On 7 February Brazil’s President Luiz Inácio Lula da Silva characterised last year’s privatisation of Eletrobras, the state-owned electricity company, as a case of “banditry”, as well as being “irrational” and “Machiavellian”.
Analysis:
Lula, speaking at a breakfast offered to left-wing and independent media outlets, focused on the terms of the privatisation, which was completed last year during the tail-end of the right-wing administration of Jair Bolsonaro (2019-2023). The current president, who heads a centre-left government, highlighted that his administration has been left with a 40% shareholding in the company, but under the terms of the contract is restricted to only 10% representation at board level. In addition, he highlighted that since privatisation, salaries paid to directors have been increased by a factor of six, asking rhetorically “this is privatising for what?”
- After various legal battles in congress, the Eletrobras privatisation was completed in June last year for a total value of US$6.9bn, making it one of the largest such divestments worldwide during 2022. As part of the transaction, the government’s shareholding in the company was reduced from 72% down to 45%. It also contained a ‘poison pill’ defence to discourage future governments from attempting to buy back control.
- Lula said he had asked the federal solicitor general’s office (AGU) to look into “leonine” clauses in the privatisation package, adding: “What I can say is that it was an erratic process. It was a leonine process against the interests of the Brazilian people. It was a privatisation against the country.”
- The president’s comments on the Eletrobras privatisation come during a week in which he has been criticising high interest rates set by the country’s autonomous central bank, and suggesting the administration might consider replacing its president, Roberto Campos Neto, a Bolsonaro appointee. Any such move would require senate approval, believed unlikely because the government coalition is in a minority in the upper house.
Looking Ahead: Financial markets are worried over government interventionism, and have been nervous: on 7 February the Ibovespa stock exchange index fell by 0.8% and the real depreciated against the US dollar.
