Governance Institutions and Outcomes
New Directions in Modern Economics series
Edited by Mehmet Ugur and David Sunderland
Chapter 10: Electricity Sector Reforms and the Tariff Review Process in Brazil
Cláudio de Araújo Wanderley, John Cullen and Mathew Tsamenyi INTRODUCTION Many countries have deregulated so-called public services utilities, causing changes in the institutional environment of this sector. The main justification for such reforms has been the policy makers’ claim that privatised organisations would be more efficient and effective in their operations and services within a competitive environment (Boubakri and Cosset, 1998; Jaruga and Ho, 2002; Johnson et al., 2000; Ogden, 1995 1997; Jacobs, 2009; Tsamenyi et al., 2010). This chapter examines such reforms in the context of the Brazilian electricity sector by focusing on the development of the tariff review process and the effects of the latter on electricity sector outcomes such as investment and prices. Electricity sector reforms in Brazil started with the privatisation programme between 1995 and 2002, which created about US$100 billion of revenue for the government (BNDES, 2002). Privatisation was a consequence of political decisions made by the Brazilian government, but these decision were taken under internal pressure for privatisation as well as external pressure from the World Bank and the IMF (International Monetary Fund), who played a significant role in the process of the utility sector’s deregulation in Brazil (Amann and Baer, 2005). In the electricity sector, 23 distribution companies were privatised for roughly US$22 billion (Araujo, 2006). This represents about 70 per cent of the Brazilian energy distribution market. The impact of privatisation on public services utilities has attracted the attention of a number of scholars (for instance, Thomas, 2006;...
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