The latest ratings reports issued by Standard & Poor?s have emphasized the risks inherent in the Brazilian Government?s new regulatory policy. About a month ago S&P downgraded its equity outlook for Brasil Telecom and Telemar in light of possible changes to the rules for telephone tariff reviews, currently being studied by the Government. In the case of electricity rates, the Mining & Energy Ministry has already announced that this year?s adjustment will be postponed. A report issued this week by S&P says ?this change, made at ministerial discretion, reflects poorly on the regulatory process and as such has increased our perception of regulatory risk for the Brazilian electricity industry?. Regulatory risk is a key variable in risk perceptions, it adds. A similar opinion is foreseeable when the Government clearly states its proposal for telephone tariffs, especially if there is open disagreement with the industry, as in the case of the electricity sector. However, it?s important to note that S&P?s ratings basically serve as benchmarks for investors and lenders. They don?t take into account some of the other macroeconomic and social issues that are equally relevant when public-service tariffs are under negotiation.
Tariffs
