The facade of Brazil's state-run oil company Petrobras headquarters in Rio de Janeiro. The Brazilian Chamber of Deputies votes a bill that would authorize the privatization of Eletrobras Monday.-AFP

RIO DE JANEIRO: Brazil's Congress passed a bill paving the way to privatize the biggest electric utility in Latin America, state-controlled company Eletrobras, a victory for far-right President Jair Bolsonaro's privatization agenda. The bill, which sets up a share issue that will dilute the government's stake in the company, passed the lower house by a vote of 258 to 136. Lawmakers must still vote on a series of amendments before sending it to Bolsonaro.

It had already passed in the Senate Thursday. The legislation will reduce the government's stake in Eletrobras from 51.82 to 45 percent, via a share issue penciled in for early next year that the state estimates will raise 60 billion reais (around $12 billion). Of that amount, 25 billion reais would go to the company's coffers and the rest to government programs, experts estimate. The government will retain a "golden share" in the company, giving it the final say on strategic matters.

Created in 1962, Eletrobras is one of Brazil's "big four" state-controlled firms, along with oil company Petrobras and banks Banco do Brasil and Caixa Economica Federal. It supplies around one-third of the electricity consumed in Brazil, Latin America's biggest economy. But critics complain it is inefficient, bloated and needs more cash to invest in modernizing its assets. "Without privatization, Brazil's energy system is going to end up in chaos," Bolsonaro had warned.

His ultra-liberal economy minister, Paulo Guedes, has said the privatization will save Brazilians up to 7.4 percent on electricity. However, during a sometimes fiery debate in the lower house, opponents warned the plan would in fact increase consumers' electricity bills and threaten Brazil's control over its energy supply.

Opponents have also criticized amendments that would increase the amount of electricity produced by heavily polluting thermoelectric plants. It is a sensitive subject for a government already facing international criticism over the destruction of the Amazon rainforest, a vital resource in the race to curb climate change.

Shares jump

Eletrobras shares surged more than five percent Friday after the Senate passed the bill, and gained another 2.21 percent Monday. They have risen more than 40 percent on the year on expectations the company would be going private. Before that happens, Eletrobras must first transfer ownership of the Itaipu hydroelectric dam and Angra dos Reis nuclear power plants to the state, since Brazil's constitution designates them as strategic assets.

The privatization comes just as Brazil faces an electricity crisis caused by the worst drought in almost a century in the central-west and southeast, key regions for the hydroelectric dams that supply the majority of the country's electricity. The drought has led the National Water and Sanitation Agency (ANA) to declare a "critical shortage of water resources," effective until November, for the Parana river basin, the heart of Brazil's hydroelectric capacity.

The national electricity regulator has imposed an additional tax of 6.24 reais ($1.25) per 100 kilowatt hours on consumers for June because of the electricity crunch-its highest extraordinary surcharge ever. Rising electricity prices are fueling a surge in inflation, which came in at 8.1 percent last month, well above the central bank's target range of 2.25 to 5.25 percent. Brazilians are fearing a return to painful electricity rationing instituted in 2001.

The legislation is a win for Bolsonaro, who has struggled to implement the privatization plans he campaigned on in 2018. Politics and the pandemic have delayed the mass spinoff of state firms he and Guedes had promised. But those plans have started to pick up again, with lucrative concessions in recent months for the operating rights to Rio de Janeiro water company Cedae and a raft of airports, port terminals and a key railroad. - AFP