- The Washington Times - Thursday, February 20, 2003

RIO DE JANEIRO, Brazil, Feb. 20 (UPI) — Brazil's new president may seek to limit the powers of regulating agencies, saying regulators may have de facto "dollarized" segments of the country's economy and too extensively controlled pricing.

President Luiz Inacio Lula da Silva criticized the agencies and their methods for setting tariffs in a meeting with government party leaders on Wednesday, those in attendance said. Lula, as he is known, complained that Brazil's political leaders didn't learn about changes in pricing policies until they read about them in the newspaper.

"The decisions that affect the day-to-day life of the population aren't approved by the government," he said. "(The regulators) are procuring the political power of Brazil. They've created a wall between themselves and the government."

Most of the regulating agencies were set up after 1997 in the midst of former President Fernando Henrique Cardoso's eight years in office, and during a time of rapid privatization. Cardoso created the agencies, which largely have autonomy from government intervention, to attract international investors. If investors could see that the pricing policies of key sectors weren't at the whims of the government, Cardoso reasoned, they would be more inclined to make longer-term investments in the country.

Since his election late last year, Lula and his team have been studying the country's regulators, targeting for changes those that they say benefit specific economic sectors more than they do Brazilians.

"Ethanol, gasoline and steel prices rose because of the dollar. How can you explain a 47 percent hike in local steel prices? The raw materials are all produced here," Lula said.

Brazil's currency lost 35 percent of its value in 2002, which made sectors with pricing methodologies pegged to the dollar or those that must rely on imports more expensive. For example, Brazil must import about 25 percent of the oil it uses because of a lack in refining capacity, which sent prices higher.

Specifically, Lula is targeting the agencies Aneel, which oversees electricity rates, and Anatel, which has responsibility for telecommunications.

The ANP agency monitors the oil market, but pricing policies are set by state-run oil giant Petrobras.

Lula said his government has already put the brakes on recent attempts to increase energy rates by more than 40 percent over the next 4 years. Instead, an increase of between 28 percent to 30 percent will be seen.

Workers' Party Sen. Aloizio Mercadante, a confidant of Lula's and the government's leader in the Senate, said the government is hoping to "rescue the intelligence of the State" by wresting some power away from the regulators.

"There are serious problems with the agencies, from the area of tariffs to that of regulation," Mercadante said. "The government has lost the ability to regulate and administer important sectors, such as utilities."

Congressman Roberto Jefferson said Lula won't have much trouble getting lawmakers to go along with curtailing regulators' powers.

"We are certain that the regulators (are acting) above the law," he said. "They're treated like a parallel power. I think the performance of these agencies is really an abuse."

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