September 6, 2017 / 11:54 AM / 3 months ago

Brazil seeks end to veto power in some companies, Valor says

SAO PAULO, Sept 6 (Reuters) - Brazil’s government is analyzing the legal and financial implications of relinquishing the right to veto certain strategic decisions in a few companies, the latest step by President Michel Temer to diminish the state’s role in the economy, Valor Econômico newspaper said on Wednesday.

According to Valor, which did not say how it obtained the information, Finance Minister Henrique Meirelles has requested from the state auditing court an analysis of how the government could exit the so-called golden share it holds in former state monopolies that have been partially or fully privatized in recent years.

The newspaper said Meirelles sent such a request on July 19, with an urgency notice. The court known as TCU began to analyze the matter only this week, the paper added.

Meirelles reckons the value of the government’s stake in those assets and the companies themselves have been impacted by the existence of those golden shares, Valor said.

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.

The government still has the veto right in planemaker Embraer SA , which it fully privatized in 2006. This also applies to Vale 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, the former reinsurance monopoly that was recently listed.

The press offices of Brazil’s finance ministry and the auditing court did not immediately responded to requests for comment on the Valor story.

The move comes as Temer seeks to sell control of the country’s biggest power utility, Centrais Elétricas Brasileiras 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.

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. (Reporting by Guillermo Parra-Bernal; Editing by Chizu Nomiyama)

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