SAO PAULO (Reuters) - Brazil’s government is analyzing the legal and financial implications of relinquishing veto rights on certain strategic decisions in a few companies, the latest step by President Michel Temer to diminish the state’s role in the economy.
The Finance Ministry said in a Wednesday statement that it asked the state auditing court to analyze whether the government can or must exit the so-called golden share during upcoming privatizations. The court known as TCU began to analyze the request this week, a person with knowledge of the matter said.
Valor Econômico newspaper, without citing how it obtained the information, said earlier in the day that Finance Minister Henrique Meirelles reckons the existence of a golden share has depressed the values of companies and government stakes alike.
The press office of the auditing court did not immediately comment.
Shares of former state monopolies and companies partially controlled by the government rose on the news, accounting for almost one-third of Wednesday's gains in the benchmark Bovespa stock index .BVSP. The index rose for a fourth straight day in mid=-morning trading on Wednesday, adding 1 percent.
The golden share allows the government to veto some strategic decisions, such as a change of control or domicile of a Brazilian company. According to Valor, the perception among government officials is that investors tend to trade shares in companies with a golden share at prices below fair value.
Relinquishing the right to exercise the veto power of a golden share would also reduce the ability of politicians to meddle in companies that for decades provided cronies with lucrative jobs, lawyers and bankers have said.
The government still has the veto right in planemaker Embraer SA (EMBR3.SA) (ERJ.N), which it fully privatized in 2006. This also applies to Vale SA (VALE3.SA), the world’s largest iron ore producer which is in the process of becoming a company with dispersed share ownership, and IRB Brasil Resseguros SA (IRBR3.SA), the former reinsurance monopoly that was recently listed.
Temer is seeking to sell control of the country’s biggest power utility, Centrais Elétricas Brasileiras SA (ELET6.SA), in coming months. When the government announced the plan on Aug. 21, it said it would retain a golden share that could veto some strategic decisions at Eletrobras, such as a change of control.
Common shares of Vale (VALE3.SA) added 0.7 percent to 35.84 reais, while those of Banco do Brasil SA (BBAS3.SA) gained 0.8 percent. Common shares of oil company Petróleo Brasileiro SA (PETR3.SA), Brazil’s largest state firm, added 2.1 percent to 15.16 reais.
Embraer added 3.3 percent to 18.27 reais, the highest since March. Common shares of Eletrobras (ELET3.SA) rose 1.3 percent to 21.90 reais, extending gains to 22 percent over the past month.
Additional reporting by Bruno Federowski in São Paulo; Editing by Chizu Nomiyama and Bill Trott