By Marcela Ayres and Bernardo Caram
BRASILIA (Reuters) – Monetary tightening in the United States makes it all the more pressing to speed up the privatization of Brazil’s largest utility, state-run power company Eletrobras, according to a high-ranking Economy Ministry official.
Diogo Mac Cord, special secretary for privatization at the ministry, told Reuters that the Federal Reserve’s stance of taming inflation will reduce global liquidity and force Brazil to offer higher returns to attract investors.
Brazil’s federal audit court (TCU) is expected to give its approval on Wednesday afternoon to the most important privatization planned by President Jair Bolsonaro’s government.
Mac Cord said the Northern Hemisphere summer time could reduce international appetite for Eletrobras shares floated in the privatization, but he highlighted that the Fed’s upcoming rate decisions are the Brazilian government’s main concern.
“The most worrying thing is this rising curve in American interest rates. Every half a percentage point they increase drains a lot of money, squeezes liquidity. So the race against time is because of that,” he said in an interview.
The Fed is likely to raise its policy rate by 50 basis points at its June 15 and July 27 meetings.
The privatization of Eletrobras was planned for May, but was held up by the TCU audit court’s questioning of the potential transaction value.
Mac Cord attended meetings on Tuesday with Economy Minister Paulo Guedes and the new Energy Minister Adolfo Sachsida to discuss the deal, which involves floating shares to dilute the government’s majority stake down to 45% or less.
Eletrobras Chief Executive Rodrigo Limp said the company could be privatized by June.
Mac Cord believes Brazil should also privatize state-run oil company Petrobras while the commodity still has worldwide relevance, though he said his office has not yet received any formal instructions to study such an operation.