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Political Economy of the Brazilian Power Industry Reform, The
Working Paper

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Program on Energy and Sustainable Development Working Paper #2, page(s): 42

December 2003

After a long period of rapid growth the Brazilian power industry entered a period of stagnation and crisis in the 1980s. Ever since the 1930s a series of tariff rules and nationalizations had squeezed private investors from the market. In their place, state enterprises had assumed the function of distributing electricity in Brazil's 26 states; Eletrobras, owned by the central government, managed the transmission system and also generated much of the electricity in Brazil. Through its control over state funds for building power plants, Eletrobras pursued vast projects such as the Itaipu hydroelectric plant and assured low electricity prices as part of the government's policy of import substitution. In the shock of the two oil crises and the Latin American debt crisis this system unraveled. Financing costs escalated yet tariffs were kept low; losses mounted.

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