ENERGY-BRAZIL: Drought Threatens Power Supplies, Economic Growth

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Mar 12 2001 (IPS) - The drought plaguing southeastern Brazil poses the risk of power shortages and, in consequence, a slowdown in economic growth this year.

If rainfall fails to reach normal levels this month and next, energy rationing will likely have to begin in May, said Mario Santos, president of the National Operator of the Electric System, the company that controls energy supplies in Brazil.

February’s rainfall stood at 40 percent of normal, which led to a heightening of the concern that began to be felt last year due to delays in the construction of thermoelectric plants to run on natural gas imported from Bolivia, and to the failure to complete hydroelectric plants due to economic troubles since the 1980s.

The March and April rains are crucial for accumulating water and easing the heat from May to September. To get through that period, experts say the reservoirs must hold at least half their capacity.

But in southeastern Brazil, the country’s most populated and industrialised area, reservoirs currently hold just 33 percent of capacity, said Santos.

The situation is alarming, according to Pio Gavazzi, director of infrastructure of Sao Paulo’s Federation of Industries. In order for the region to avoid rationing, it would have to rain at least three-quarters of the normal March rainfall from now to the end of the month, he added.

Energy consumption in Brazil is growing one percentage point ahead of Gross Domestic Product (GDP). With last year’s 4.2 percent economic growth, and a similar figure forecast for this year, demand will have grown by more than 10 percent.

Last year, energy experts like Luis Pinguelli Rosa, with the Federal University of Rio de Janeiro, began to predict that energy shortages would begin this year and last for several years.

The government’s plans are based on an expected nine percent increase this year in Brazil’s electricity generating capacity, which currently stands at 67,000 megawatts.

But the drought that began last year has neutralised the government’s efforts, since nearly half of Brazil’s power is generated by damming its rivers.

Furthermore, the government’s plans have run up against a number of difficulties on the ground. The 49 plants to run on the natural gas that Brazil began to import from Bolivia when a huge new pipeline began to operate last year have not yet been completed.

Discrepancies over guarantees against swings in Brazil’s exchange rate, which could drive up the price of natural gas in dollars, have scared off private investors and forced the government to put several emergency plans into effect, through the state-run oil company Petrobras.

But delays in meeting the energy production targets, and the resultant downward corrections in production goals, are inevitable.

The hydroelectric plants currently under construction are caught up in the uncertainty surrounding the government’s privatisation programme and resistance from the environmental movement, not to mention the effect of scarcity of investment in the past few decades.

Several dams are facing embargos or delays resulting from lawsuits that are demanding more meticulous environmental impact studies and solutions for people displaced by the projects. In a few cases, the final generating capacity of the dams had to be reduced in order to adapt to the legal requirements.

Privatisations in the sector have also suffered setbacks and delays. There is resistance to the sale of the main companies, even among the ruling coalition.

The Feb 23 removal of the minister of mines and energy Rodolpho Tourinho, due to political reasons, could slow down investment and hold up the process even further.

Rainfall has been normal in the past few months in southern Brazil, ensuring local supplies and enabling the area to assist the drought-stricken southeast. But limited transmission capacity has made it impossible to transfer more energy from one area to another.

In the face of such obstacles, companies that have large energy requirements have begun to produce their own electricity, through small generators, using water power as well as hydrocarbons and other fuels.

Last year, industry in the state of Sao Paulo produced 14 percent of its own electricity requirements, up from nine percent in 1996, according to Gavazzi.

Rationing would affect production in industry, especially in sectors with round-the-clock activity like steelworks, glassworks and chemical and textile factories. Power outages can lead to the loss of inputs and make it difficult to get production going smoothly again.

Without sufficient electricity supplies, economic growth could slow down in Brazil, which only recently overcame the effects of the Asian and Russian financial crises that led to stagnation in the late 1990s.