Brazil Drought May Bring Power Rationing

By Lucy Jordan, Senior Contributing Reporter

BRASÍLIA, BRAZIL – For the first time since 2002 Brazil may be forced to introduce power rationing, as high temperatures and a relentless drought in the Northeast have severely diminished reservoir levels. President Dilma Rousseff has called an emergency meeting to discuss energy shortages on Wednesday in Brasília, reported Folha de São Paulo.

Following power cuts last month that plunged large swathes of the country into darkness, including Rio de Janeiro’s airports, Rousseff sought to allay fears over energy shortages, dismissing the risk of power rationing as “ridiculous.”

Yet surging consumption during a particularly hot and dry December has put extra strain on dwindling resources.

Reservoirs in the Southeast were at only 29 percent of capacity in December according to data from Brazil’s national electrical grid operator, ONS (Operador Nacional do Sistema Elétrico), although recent heavy rain and flooding in Rio de Janeiro state, that has left thousands homeless, may have since raised these levels. Reservoirs in the South and North were at 36.5 percent and 41 percent respectively.

Meanwhile, in the Northeast the worst drought the region has seen for half a century is crippling agriculture production and destroying livelihoods. December saw half of the rain that is average in the region and some areas have not seen significant rainfall for twenty months.

Reservoirs are currently running at 31.61 percent of capacity, well below the 34 percent required to guarantee electricity supplies. “We are experiencing the worst drought in fifty years, with consequences that could be compared to a violent earthquake,” Eduardo Salles, the agriculture secretary in the Northeastern state of Bahia, reportedly said.

The energy shortages will be inconvenient for the government, which is urgently seeking to kick-start a stagnating economy, and politically touchy for Rousseff, who as Minister for Mines and Energy during Lula’s presidency was tasked with reforming the energy sector to ensure a consistently reliable power supply.

The industry has reacted skittishly to rationing fears, with prices up by 62 percent to R$554.82 per mega watt last week, according to data released by CCEE, Brazil’s electricity trading board. Meanwhile Brazilian power companies fell on the stock markets, with Eletrobras tumbling 4.6 percent, Bloomberg reported, AES Tiete SA slipping 3.9 percent and Eletropaulo Metropolitana SA falling by 4.2 percent.

Blackouts and droughts are not uncommon in the semi-arid Northeast but were particularly severe last year. Cattle and crops have died in large numbers, and October saw the state’s worst power cut for a decade.

More than 900 municipalities throughout states including Pernambuco, Piaui, Bahia and Algoas have declared a state of emergency. The region, one of the country’s poorest, is home to thousands of small-scale farmers.

The states with the most drastic agricultural losses in 2012 were Ceará, which saw its production of food and raw materials fall by almost half, and Paraiba, with a drop of 29.28 percent, according to the Ministry of Agriculture. Pernambuco’s production fell 18.79 percent and Bahia’s by 5.43 percent.

José Garcia Gasques, Coordinator-General for Strategic Planning of the Ministry of Agriculture, said in an interview the drought was likely to elevate food costs, especially for low-income communities who rely on basic commodities like beans and rice. “We don’t yet have statistics on regional prices, but other experiences of droughts in the Northeast in previous years show that consumer prices rise as a result of drought,” he said.

The government announced Monday it would make available an additional R$500 million to farmers affected by the drought, bringing total emergency credit funds to R$2.4 billion by February. “The government’s priority is to support family farmers in maintaining their activities even in this adverse situation,” said Minister of National Integration, Fernando Bezerra Coelho, in a statement.