The privatist rage of Folha de S. Paulo – II

Image: Regina Silveira
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By CESAR LOCATELLI

Average electricity tariffs for residential consumers have risen 75% above inflation since privatization began, this should be the heart of the discussion

A huge photo of the illuminated favela Paraisópolis is stamped on the cover of the print edition of Folha de S. Paul this Sunday, 4/9. The intention is to show the benefits of privatization: the supply of light in the region was precarious until privatization of the service, says the fine line.

Right at the beginning, but there on page 24, the festive joy of the newspaper's cover is forced to face reality: the last bill of a resident of Paraisópolis was 380 reais. Helena Santos tells the newspaper: “Today I feel much more comfortable (…) But I couldn’t pay the electricity for almost a year, I got it right a little while ago, and no one can explain it, because I already went to Enel to ask, why electricity is so expensive” .

Well hidden, in the lower right corner of page 25, is the graphic that should have been stamped on the first page. The real increase, that is, the increase above inflation, in the average tariff for residences was 75%. The tariff in nominal values, disregarding inflation, went from 76,3 reais per megawatt-hour to 643,1 reais.

In short, the main promise was not fulfilled. It was not and will not be with the privatization of Eletrobras. Several electricity specialists point out that tariffs will rise due to the transfer of control of the company to the private sector.

“The increase in the energy tariff is in the DNA of the approved proposal. It removes from the consumer the benefit currently enjoyed by the cheaper generation of amortized hydroelectric plants. It allows Eletrobras to sell this energy for a value that can reach up to three times the value currently paid by the consumer”, say specialists Maurício Tolmasquim, former president of the Energy Research Company, and Nelson Hubner, former director of the National Energy Agency Electric.

In addition to hearing Helena Santos, Folha heard Elena Landau, who was the director of the National Privatization Program of the government of Fernando Henrique Cardoso, who today supports the candidacy of Simone Tebet: “Does the model that is there generate the competition we would like? Is it possible to reduce the tariff? Are we giving subsidy to those who need it? What is the main objective of the Brazilian energy transition? These substantive discussions did not accompany privatization and are being pushed with their bellies.”

Elena Landau, however, seems not to have asked these same questions during her management of the privatization program. Aloysio Biondi quotes Elena Landau in his book (excerpt reproduced below), Privatized Brazil: An assessment of the dismantling of the StateOf 1999.

“On a Friday, five days before the auction for the 'privatization' of Cemig, an energy company in Minas Gerais, President Fernando Henrique Cardoso signed a revolutionary decree. Through it, the BNDES was 'authorised' to – read 'received orders to' – also grant loans to foreign groups. Historic turnaround – and inconceivable. Created to support national development, the state bank was initially focused on financing infrastructure projects and, later, as an instrument of industrial policy, it was tasked with creating competitive conditions for national groups. To fulfill this role, the BNDES was prohibited by law from financing foreign companies. The presidential decree of May 24, 1997 opened the BNDES coffers to multinationals, so that they could buy state-owned companies. This at the same time that the bank was still prohibited from granting loans precisely to Brazilian state-owned companies, in charge of the infrastructure and basic sectors. The following Wednesday, an American group bought a block of one third of Cemig's shares for 2 billion reais, with half of that amount financed by the BNDES. So it is".

“The submission of the Brazilian government to the interests of other countries culminated in this 'breaking in' of the BNDES by the multinationals. But this submission was present in the privatization process for a long time – always with immense damage to the country's interests.

Examples: (1) Electric energy – on the eve of the Light auction, the Brazilian government gave in to a series of pressures from potential 'buyers'. It fell to Elena Landau, privatization director of the 'BNDES, and later director of a foreign bank, to announce them in the usual complicated language, to prevent public opinion from becoming aware of the seriousness of the decisions.

(a) Tariffs – while saying that tariffs would be reduced to benefit the consumer, the government had already agreed to readjust them every year, according to the inflation measured by the IGP – DI (that is, the government granted automatic readjustments, indexed). Expected term for this indexing to last: five years. Deadline announced by Elena Landau: eight years. Three more years of automatic readjustment.

(b) Technology – Buyers were given 'freedom' to adopt whatever technology they saw fit. In plain English, what did that really mean? Technology is synonymous with equipment. So, what the government gave was freedom for Light and other future 'buyers' to adopt technology from their headquarters, supplied, of course, by the factories in their countries of origin. This concession brought the predictable consequence: the “privatized” companies began to massively import equipment, parts, components. They 'broke' the national industry. And they 'roasted' dollars, contributing to the future crisis of the real.

(c) Indebtedness – another 'freedom' granted to buyers: freely deciding the means of financing their future investments, that is, the requirement that multinationals bring their own capital to invest in the country disappeared. They were able to resort to loans on the world market, increasing indebtedness and interest payments by Brazil. Another factor in the collapse of the real.

(d) Bigfoot – finally, Mrs. Elena Landau was tasked with also informing that the government had abandoned the model it had always publicized for the privatization of energy companies. Until then, it was assured – even to the National Congress – that the government would actively participate in the management of privatized companies. The turnaround: the government gave up being a co-manager, to concentrate on the role of supervisor of the sector. Total autonomy for multinationals to act in accordance with their interests. And your countries.

(e) Who rules the country – with the privatizations, the government could even extinguish the Ministry of Energy, as it lost any function. Like this? Also unbelievably, the entire energy policy in Brazil came to be decided by a kind of 'condominium', as the government says, formed by the now privatized energy companies, or “operators”… Your name? National System Operator – ONS . A 'condominium' which, contrary to what Brazilians think, was not only responsible for the energy transmission system, and which public opinion became aware of because of the 'blackout' of March 1999. Its powers are total : the “condominium” of operators replaced the government and started to decide where, when and how plants should be built, which are priority regions, etc. The problem of tariffs and quality of services was left to the government's Electric Energy Agency. The rest, with ONS , from the operators. For which Ministry? The government no longer commands anything. He doesn’t even rule anymore.” (p. 57 to 59).

*Cesar Locatelli holds a master's degree in economics from PUC-SP.

To access the first article in the series click on https://aterraeredonda.com.br/a-sanha-privatista-da-folha-de-s-paulo/

 

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