Brazil's power market hews closely to the state capitalism model that defines much of the country's economy.
Prior to the 1990s, the sector was largely state owned and managed, with most of its infrastructure in the hands of federal power company Eletrobras and state utilities. But by the beginning of the decade, the industry was on the verge of collapse, as subsidy distortions and massive budget shortfalls hindered the development of new generation capacity.
Two sets of reforms in the 1990s and 2000s unbundled the market and opened it to outside competition, particularly in the distribution segment. The reforms also introduced the federal capacity auction system, a key policy tool used by the government to guide the sector's development. Nonetheless, state enterprises remain the dominant players, while federal banks underwrite much of the investment in new electrical infrastructure.
Now the hydro-dependent electricity system, Latin America's largest, is beset by droughts and soaring prices. New mega dams, which in the past have served as the foundations of the Brazilian grid, are risky and challenging to build. Meanwhile, state finances are under strain as the economy stagnates and a corruption scandal rocks the political and business worlds.
Fortunately, there are just as many solutions as there are problems for the power sector. This report will examine the power market's challenges in the short and long term, and the opportunities they present.