Brazil, facing power loss, sets cutbacks
The Boston Globe, May 27, 2001
CURITIBA, Brazil - More than two-thirds of Brazil faces electricity rationing starting Friday in an effort to avoid rolling blackouts over the next six months. The power shortage has become Brazil's worst energy crisis.
In a televised public address May 18, Brazilian President Fernando Henrique Cardoso blamed nature for most of the problem. More than 93 percent of Brazil's energy is generated by hydroelectric power plants that rely on rain to fill its reservoirs.
''Independent of the criticism, some of it just, about the errors in energy politics and the lack of future planning in the use of our water reserves, the fact is that there has been a drastic reduction in rainfall,'' Cardoso said.
An estimated 170 million people will be affected in the southeastern, central, and northeastern regions, where the government has imposed strict limits on energy consumption. Rationing will affect economic hubs like Sao Paulo, Rio de Janeiro, and the federal government in Brasilia, located in regions responsible for 78 percent of the country's gross domestic product and 67 percent of its exports, according to government figures. Brasilia has stopped illuminating national monuments and is shutting off street lights.
Residents are being asked to use 20 percent less energy than they consumed a year ago. If they fail, their power will be cut for three days. If they fail a second time, it will be cut for six. Those who conserve will be reimbursed; others will see their monthly bill increase by 50 percent to 200 percent, depending on kilowatts used. However, the government calculated that the average consumer would be able to achieve only a 17 percent reduction.
Energy minister Pedro Parente, now referred to as the ''Minister of Blackouts'' inthe media, admitted that even with the mandatory rationing plan, blackouts might occur in July and August.
''We will first try out the cooperation of society, who I am absolutely sure will collaborate. But we can't guarantee that it will not be necessary to cut energy,'' he said.
Brazil's hydroelectric power plants are the biggest in the world. But reservoirs in two-thirds of the country are down to one-third of their water supply. Just 6 percent of Brazil's energy comes from natural gas.
The government reaffirmed its commitment last week to bring online nine of the 49 gas-powered generators planned by 2009, in an effort to avoid future shortages.
''It sounds like a good idea,'' said Carlos Roberto Bittencourt, president of an antiprivatization group of engineers. ''The market price of natural gas is in US dollars. Given the value of the Brazilian currency, it will be a ridiculous price for us to pay.''
Short of a monsoon, Brazil's reliance on cheap waterpower is likely to keep it deep in an energy crisis for the next 12 months, energy ministers and the private sector are warning.
Despite a lack of rainfall - 10 percent below normal in most of the country - critics charge that blaming nature falls short of reality and punishes consumers.
''It's absurd. We've always had periods of dry spells and we didn't face an energy emergency then,'' said Luiz Pinguelli Rosa, an outspoken critic of Brazil's energy politics.
Brazil has been courted by US and British economic consultants for most of the 1990s about its energy industry.
Brazil seeks to adopt the British model, which relies on private utilities and separates generation, transmission, and distributionon the assumption that prices will drop and competition and efficiency will increase.
''This model Brazil is adopting to move out of state-owned energy companies is the problem,'' said Luiz Perreira, the director at Ilumina, an energy policy think tank. ''It is based on a system that relies almost 100 percent on natural gas and private utilities, which is simply not a reality in Brazil. We've always had water reserved for five years, but we used them all up because the government simply stopped investing in this sector in order to implement this model.''
Government energy spending dropped from $6.2 billion in 1997 to $3.1 billion in 2001. The government also cut off investment in power infrastructure in order to pay down foreign debts.
Nearly 100,000 jobs were cut from the sector. Consumer costs rose from $35 per megawatt hour in 1995 to $80 now in most regions, according to several studies. Costs are higher in states where the utility is owned by private firms.
Demand has grown 4 percent since 1991, but generation capacity has grown only 3 percent, according to analysts at Fator Doria Atherino in Sao Paulo. Brazil consumes 2,157 kilowatts per hour on average, one-fifth of the amount used by the United States.
Brazil's energy crunch is being likened to California's, and many of the same multinational energy companies are involved. AES Corp. of Virginia, which is under investigation for price gouging in California, is Brazil's biggest energy investor and the owner of Eletropaulo, Latin America's largest energy company. Duke Energy of North Carolina, which also supplies power to California, is also investing in Brazilian energy companies under the government's privatization plans.
AES and Duke are vying for ownership of one of Brazil's most successful and largest energy firms, the $5 billion Copel of Parana state, but there is strong opposition to its scheduled sale in August.
Moreover, two regulatory agencies have yet to iron out their plans for energy deregulation, which irritates multinational energy firms much more than the lack of rainfall.
AES's Dennis Bakke said this month that Brazil's energy regulators were to blame for the crisis, citing the absence of clear-cut energy rules and the government's interest in protecting consumers. ''Like AES, others are interested in investing here, but without clear rules, it's not possible,'' he said. ''These policies will ruin the economy, and investors will not want to enter the country and the ones that are here will have a hard time.''
''The demand is bigger than before,'' said Carlos Langoni, the former president of Brazil's Central Bank and director of Getulio Vargas Foundation. ''This is a transition phase. It's going to be a hard year.''
This story ran on page A20 of the Boston Globe on 5/27/2001.
RIO DE JANEIRO, June 5 — At night, the lights on streets and beaches and in parks and tunnels are dimmed. Air-conditioners in the president's office have been turned off; nighttime sports events and concerts have been canceled. Government employees may soon be forced to shift to a six-hour work day, and private companies are talking of moving production abroad for the duration of the emergency.
In response to what increasingly resembles a California-style energy crisis writ large, on Friday Brazil began at least six months of obligatory electricity rationing.
Three-quarters of the 170 million Brazilians have been told that they must immediately cut consumption by 20 percent or face rolling blackouts and unscheduled power interruptions, which would surely cripple the economy here, in Latin America's most populous nation.
The government says the measures are needed because the country is in the throes of its worst drought in decades. With one of the most extensive river networks in the world, Brazil, which is larger than the continental United States, obtains more than 90 percent of its electricity from dams and has not invested extensively in alternatives.
Few ordinary Brazilians had any inkling of the seriousness of the crisis until the government announced the conservation measures in mid- May, sparing only the Amazon districts and the far south. But as the harsh reality of the situation sinks in, the initial shock and anger are giving way to a grim realization that nearly every aspect of life will be curtailed.
"We have been raised to think that ours is a land of abundance and riches, where nothing is ever lacking," said Lucina Trilho, a store clerk. "So yes, that may have led us to be wasteful. And yes, we may need to be re-educated. But it is going to be difficult, even frightening, to have to make all these adjustments."
Under the government plan, households that fail to meet conservation targets are to have their power supply cut for up to six days. Small consumers who manage to save more than 20 percent, on the other hand, will receive cash bonuses, while companies that cut consumption by more than that amount will be allowed to sell their extra savings to others.
Although Brazilians are used to government pronouncements that are quickly reversed or undermined, this time they are clearly taking the threats seriously: consumption fell by 10 percent even before the measures went into effect.
"I've even disconnected the lights illuminating the little statue of the Virgin Mary in my living room," said Aurora Nascimento Fonseca, a jittery 81-year-old who lives on a small pension.
All across the country, in fact, the rationing plan and the penalties that go with it have set off a mad scramble to find ways to save electricity and money. Just try, for example, to buy a fluorescent bulb, flashlight, generator, gas-powered lantern, batteries or even candles.
"The demand for fluorescent lighting has shot up 1,000 percent in the last couple of weeks," said Eulalia Cardoso, a weary saleswoman at a hardware store where customers were lined up at the door. "We can't keep up with the requests, and neither can our suppliers. As soon as a new stock comes in, it immediately sells out."
Sales of electrical appliances, in contrast, have plummeted. As Míriam Leitão, a columnist for the daily O Globo, noted, items "formerly seen as symbols of status and comfort in residences are now being regarded with alarm and disconnected from their sockets."
In at least one sense, the timing of the government measures is propitious: with the Southern Hemisphere winter approaching, use of air-conditioners and fans is minimal.
But most Brazilian households with power use electricity, not gas, to heat shower and bath water, which means millions must gird themselves for months of cold washes.
"At home, we're doing that and everything else we can to cut back on our electricity consumption," said Alfredo Rebello, a salesman whose monthly bill averages about $40. "We're watching television without lights on, doubling up the loads of laundry and disconnecting the coffee maker and microwave oven except when we have to use them."
Things are not much different at the office and residence of President Fernando Henrique Cardoso in Brasília.
"We're in the dark at the palace," the president said in a newspaper interview late last month. "We've turned off the outside illumination, and I've ordered all the interior lighting turned down, the refrigerators disconnected and the heat to the swimming pool turned off."
Here in Rio, a city of leisure-loving night owls, the municipal government has said the spotlights trained on Rio's most famous landmark, the statue of Christ atop Corcovado Mountain, will continue to shine.
But outdoor street lighting has been cut by one-third, and nearly every nighttime activity in major cities is likely to be affected.
Gasoline stations across the country, for example, plan to shut from 10 p.m. to 6 a.m., which probably means fewer taxis and the loss of jobs for night-shift station attendants. Professional soccer games, concerts and other entertainments have been banned, but the level of protest has been less than expected because many people say they are afraid to go out into the darkened streets.
"The level of crime is already terrifying, so imagine how it is going to be with the streets darkened," said María Aparecida Guimarães Gusmão, a 35-year-old homemaker. "I'm sure that the criminals are going to take advantage of these measures and that the ordinary citizen is going to remain at home, sitting in the dark."
The police plan more nighttime patrols, but the situation of other essential public services is less clear: barely half of Brazil's hospitals have generators, for instance, and private schools say they will have to struggle to cut consumption.
The rationing plan was first announced May 18. But the government's Energy Crisis Coordinating Committee continues to tinker with the measures, giving the impression that it is not in control of events and adding to the sense of confusion, frustration and uncertainty.
No sooner had the rationing been announced than lawyers said they planned to challenge it as unconstitutional. After a top energy official criticized judges "who must live on Mars," the government first issued a decree saying rationing takes precedence over the consumer protection code, which was to be the basis of the court case, but then backed down when a judge ruled otherwise.
Facing a long and costly legal battle, President Cardoso announced Monday that he was modifying a system of surcharges that had been a crucial part of the rationing effort. Even so, the public is irate.
"None of this would even be happening if the people in Brasília had been doing their jobs properly all along," said Armando Tavares Araújo, an engineer. "I'm absolutely disgusted, indignant at the fact that we, the Brazilian people, are going to be made to suffer because for nearly 20 years the government hasn't planned ahead and kept up with demand."
Initially, the government had also said that if Brazilians met the conservation targets, that would be sufficient to avoid rolling blackouts. Now, though, officials are warning that it may become necessary to order the nation to adopt a four-day work week, giving employees Mondays off until the end of the year.
"All that is lacking is an official declaration that the country is in a state of emergency," Alcides Tápias, the minister of development, industry and commerce, said late last month in São Paulo, the business capital. "But in fact, that is the situation."
Brazil's economy, the eighth largest, grew a robust 4.4 percent last year, and initial forecasts were for a similar performance this year. But now, to the alarm of workers worried about their paychecks, those predictions are being scaled back by as much as half, raising fears of recession, inflation and the loss of foreign investment.
"Look, we're Brazilians, so we have already shown that can put up with just
about anything," said Abrahão Miguel dos Reis Motta, a 29- year-old electrician.
"But my big fear is that a lot of people are going to lose their jobs as
companies cut back production, that this is not a temporary situation but the
start of something that will only get worse and last for a long, long