Who pays the bill for privatization?

The most important event of the week, undeniably, was the announcement of the privatization of the Eletrobrás system, responsible for more than 40% of the national energy generation. In a single day, the company's shares rose 50%, creating the false perception that what is good for the financial market can also be good for the country. According to the official discourse, free from state constraints, the company would be more efficient, and these productivity gains would explain the abrupt increase in the company's value.

Nothing could be further from the truth. While it's always possible to improve the management of any company, whether public or private, Eletrobrás's surge essentially reflects a single reality: the prospect that the future owners of the company's power plants will be able to charge more for the energy sold to industries and residential consumers.

Since many of Eletrobrás' power plants have already been amortized, and their construction costs were paid for by Brazilian society, their energy is sold below the prices of the free market. With the announcement of the intention to sell them, Minister Fernando Coelho Filho also stated that the plants would leave the quota system and negotiate energy on the free market. At the same time, he promised lower tariffs – which is a contradiction, since the megawatt/hour costs R$ 61 under the quota system and R$ 170/hour on the free market. A difference of no less than 178%.

Clearly, the government's sole objective with this announcement was fiscal in nature. Since the Temer administration was unable to meet an already quite generous fiscal deficit target, which jumped from R$ 139 billion to R$ 159 billion, the rush is now to sell off the crown jewels. And there is no concern whatsoever for the country's competitiveness. On Thursday, for example, the National Electric Energy Agency (Aneel) contradicted the official discourse and announced that tariffs would rise by at least 10% under the proposed privatization model.

The increase in tariffs is not the only side effect of a privatization announced in haste. In the Brazilian electricity system, most generation is hydroelectric and involves environmental resources such as the main national rivers. Transferring such assets to the private sector – and even to international groups – would mean relinquishing basic principles of sovereignty.

This word, however, has lost all value in this new Brazil inaugurated on May 12, 2016, with Temer's rise to power. American troops were invited to conduct military exercises in the Amazon, agricultural lands will be sold to foreigners, pre-salt oil fields have already been ceded to multinationals, and one of the largest indigenous and environmental reserves on the planet, the size of Denmark, will be opened to mining companies. In this context, giving up energy security is an absolutely coherent, albeit stupid, move.