Brazil may begin forced power cuts from August Thursday May 3, 7:43 PM EDT

BRASILIA, Brazil, May 3 (Reuters) - Brazil could begin forced power cuts in August if electricity rationing starting in June does not ease the threat of an energy shortage crisis, the country's National Electrical Energy Agency (Aneel) said on Thursday.

Aneel made the statement while presenting a power rationing plan to representatives of 64 electricity companies which it hopes will avert a California-style shortages later this year.

An acute shortage of water to power Brazil's hydroelectric plants and a lack of investment in the generation sector have combined to put Latin America's biggest country on the verge of the crisis which could slow economic growth.

Aneel's plan aims to cut energy consumption by 20 percent. If analysis of the results of the plan in June and July show it has not had 80 percent success, power cuts will be inevitable, the agency said.

The plan will be implemented in regions with power shortages first, but could be widened to other areas.

Consumers who use more electricity than their allocated quotas will also be fined under the plan. The quotas would be set for all levels of consumer from industries to households.

The bigger the overconsumption, the bigger the fine would be, with excess consumption charged at up to 15 times the price. Repeat offenders would face even bigger fines.

But the plan to fine overconsumption has angered power companies. They are irritated that they will not see a single penny of the fines which they feel they deserve as compensation for having to ration the power they generate.

"It's a difficult process," Aneel director Jose Mario Abdo told reporters. "In times of hardship, nobody should be privileged."

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-- Martin Thompson (mthom1927@aol.com), May 03, 2001

Answers

ANALYSIS-Brazil still unprepared for electricity crunch May 11, 2001

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By Andrei Khalip

RIO DE JANEIRO (Reuters) - With 20 days left before Brazil starts power cuts amid a tough electricity crunch, no concrete plan for blackouts has materialized and experts blame the government for neglect and underestimating the energy crisis.

Most economists and industrial leaders agree that blackouts would put the brakes on Latin America's largest economy, spur layoffs and further damage Brazil's fragile trade balance, but few dared make a forecast due to uncertainty about the plan.

``There is no plan of action, and it shouldn't appear for another week -- they must be kidding,'' said one New York-based economist. ``The government has known about the problem for ages, now it's two weeks left and they're not ready.''

Experts also say the lack of a plan would leave no time for electricity distributors to prepare controlled blackout schemes, thereby possibly undermining the plan when it is finally implemented.

The main program that the government is hastily mulling now is to slash power consumption in the main producing and most populous regions, which account for some 80 percent of gross domestic product, by an average of 20 percent via programmed blackouts from June 1 to at least the end of November.

But the plan is only due to be announced May 23. In the meantime, government officials are deciding how to guarantee lower power consumption and minimize losses for the economy, especially in electricity-intensive industries such as aluminum and car-making, which are key for Brazil's exports.

Those last-minute arrangements may change the percentage of power to be rationed, or create a special group of privileged consumers which would not suffer power cuts, while the rest, mainly households, would carry the main burden.

But officials warn there is also no guarantee that rationing would not have to continue after November and into next year, or spread to the rest of the country -- the Amazon and adjacent regions and three southernmost states.

Brazil, which relies on hydroelectric power plants for over 90 percent of its power, last year and this year has suffered through the worst drought in 70 years, as the rains did not refill power stations' reservoirs.

On top of that, investment in power generation has been inadequate over the past decade, according to experts.

``There has long been a problem... But only this week the government realized the seriousness of the situation. So now there are lots of trials and tribulations,'' said David Zylbersztajn, head of the National Petroleum Agency (ANP).

Mainly noncompulsory measures, in force for over a month, have brought few practical results. The power-saving campaign's symbol, a smiling socket, hit main television channels only this week, after being delayed a month.

And it wasn't before late Thursday that President Fernando Henrique Cardoso ordered the creation of a task force with sweeping powers to tackle the crisis, led by his chief-of-staff, Pedro Parente, who has a reputation of a technocrat ``fireman.''

Some experts expressed hope that this body would be able to come up with a plan of action before May 23.

``As of now, it looks very frustrating, to say the least,'' said Ken Colli, an economist specializing in Latin America with Credit Lyonnaise in New York. ``There is no question that it will have an impact on economic growth...but where else is it going to show up -- trade gap, inflation, fiscal accounts?''

Colli's worst-case assessment was that Brazil's gross domestic product growth would slow to 2.5 percent to 2.9 percent this year compared to earlier forecasts of 4 percent to 4.4 percent and last year's growth of 4.5 percent.

U.S. investment bank Merrill Lynch cut its 2001 growth estimate for Brazil to 3.4 percent from 4.0 percent, citing the threat of power cuts. Merrill, which also rapped uncertainty surrounding the rationing plan, cut next year's GDP estimate to 3.0 percent from 4.2 percent.

While Brazil's central bank head Arminio Fraga says rationing should not spur a rise in inflation, some economists argue that imports of diesel fuel to power small generators used by residential apartment buildings and small enterprises may boost consumer prices.

Experts see the only way to exit from the crisis is by building more gas-fired plants as soon as possible, and by government policies to encourage further investments.

It already approved a plan this week for state oil giant Petrobras to provide thermoelectric power plants with natural gas at a fixed price in local currency and absorb the fluctuation in the foreign exchange cost of mainly imported natural gas -- likely boosting energy supply in the medium term.

^ REUTERS@

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-- Martin Thompson (mthom1927@aol.com), May 11, 2001.

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As power cuts spread gloom, only candlemakers see bright future for Brazil

By TONY SMITH The Associated Press 5/12/01 2:04 AM

SAO PAULO, Brazil (AP) -- As Latin America's biggest country prepares for daily power cuts of up to four hours, Brazilians couldn't be gloomier. They fear increased street crime, riskier hospital visits and long walks up stairs in high-rise condos. Some even say rationing could plunge the country into recession.

So why is Charles Bueno smiling? He is sales director for Paloma, one of Brazil's biggest candle manufacturers, and sales are rocketing before blackouts start June 1.

"Everybody's praying to St. Peter for rain, but I should light a candle to him for not sending any," Bueno said. "The only people smiling are those selling candles, batteries, oil lamps and generators."

A series of dry summers has left Brazilian reservoirs at record low levels, meaning the country's power network, driven nearly exclusively by hydroelectric stations, cannot keep pace with growing demand from the expanding economy.

Alarmed, the government of President Fernando Henrique Cardoso is scrambling to build 55 thermoelectric power stations by 2003, boosting the energy grid by over 21,000 megawatts, about a third of the country's current generating capacity. Other plans include raising output from existing plants such as Itaipu, a massive 12,600- megawatt hydroelectric dam on the border with Paraguay.

National energy agency Aneel plans to auction licenses in June to build eight new hydroelectric plants worth $1.6 billion, but their construction will take seven years.

Meanwhile, the government hopes that nationwide rationing will cut consumption by as much as 35 percent over the next six months.

That's music to Bueno's ears. Paloma's monthly production of 1 million candles is already up 25 percent and Bueno's sales teams have stocked local Wal-Marts, a giant discount retail chain, with "blackout kits" of 18 or 32 cut-price candles.

But for most Brazilians, blackouts will bring only gloom, inconvenience at home and less safety on darkened streets.

"These cuts will bring tremendous risks for the people," said Marcia Vieira. "Imagine a prison without power -- how are the police going to be able to guarantee our safety?"

"And the question with hospitals is also a very delicate one," added the 28-year-old bank worker. Only one in seven hospitals in her home state of Sao Paulo -- Brazil's richest and most populous -- have generators to keep equipment running, the daily Folha de Sao Paulo reported.

After congratulating itself on a quick recovery from 1999's drastic devaluation of the real, Brazilian business is now bracing for a shock that threatens to stop growth in its tracks.

Originally forecast as 4.5 percent this year, economic growth could slow to as low as 2 percent, according to Celso Pinto, chief editor of business daily Valor.

Fernando Garcia, economist at the Getulio Vargas Foundation, was even more pessimistic.

"If the cuts continue until April, we will go into recession in 2002," he said. A study by the foundation said energy cuts could mean layoffs for more than 800,000 Brazilians and cost the government as much as $3 billion in lost tax revenues.

Companhia Vale do Rio Doce, the mining giant which uses about 4 percent of Brazil's electricity, has plans to transfer temporarily its manganese and iron alloy production to factories in France and Venezuela, Folha reported Friday.

Investors are also souring.

Dennis Bakke, president of AES Corp., the single largest investor in Brazil's energy sector, announced this week the U.S.-based company was suspending investments of $2.5 billion in Brazil until Aneel modified its "disastrous" policies.

An incomplete privatization program has left power distributors in private hands, but generators are still under state control.

"I think society is unaware of the consequences this will have on the country's economy and politics," said Olavo Setubal, head of Itau, Brazil's second-largest private bank, in an article published Wednesday.

The consequences are not lost on Cardoso, who is already battling to keep his coalition out of a mire of corruption allegations ahead of elections next year.

On Thursday, Cardoso appointed his chief of staff, Pedro Parente, to head an emergency energy task force. But all Parente could tell reporters Friday was: "We are working on emergency measures and also structural measures so that this situation doesn't happen again."

Earlier this week, Cardoso went on national television to distance himself from a government plan to penalize consumers using too much electricity. He said fines would be replaced with incentives to households that save energy.

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-- Martin Thompson (mthom1927@aol.com), May 12, 2001.

Brazilians in the dark about looming energy cuts

Monday, May 14, 2001 By Shasta Darlington

Concern was growing in Brazil as residents braced for still unspecified power cuts due to start in less than three weeks. Faced with a crippling energy crunch, officials said they would impose rolling blackouts June 1 that were to last up to six months and cut electricity consumption by about 20 percent.

But as of Sunday, the authorities still had not announced specific measures or explained how and when the country would plunge into darkness.

Sales of candles and home generators surged and "survival manuals" were distributed to the country's 170 million people.

But many were wondering about such things as whether hospitals, police stations, schools and banks would be forced to close.

In crime-hit Rio de Janeiro, residents demanded to know how police would prevent massive looting, mugging and carjacking when street lights and security systems go down.

"We're going to be sitting ducks!" one woman told a local newspaper.

The state's secretary of public security told local media police would beef up forces in risky neighborhoods and provide prisons with generators to prevent escapes. But the official admitted, "It is impossible to cover 650 neighborhoods in the city at the same time."

In Sao Paulo, Brazil's financial hub, residents worried about traffic snarls and with thousands of high-rise condos, many wondered how they would make it up to their flats.

Brazil is facing its biggest energy crisis in decades because of a severe drought that lowered water levels at hydroelectric plants, which provide Latin America's biggest country with 90 percent of its electricity.

Economists have warned the power cuts will harm Brazil's recovering economy, throw thousands out of work and deal another blow to the country's fragile trade balance.

A new government task force is due to meet for the first time this week, although measures are not expected to be announced until May 23.

Copyright 2001, Reuters

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-- Martin Thompson (mthom1927@aol.com), May 16, 2001.

Brazil bans night matches to fight energy crisis RIO DE JANEIRO, Brazil, May 16 Kyodo - The Brazilian government ordered power companies on Wednesday to suspend from Thursday the supply of electricity to all stadiums hosting nighttime sporting events, a special federal chamber said. (08 :53)

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-- Martin Thompson (mthom1927@aol.com), May 16, 2001.

Fear of Brazilian blackouts sparks buying frenzy Updated 5:09 PM ET May 17, 2001 By Andrei Khalip RIO DE JANEIRO, Brazil (Reuters) - Whether they sell candles or flashlights, batteries or mighty power generators, merchants are having a heyday in Brazil as a buying frenzy has spread ahead of dreaded blackouts that could begin next month.

"I'm sorry to say it, but it's a great moment for us," said Marcelo Almeida, owner of Rio de Janeiro's Veluz candle factory and Candle Empire shop. "Our sales have jumped phenomenally, by about 80 percent."

"But it's a shame because everyone will suffer from outages."

Brazil's government, grappling with a chronic power shortage, is due to announce its full anti-crisis plan Friday, which could result in forced blackouts across most of the country.

The power crisis comes on the back of years of poor investment and bad management of the sector and was sparked by droughts that left hydroelectric plant reservoirs nearly empty. Brazil relies on water- powered plants for 90 percent of its electricity.

Economists say power outages would put the brakes on economic growth, resulting in layoffs and expanding Brazil's yawning trade gap.

BEST-SELLING GENERATORS

The phenomenal rise in sales of affordable candles that Almeida is experiencing fades in comparison to the jump in demand for power generators.

The devices, which rarely come cheaper than $800, represent quite an investment for average Brazilians. But Luciana Machado, sales manager at Fermatec, a firm specializing in generators, said consultations mushroomed sixfold and sales were more than double their pace of a few weeks ago.

"Especially those portable generators on wheels. People just come and load them onto their cars," she said. "We already rented what we had for rent, and we are one of the few firms that still have generators here in the shop to pay and go."

Prices of such generators rose about 30 percent recently after firms ran out of stocks in Brazil and had to import, she said. And despite a price tag of between $900 and $2,700 for home generators, customers were coming from all walks of life.

"We have clients who want to protect their little house and pay by installments, and we have people who buy generators for their mansions and pay up front," she said.

The cheapest device can power a few lamps, a refrigerator and a television. Air conditioning has become an unaffordable luxury as it puts too much of a strain even on the more expensive machines.

At the heavy duty end of the market, commercial firms, industrial plants and shopping malls were also falling over themselves to buy machines costing from $50,000 to $500,000.

"Our sales rose 100 percent," said Fernando Costa, who sells generators in Rio for Caterpillar Inc. "When a shopping mall has no power, it has to close down. If you remain open -- you cover the costs of the generator in three days or so."

Increasing use of generators is expected to sharply boost demand for gasoline and diesel fuel.

Other firms were raring to jump on the blackout bandwagon.

"It's crazy, out of 10 calls we get, nine are asking for emergency lamps," said a sales manager with Palacio das Ferramentas electric appliances store in Rio city center. "We are waiting for a big lot to start selling them immediately."

And for the lesser-income earners, many shops and street stalls quickly threw together "blackout emergency kits," including lanterns, flashlights, candles, matches and batteries.

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-- Martin Thompson (mthom1927@aol.com), May 18, 2001.