Energy crunch means dark times ahead for Latin America's biggest economy

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Energy crunch means dark times ahead for Latin America's biggest economy

TONY SMITH, AP Business Writer

Saturday, June 9, 2001, ©2001 Associated Press

URL: http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/06/09/international1215EDT0512.DTL&type=news

(06-09) 09:15 PDT SAO PAULO, Brazil (AP) --

The shop floor at the Osram light bulb factory on the outskirts of Sao Paulo is decidedly gloomy: 53 of the 650 workers have been laid off and 450 have been sent home on paid leave.

They are among the first casualties of an emergency government energy rationing plan that began Monday. It is designed to cut national electricity use by 20 percent and stave off rolling blackouts as Brazil faces its worst energy crunch.

Echoing the power shortage in California, the crisis stems from generating capacity -- almost exclusively hydroelectric stations -- failing to keep up with the growth in demand and is is threatening to cripple growth in Latin America's biggest economy.

"The light bulb industry was always going to be the first to take a hit, because we make a product that is intimately linked to energy use," said Carlos Ludewig, marketing director at Osram.

To meet the government's energy savings targets, Brazilians are scrambling to swap regular light bulbs for energy-saving fluorescent ones. They are taking shorter showers and unplugging their microwaves.

Electrician Erivaldo Santos says his work day is now "busy, very busy." For a fee of $65, he is fitting energy saving timer switches and checking for excess wastage in apartments in Sao Paulo's middle class Jardins neighborhood.

Yamamura, a popular lighting store has been rationing fluorescent bulbs to five per customer while waiting for new stocks to arrive.

Ludewig is confident that spiraling demand for Osram's largely imported, high-tech fluorescent tubes and bulbs will more than compensate for the slump in sales of the regular incandescent lamps it makes locally.

But when it comes to Brazil's ability to shake off its energy crisis, Ludewig's confidence wanes. "We don't believe Brazil will be able to breathe normally again for the next three years," he said.

Nobody knows yet how much damage the energy rationing will do to the economy, but most Brazilians agree it's going to hurt. Analysts are predicting economic growth, a robust 4.5 percent last year, could fall to as low as 2 percent this year, bringing a rise in unemployment and a slump in consumer spending. Some even predict recession for 2002, when national elections are due.

Even before the rationing started to bite, the signs were not good. Jose dos Santos Dias, sales manager at Lord, a plastic bag manufacturer, said the main supermarket chains had scaled back their orders by 15 percent. Aluminum producers Alcan Inc., Alcoa Inc. and Billiton are cutting back production in Brazil by 25 percent.

Shopping malls have shortened their opening hours and some factories are considering introducing a four-day week to save energy. The main reason for the energy crunch is that for the past decade demand for electricity has risen by 4.3 percent a year, while output by the hydroelectric network just increased 3.1 percent annually.

And now, a stubborn drought is drying up the reservoirs that drive the turbines. In the two hardest hit regions -- the northeast and the southeast -- reservoirs are under 30 percent full, less than half the normal May average.

The government has only half privatized the energy sector, selling off distribution companies but keeping control over most generation utilities. It has also failed to fully deregulate prices, giving investors little incentive to get going on 55 natural gas-powered electricity plants the government wants private companies to build.

"The problem is there was too little privatization, too little private investment and the whole system has been working on the limit for years," said Edmilson dos Santos, professor of energy and electrical engineering at Sao Paulo University.

He said the top priorities should be new power lines to bring electricity from hydro stations in the north and south that are operating normally and the completion of about a dozen generating stations that are being built by state oil giant Petrobras and to be run on gas imported from Bolivia.

"The problem now is that it will be difficult to get private investment for these projects at such short notice," dos Santos said.

©2001 Associated Press

-- Swissrose (cellier3@mindspring.com), June 09, 2001

Answers

Another side effect of when the lights go out is that nine months later there is a huge baby boom. Just what they need for there energy shortage. Ha heh!

-- Guy Daley (guydaley1@netzero.net), June 09, 2001.

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