The fiction of the electricity market

Whatsapp
Facebook
Twitter
Instagram
Telegram

By LUIZ CARLOS BRESSER-PEREIRA*

The price of energy is an obstacle to the growth of the Brazilian economy that has been almost stagnant for so long.

Although Brazil is able to produce energy very cheaply, energy is very expensive in Brazil. The outstanding journalist Economic value, Cristiano Romero, showed the same concern.

His last column in that newspaper, on February 24, has a suggestive title, "Light for the hour of death". In this article he shows with a lot of information how expensive the price of energy is in Brazil. And how this price is an obstacle to the growth of the Brazilian economy that has been almost stagnant for so long.

Why does it happen? I don't have a safe answer for it, but I believe that privatizations are one of its causes, probably the biggest one. I am very critical of the privatizations that are being carried out in the country.

More broadly, I criticize the privatization of sectors that are characterized by being natural monopolies or quasi-monopolies. I am critical because in these sectors the market, whose logic is that of competition, is not present.

The market is an irreplaceable institution in the competitive sectors of the economy. Through prices, the market, in addition to efficiently allocating production factors, avoids the abusive profits that characterize monopolies.

In the case of electricity, there is no market. There is a market fiction that does not serve the interests of the country, but the interests of the many economic agents that are involved in privatizations. In other words, I am critical of privatizations because I believe in the market.

Cristiano Romero points out that the price of energy paid by Brazilian industrial companies is much higher than in other countries, and cites an expert, Pedro Perosa, president of the Association of Large Industrial Energy Consumers and Free Consumers.

For this specialist in the field, energy is expensive “because you pay for a lot of things that shouldn't be on the bill. Charges comply with public policy and, unlike taxes, are not compensated”. Because, in other words, market regulation creates privileges.

The CDE (Energy Development Account) is part of this regulation, a sectoral fund whose objective, according to ANEEL, is to pay for various public policies. Thus, “cross-subsidy systems create incentives for opportunistic practices” – which cost the State and consumers a lot. Who pays are the energy consumers.

Is this because regulation is poorly done? No, this is because it is impossible to regulate the sector so that it “looks like a market”. Therefore, when privatizations happen, prices rise abusively.

For this reason, it is much more logical to assign responsibility for sectors such as energy to state-owned companies. There are also distortions within the State, but they are smaller. When prices are too high, they are earned by society, not profiteers.

* Luiz Carlos Bresser-Pereira He is Professor Emeritus at the Getúlio Vargas Foundation (FGV-SP). Author, among other books, of In search of lost development: a new-developmentalist project for Brazil (FGV).

See this link for all articles

10 MOST READ IN THE LAST 7 DAYS

______________

AUTHORS

TOPICS

NEW PUBLICATIONS