Brazil names new energy minister

By an OGJ correspondent

RIO DE JANEIRO, Dec.23 -- Brazil's President-elect Luiz Inácio Lula da Silva on Friday named Dilma Rousseff, a former energy secretary of southern Rio Grande do Sul state and a member of his Workers' Party (PT), as the new mines and energy minister.

Lula and his cabinet will be sworn in Jan.1. Rousseff, an economist, said she is against privatizing state-owned electricity companies.

She was praised by electric power executives for investments she directed in Rio Grande do Sul state, which avoided a blackout during government rationing of electricity in 2001.

"She has a deep knowledge of the sector and acts as an executive," said Wilson Ferreira Jr. president of Companhia Paulista de Forca e Luz (CPFL), a power distributing company in São Paulo, who previously worked with her in in Rio Grande do Sul state.

"We feel the choice of Rousseff as minister was correct, and we are optimistic," said Flavio Neiva, president of the Brazilian association of large electric power generators (Abrage).

However, Wagner Freire, former exploration and production director of Petroleo Brasileiro SA (Petrobras), and now CEO and president of the independent Starfish Oil & Gas SA, said, "As usual, when one picks someone from the electricity sector, the chances are that (she) knows little about the oil sector."

Brazil's congress in 1997 passed legislation that ended Petrobras' energy monopoly and brought 43 international oil companies into Brazil. Petrobras continues as a state-owned company; the government has 33% of equity bonds but controls a majority of votes on the board of directors.

"Formally, whoever represents the government as the controller shareholder normally is someone appointed by the finance minister. But as far as the day-to-day business, it is the minister of mines and energy that takes care of Petrobras," said Freire.

Rousseff said she would consider the federal tax on fuel as a cushion against fluctuations in the price of international crude.

But if that practice is generalized, the whole effort to open up the market will be lost, said other officials. The more sensitive item is liquid petroleum gas (LPG), whose abnormal consumption in Brazil is the result of subsidies during the 44 years of Petrobras' monopoly, Freire said.

He said he doubts Lula will establish price controls over oil products. "The new minister has to follow the law and theoretically cannot interfere in the deregulation process. But a provisional measure can be issued (subject to congressional approval)," Freire said. That "is highly unlikely to happen, particularly because the PT does not have a majority in Congress."

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