Investors, opposition politicians agree that privatization is not attractive.(state-owned industry in Brazil)(Brief Article)

SAO PAULO -- Since the overwhelming success of the privatization of state-owned bank Banespa last year, investor interest in state companies as well as new public service concessions has been soft. This coincides with growing opposition by opposition parties to new privatizations in the electricity sector.

This decline in interest comes at a time when Brazil needs foreign capital more than ever as a result of a slowing economy, long-term electricity shortage, devaluing currency and the sagging economy in neighboring Argentina.

The most recent privatization failure was a tender for B and C-Band mobile phone licenses, scheduled to be auctioned Aug. 21' The tender was cancelled due to a lack of interest by investors. This was regulatory agency Anatel's third attempt to award the concessions, and after sweetening the deal twice, it seems unlikely that a fourth attempt will be made. Instead, the frequencies will be sold as part of a new effort to award bands for third-generation communication services, which should be auctioned next year.

Copel survives vote to stop sale

Parana state barely avoided a fatal blow to plans to scrap the privatization of state power distributor Companhia Paranaense de Energia (Copel). The state assembly debated for 20 hours before it decided by just a single vote to allow the sale to go forward.

The debate over privatization in the electricity sector has intensified across the nation. All of the major opposition parties now strongly oppose any privatizations in the power sector and even former Telecommunications Minister, Luis Carlos Mendonca de Barros, who headed the privatization of phone company Telebras, is against privatizations in the electricity industry. Despite the success of southern power generator Gerasul and other privatized power firms since their sales, it seems very unlikely that the Cardoso administration will be able to move ahead with any privatization in the electricity industry before next year's elections.

Lack of investment in the energy sector, coupled with severe drought, has forced Brazil to cut energy consumption by 20%. So far, conservation programs have keep the country from experiencing rolling blackouts, but that remains a possibility. In northeastern Brazil, for example, the population has not met government mandated conservation goals and blackouts are likely if consumption is not further reduced.

In such an uncertain climate, political support for privatization appears to have evaporated.

Print Get the Mag Weekly Updates