This content is from: Local Insights

Brazil

Privatization of the electricity sector is resumed

After almost one year of recess the privatization of Brazilian electricity companies has been successfully resumed with the beginning of the privatization of the Energy Company of the State of São Paulo — CESP, which plays a significant role in the Brazilian electricity market.

In order to simplify the privatization process, CESP was recently divided into three smaller companies, each being sold separately.

On July 28 the Paranapanema Electric Company of CESP had its control sold to the US distribution company, Duke Energy, for R$1.239 million ($690 million), at a premium of 90% over the minimum stipulated auction price.

Tiete Energy, another company division of CESP, is to be sold in October. CESP's Parana Electric Company still does not have a date set for its privatization as it is considered to be a more complex enterprise, representing approximately 16% of the total Brazilian electricity market.

Foreign banks in Brazil

In accordance with recently published records of the Central Bank of Brazil, during the period from August 1995 to December last year, 63 foreign financial institutions were granted authorizations to acquire the control or a participation in domestic institutions. The participation of the foreign capital in the net assets of the domestic market grew from 7.8% in 1993 to 15.5% at the end of last year. CCF and Santander are two of the international institutions which have established a fully operational presence after an initial period of careful consideration with local representatives. In December 1998, there were 183 representatives of foreign institutions registered with the central bank.

International funds borrowed by domestic banks

The National Monetary Council Resolution 2625 of July 29 1999 allows domestic banks to freely invest, in the domestic market, funds borrowed abroad provided that they are the proceeds of public issue of securities; or there is a contractual commitment for the funds to be kept in the country for at least five years.

Eliana Maria Filippozzi

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