Itaipu is the perfect example to expose state inefficiency

A study carried out by the National Energy Consumers Front exposes state inefficiency with cold numbers, taking the binational Itaipu plant as an example. The first point that draws attention is the tariff charged by the generator: R$294 per megawatt hour. When taking into account eight other large hydroelectric plants, which have already amortized their investments and have economies of scale, the average value is R$ 101.78/MWh. Therefore, we are talking about a tariff almost three times higher than that of other generators of similar size. There is an uncomfortable detail in this discrepancy: this price, paid by the distributors, will weigh heavily on the pockets of those who pay the electricity bill every month.

When the tariff charged by Itaipu is compared to plants like Furnas and Itaparica, the difference becomes even more frightening. In Furnas, for example, a megawatt/hour costs R$65, a value four and a half times higher than that charged by the binacional.

What explains this disparity?

Itaipu has a kind of license to spend, since its statute exempts it from being under the auspices of the State-Owned Companies Law. It is a public company, formed by two governments – but legally, the Federal Supreme Court understood that the company is an “international body governed by private law”. This means that the directors of the hydroelectric plant only have to answer to the shareholders. In this case, the occupants of the Planalto and De Los López palaces.

The Federal Court of Auditors attempted to inspect Itaipu’s expenses, but the STF understood that the binational nature of the company would prevent a Brazilian supervisory body from having the primacy to audit the energy generator’s balance sheet.

In practice, this means that the company does what it wants and wants, which allows any political maneuver in the administration. It is no surprise, therefore, that practically all governments used the company’s advice to supplement the salaries of their ministers or other members of the federal management. Currently, ministers Fernando Haddad, Rui Costa and Esther Dweck are adding R$27,000 a month to their monthly income.

Itaipu is the hydroelectric plant with the most people on its staff: 2,845 vacancies filled. This is also explained by the fact that some functions, such as management, are duplicated between Brazilians and Paraguayans. But let’s compare this structure with that of the Furnas system, which has 2,000 employees. Incorporated into the privatized Eletrobras system, the hydroelectric plant is expected to cut 1,000 jobs.

Another point in the study stands out: in the company’s balance sheet, the item “others” in the “operating expenses” category accounts for R$2.1 billion. A large part of this amount was allocated to socio-environmental projects on both sides of the border. This is a noble intention, without a doubt. But it is estimated that Itaipu has allocated around R$800 million to projects in the states of Paraná and Mato Grosso do Sul alone. If it were a private company, would such resources be allocated for this purpose? Maybe not. Nothing against helping nature preservation. But the problem is that this initiative boosts electricity bills across the country.

The coexistence of the counselors who come from the Esplanada dos Ministérios with the Paraguayans could do Brazil a lot of good. Our neighbors have a very simple tax system called 10-10-10. This is a ten percent income tax rate for individuals and legal entities. The third item, also 10%, refers to value added tax (VAT).

With this policy, Paraguay has prospered like never before in recent years. Between 1999 and 2022, poverty in the country fell from 45% to 25% (and the extreme poverty rate plummeted from 11.5% to 5.6%). GDP, already discounted for inflation, has doubled in real terms since 2000, almost twice as high as the Latin American average in the same period.

Given these results, is there still any doubt about the beneficial effects of a State that charges less taxes?

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