Brazil eyes privatization of Eletrobras

Rio de Janeiro (AFP) –


Brazil's government is eying the privatization of giant power utility Eletrobras in a bid to balance a yawning budget deficit, the energy ministry said.

"This measure will add competitiveness and efficiency to the businesses in the management of its operations, without the stumbling blocks facing public companies," the ministry said in a statement issued late Monday.

The government, which is struggling to pay the bills after two years of deep recession, hopes to raise 20 billion reais ($6.3 billion) in the partial sell-off of the country's biggest power utility. The government would retain a golden share to exercise veto power.

Currently the government holds 40.98 percent of Eletrobras' capital, while state development bank BNDES holds another 18.72 percent.

Common share prices rocketed on the announcement Tuesday, rising more than 40 percent at around midday, and preferred shares rose 26.25 percent. The surge helped push the Sao Paulo market's Ibovespa index above the 70,000 barrier.

Last week, the government conceded that it would not meet its budget targets and raised the expected budget deficit ceiling to $50 billion in 2017, up from $44 billion.

Eletrobras has been damaged by the gigantic corruption network uncovered at a host of Brazil's biggest companies. However, scandal-plagued President Michel Temer is pushing through market reforms that he hopes will loosen up Brazil's notoriously inefficient economy and restore growth.

The energy ministry said the troubled company's debts were draining funds that could "be used for security, education and health."

The government is modelling its plans on previous privatizations of aerospace company Embraer in 1994 and mining giant Vale in 1997.