The proposals for privatization of Minas Gerai Energy Companys (Cemig) and Minas Gerais Sanitation Company (Copasa) from the government of Romeu Zema (Novo), sent to the Legislative Assembly of Minas Gerais (ALMG) last Thursday (14), bring different models for the future of state-owned companies. Together, the two companies’ projects are worth more than R$15 billion, according to the Minas Gerais Executive.
Protocoled by the then-acting vice-governor, Mateus Simões (Novo), the bills outline how the state intends to transfer the management of companies to the private sector, with the proposal to increase efficiency and competitiveness. At the time, the governor was on an international agenda in Arzebaijan, participating in the United Nations Conference on Climate Change, where the president of Cemig, Reinaldo Passanezi Filho, was among the speakers.
Privatization proposals depend on political articulation to advance through the state Legislature. Although the government has a favorable base, resistance from unions, social movements and part of the opposition is likely to intensify the debate in the coming months.
In October last year, Zema sent ALMG a proposal to amend the State Constitution with the exclusion of the requirement for public consultation for privatization. The proposal is at the Constitution and Justice Commission (CCJ) awaiting an opinion. “For us, holding the referendum is not a problem, but bureaucracy,” said Simões.
Privatization of Cemig goes through a “corporation” model with state veto
The model proposed for the privatization of Cemig is that of a “corporation”. This involves making the company’s shares available to the financial market, resulting in a structure without a defined controller.
However, the government of Minas Gerais would maintain a 17.04% stake in the total shares, along with the so-called “golden share“, a special action that guarantees veto power in strategic decisions. This structure aims to preserve public interest in essential topics, such as energy security and investments in the state.
The proposal comes at a time when Cemig announces significant changes in management. Andrea Marques de Almeida, a former executive at companies such as Vale and Petrobras, will assume the vice-presidency of Finance and Investor Relations in December, in a move interpreted as part of the preparation for the company’s privatization.
Golden share in Cemig’s proposal preserves public interest in items such as energy security and investments in Minas.
Copasa has traditional privatization proposal with promise of tariff reduction
For Copasa, the government of Minas Gerais proposes a more direct model, in which share control would be transferred entirely to the private sector. According to vice-governor Mateus Simões, regulation will continue to be the responsibility of the Water Supply and Sewage Services Regulatory Agency (Arsae-MG), which, according to him, would ensure fair tariffs and quality services.
The government argues that the privatization of Copasa could reduce costs for consumers, since state regulation and monitoring by the Public Ministry and society would guarantee transparency. Furthermore, Simões argues that the efficiency of private management could attract more investments and expand sanitation coverage in the state.
Union warns of loss of work and government responds
The transition worries worker unions in the categories involved. Sindieletro, which represents Cemig workers, warns of potential job losses and increased tariffs. The government, in turn, claims that employees’ labor rights will be preserved and that privatization could open new vacancies, especially in technical areas.
The argument is that the private sector would have more flexibility to contract directly, reducing dependence on outsourcing. “They will not suffer any salary reduction. They continue to have the same collective (work) agreements and conventions respected,” said Simões at a press conference after the bills were delivered to the Legislative Assembly.
One of the government’s main points of defense is that energy and water tariffs will not be directly impacted by privatization, as they continue to be defined by regulatory agencies. In the case of Cemig, it is responsible for supervising operations and setting prices, while in the case of Copasa, Arsae-MG has a similar role.
“In the case of Copasa, the person responsible for regulation is Arsae, a state agency. Even if it is privatized, tariff control remains ours, audited by the Public Ministry and the population, to be monitored so as not to have any charges for services that are not being provided”, said Simões.
The deputy governor also highlighted that privatization promises gains in operational efficiency, with expectations of cost reduction over time. “A more agile and efficient company tends to offer more competitive rates, benefiting the end consumer”, he argued.
