of Eletrobras, a giant formed by hundreds of companies that operate in all three phases of the electric power industry (production, transmission and distribution of electricity). There are 233 power generation plants, including Furnas - which operates 12 hydroelectric and two thermoelectric plants - and the S�o Francisco Hydroelectric Company (Chesf), in addition to six distributors, all in the North and Northeast, and 61 thousand kilometers of transmission lines, half of the total of the country and enough to give a return and a half on the planet. The Angra nuclear power plants will also be excluded from the privatization, since the Constitution provides that only the state is its controller, and Itaipu, which also belongs to Paraguay. The privatization plan of the government is to reduce this participation by issuing new shares. Today, the federal government holds 60% of Eletrobras' shares. The Union owns 41% and the National Bank for Economic and Social Development (BNDES), along with its participation arm, BNDESPar, of another 19%. With a greater volume of shares, the public sector slice would be diluted and the company capitalized. According to the government, the privatization model would try to keep control of the company from being in the hands of only one group, but this is a risk that can not yet be ruled out. Having 30% of the country's potential for generating electricity, such as Eletrobras, in a
  2. 2. 2 few hands could cause the controlling group to become a price maker, that is, with capacity to determine energy prices. The energy bill will become more expensive with the privatization of Eletrobras. The National Electric Energy Agency (Aneel) estimates that there may be up to 16.7% increase in energy bills. The main reason is the planned change to the regime of commercialization of the energy produced by the Eletrobras plants, the so-called "descotiza��o". The "descotiza��o", discussed before the privatization, through a consultation that the Ministry of Mines and Energy launched in July to discuss changes in the regulatory framework of the sector, provides for the payment of a bonus to the Union - the R $ 20 billion that the government hopes to raise with the privatization and that would be paid with the issuance of shares of the company. It should be noted that in the last 60 years Eletrobras invested approximately R$ 400 billion in the construction of power plants, transmission lines and substations. Not counting the amount of 40 billion, already ratified, referring to the compensation for the Basic Network of Existing Systems (RBSE) that the group will receive until 2025. However, it was announced that the government will "raise" around R$ 20 billion with privatization, which is a substantial amount lower than the R$ 400 billion already invested. In addition to intending to sell Eletrobras for a price that is extremely below the real value, contrary to what the Temer government says, Eletrobras is a company that contributes positively to the primary result of the government. In the last 10 years, including in this calculation the rare years of loss, Eletrobras paid directly and indirectly, approximately R$ 13 billion. That is, in the aggregate, Eletrobras contributed positively to the primary result of the federal government, having, at various times, paid much more than the 25% of minimum dividends determined by Law. These data are sufficient to demonstrate that, in the medium and long term, the privatization of Eletrobras is very bad for Brazil, in addition to being a crime against the motherland. One of the arguments of the government is that the sale of Eletrobras would serve to reduce the primary deficit. The value of the sale shows little relevance near the forecast of nominal and primary deficit of 450 billion and 157 billion reais, respectively. The Temer government, therefore, works to sell the state-owned company for a price much lower than its real value and the resources obtained will not reduce the primary deficit. The Michel Temer government insists on the privatization that, if implemented, will promote the delivery of strategic public equity at a banana price, paralyze investments in the electricity sector, increase electricity prices, and increase the risk of electricity rationing. It is important to note that the Eletrobras System is the largest business conglomerate of clean energy in Latin America, composed of 16 companies in the segments of generation, transmission and distribution of electricity. Eletrobras has 47 hydroelectric plants, that is, 47 dams whose management is a matter of national security, without ever having had an accident. Eletrobras is responsible for 30% of the generation, 50% of the transmission and 50% of the storable energy (water management and reservoirs) in Brazil. This percentage is huge compared to other companies. It is clear that control of such a package by a private company can cause a strong market imbalance, with a great risk of operational manipulation and of the price of energy. It should be emphasized that Eletrobras has been the main player in the expansion of the Brazilian electricity system, promoting the development of all regions of the country.
  3. 3. 3 Contrary to the assertion that Eletrobras is inefficient, its subsidiaries have presented the best operating indicators in the market with a high level of availability of transmission and generation that guarantee the supply of electricity with quality. In cases of weather disasters, with the occurrence of transmission tower outages, Eletrobras has contingency plans that reconstruct the lines in record time, which is not financially attractive to the company, but is very important for the national interconnected system. What is the probability that this position will be kept in the hands of a private company that will control Eletrobras? In addition, the company sells subsidized energy to the consumer, which favors the low tariff. Will this situation also persist with Eletrobras in the hands of private capital? The answer is no. Brazil needs many investments in the expansion of the electric system. In recent years, the growth in electricity supply was on average 2% higher than GDP growth. Everything indicates that the privatization of Eletrobras will mean the delivery of the Brazilian electric sector to foreign capital. Once privatized and denationalized, it is quite possible that the labor and equipment destined for Eletrobras are imported from foreign countries to operate the system. This process will certainly result in the scrapping of the Brazilian electrical equipment industry, in addition to the precariousness of working conditions and the rise in long-term unemployment rates. No to privatization of Eletrobras. * Fernando Alcoforado, 78, holder of the CONFEA / CREA System Medal of Merit, member of the Bahia Academy of Education, engineer and doctor in Territorial Planning and Regional Development by the University of Barcelona, university professor and consultant in the areas of strategic planning, business planning, regional planning and planning of energy systems, is the author of 14 books addressing issues such as Globalization and Development, Brazilian Economy, Global Warming and Climate Change, The Factors that Condition Economic and Social Development, Energy in the world and The Great Scientific, Economic, and Social Revolutions that Changed the World.

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