By Junior Isles, Managing Edidor
Of course wealth is relative, and can be measured in different ways. But sometimes it is hard to tell the difference between a “rich man” and a “poor man”. Consider North America and its not too distant neighbour South America – worlds apart on the economic scale.
Now zoom in on the two economic ‘jewels’ within these two land masses – the state of California and the country of Brazil – and the difference becomes even more stark. Brazil has a GDP of $558 billion compared to the $1.3 trillion economy of California. Yet on the energy front, the two are not so different – both are in crisis.
There are some common reasons why these two dissimilar economies share the problem of a temporary over-dependence on candles. Both were victims of under-investment in the sector. A lack of rainfall also played a significant role. There was also the issue of power tariffs being set at a level which prevented generators from recouping their losses. In August of 2000, Brazil raised tariff rates for its generators. But under current concession laws, generators cannot pass on costs to customers through higher rates, and can only change their prices once a year. Also, energy prices are fixed in Reals, whereas natural gas imports are in dollars, deterring investment in thermal plants.
California and other US states are largely unfamiliar with facing crises of any kind. Yet for Brazil and many of its other Latin American neighbours, a crisis always seems to be just around the corner.
Argentina is in the depths of a recession and concerns over its ability to pay its debts have helped knock more than one fifth off the dollar value of the Brazilian Real. This combined with a slowdown in the US economy – these countries are Brazil’s main export markets – has prompted the central bank to cut GDP forecasts from between 4.0 and 4.5 per cent to 2.8 per cent.
When Jorge Vasconcelos became Brazil’s Mining and Energy Minister in March, there were expectations that boosting power supplies would be his top priority. Yet by June, to the dismay of industrialists, Brazil began energy rationing.
According to reports, Brazil will need 25 000 MW over the next five years. It was hoped that Vasconcelos would kick start the government’s stalled “emergency plan” which encouraged the construction of gas fired power plants. “Gas fired plants are a good option… and we must not forget about alternative sources of energy such as wind or solar power,” said Vasconcelos.
According to Frost & Sullivan, as of 1999 Brazil wanted to invest $25 billion over 20 years in renewable energy. Most of this 20 000 MW renewable capacity would be in the form of photovoltaics for rural electrification. Christie Hangey, Frost & Sullivan’s research analyst for Latin America added: “Although there is no formal wind programme, with the current situation, President Cardoso wants to set aside government funding for wind projects.”
This general desire for a better environment, in spite of the added financial burden, is a credit to the troubled Latin Americans. Certainly it is a far cry from the US stance, which once again rejected the revised Kyoto agreement reached in the recent Bonn summit.
Argentina was one of the first to say it would follow any guidelines set by the Kyoto protocol whether or not they were bound to it. “The Latin Americans are not in the first round of emission reductions but, with the exception of Venezuela, they plan on keeping up with the more industrialized nations,” noted Hangey.
With the ongoing economic and power crises, the promise of a Latin America with a ‘wealth’ rivalling that of the US will never be anything more than a distant dream. And (without power) a dim one at that. But wealth is relative as are the values that people put on different things. Certainly there is air and water pollution in Brazil’s large cities, and deforestation around the Amazon Basin is also an issue. Ironic since these same forests could act as carbon sinks. But like many other countries around the world, by supporting the Kyoto Protocol Brazil is taking a responsible attitude to a better environment.
It is a rich legacy that Latin America and most of the rest of the world are attempting to leave our future generations. I wonder whether our children will feel richer for it? Or would they just prefer to have the dollars in their pockets?