Brazilians hit the dimmer switch

Shortfalls of rain and investment threaten to pull plug on Brazilian and other regional economies.

Monica Timm walks along the aisle of the Ipanema department store looking for candles. She's already bought flashlights and is preparing to live without a freezer, a computer, and a television.

Like many of her fellow citizens facing energy cuts and potential blackouts, the Rio speech therapist fears what will happen if the lights go out: "I am worried particularly about crime."

Droughts, regulations that inhibit investment, and a lack of planning by government have resulted in a crisis that threatens to darken Brazil over the next six months and possibly even years.

Energy supplies are also being stretched in some other parts of South America, where many countries rely heavily on hydroelectric power. Officials are beginning to see regional cooperation with energy-rich neighbors as one path toward a solution.

In Brazil, a country where 92 percent of the country's energy is generated by hydroelectric dams, low rainfall has left reservoirs dry. As of tomorrow, all but the poorest consumers have been ordered to cut monthly consumption by 20 percent or risk having their electricity cut off. Industry has been told to economize by up to 25 percent.

Brazilian President Fernando Henrique Cardoso blames his predecessors for failing to invest in generating capacity, but critics counter that Cardoso's own reforms of the energy sectors have been shortsighted and incomplete.

While energy consumption has risen 50 percent over the past decade, generating capacity has grown by only 35 percent over the same period, according to experts.

Although 70 percent of electricity distribution is in the hands of the private sector, 80 percent of Brazil's generating capacity is still controlled by the state. Critics say the government has not invested enough in generating capacity or in transmission lines.

There are investment opportunities in Brazil, but companies are reluctant to spend money because they say authorities interfere in the process and prevent them from managing their assets. One U.S. company, AES Corp., which wanted to build fossil-fuel power plants, suspended plans to invest $2.5 billion in Brazil in May, blaming the country's regulatory body for its lack of clear rules surrounding investment and regulations that prevent generating companies from raising energy prices.

It is a similar story in Chile, perhaps the most advanced nation in South America, as well as in struggling Ecuador. Generating companies in both nations complain about the lack of financial incentives for investors. In Chile and Ecuador, just as in Brazil, the companies are not free to raise prices, and fear they may suffer heavy losses if their operating costs increase unexpectedly.

If more investment in thermal energy plants does not occur soon, Chile faces electricity shortages in 2002 and 2003 to rival those that hit the country in 1998 and 1999. Potential problems are exacerbated by an overreliance on hydroelectric generators. About two-thirds of Chile's and Ecuador's energy comes from dam projects, and if rainfall is low this year and next year, rationing is predicted.

"If Ecuador does not take action to construct plants soon, the country faces problems at the end of 2002," says Carlos Navas, a senior advisor to the Quito-based Latin American Energy Organization. "Governments right now are relying too much on rain."

Some countries see integration as the way forward. Chile plans to plug parts of the country into the grid of neighboring Argentina, and Brazil will link northern parts of the Amazon region to the Venezuelan grid in July.

"Without doubt the region is moving towards a greater energy integration," Bruno Philippi, the former head of the Chilean generating company Gener, said last year.

Those moves will take time to implement, however. In the short term, authorities are scrambling.

All over Brazil fluorescent bulbs are being installed in public places, and at some small businesses, solar panels are being put in. The federal government has adjusted work hours, once 9 a.m. to 6 p.m., to 8 a.m. to 5 p.m., and disconnected all air-conditioning units. Evening soccer matches in Brazil's regional soccer championships have been rescheduled to the afternoon. Outdoor concerts, exhibitions and children's entertainment parks shut down after dark.

Authorities in Rio and Sao Paulo have disconnected one- third of the lamps on the cities' main highways and bridges, and ordered public buildings and statues to go unlit at night.

Rio officials say light will continue to shine on the city's symbol, Christ the Redeemer at least for the moment. Authorities had originally planned to turn the lights out on the statue and Copacabana beach at 1 am but did an about-face two weeks ago after police raised concerns of increased violence in the area. All police leave has been cancelled, and officers are on 24-hour standby. With some traffic lights out and the tunnels that cut through Rio's hillsides even darker than usual, officers are being drafted to direct traffic and deter criminals with their increased presence.

The general outlook, however, remains gloomy. Six months of reduced consumption could further damage an economy already being hit by US slowdown and hard times in neighboring Argentina. Economists say they expect the economy to grow by at least 1 percent less than the original estimate of 4.5 percent for the year. A study by the Getulio Vargas Foundation, a combination think tank and university in Rio, estimates the crisis could cost Brazil, Latin America's largest economy, up to 850,000 jobs.

Politically, the picture is no brighter for Cardoso.

The energy crunch has badly damaged the credibility of an administration that has already lost support because of a series of political scandals. And with a prolonged dry spell likely to mean the crisis will continue into 2002 - the year of a presidential election - there could be dark days ahead for Brazil's leader.

Not to mention Monica Timm. But her clouds have a silver lining.

"I live on the 11th floor," Timm jokes, when asked what she plans to do if the elevator stops running. "At least I'll lose weight."

Next week: Power in post-nuclear Germany.

(c) Copyright 2001. The Christian Science Monitor

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