— Electric power rationing could reduce economic growth 1.5% in 2001, the Getulios Vargas Foundation said in a new study.

Details of rationing are due to be announced on May 23 with the program expected to begin June 1 and last for 6 months. Most analysts are predicting the government to impose cuts of 20% and possibly more.

Electric power rationing could cut gross domestic product growth to 3% GDP this year, the foundation reported.

The loss to the economy could be $7.5 billion (US) in goods and services that will not be produced. The study also predicted 850,000 people could lose their jobs if the government imposes a 20% rationing plan.

Ironically the foundation’s study is more optimistic than a study from the Brazilian Mines and Energy Ministry. According to a ministry study,. the losses caused by the power rationing could reach $22.5 bn.

The government decided to ration electric power due to poor rains in the last 2 years which severely depleted reservoirs. Brazil is 90 per cent dependent on hydroelectric plants for its power. And gas-fired generation has not come on as fast as the government expected.

Sao Paulo’s Federation of Industries asked the government not to apply the rationing scheme to industries such as steel factories, and textile producers that consume huge amounts of energy and depend upon suppliers that are unable to produce their own power.

Initially, the government planned to impose heavy fines on industrial and residential consumers who surpassed a consumption quota system set for each sector of the economy. However, due to public outcry and political criticism, including opposition by many members of the government’s coalition, President Fernando Henrique Cardoso stepped in and ordered the Mines and Energy Ministry to eliminate the fines and substitute bonuses for those who save energy.

Political analysts said the president’s move was principally motivated by the 2002 presidential, gubernatorial, and congressional elections. Public opinion polls show the government’s popularity sliding due to public perception of rampant corruption, soaring unemployment, and growing urban violence