SÃO PAULO—A drought in Brazil is crimping water and electricity supplies, creating tensions between the countrys two largest cities and raising the prospect of rationing that stands to hurt President Dilma Rousseffs re-election hopes. The several-week drought in Brazils wealthy southeastern region, home to São Paulo and Rio de Janeiro, is the worst in close to 50 years, and has severely depleted the reservoirs in a country that relies on hydroelectric plants for over two-thirds of its power. Ms. Rousseff won the 2010 election while promising to improve the countrys infrastructure—particularly transportation, housing and energy. But the drought—which experts say is likely to lead to power rationing this year—is now weighing on Ms. Rousseffs expected run in the October elections. Dilma will try to sweep this issue under the rug for as long as she can, said Adriano Pires, head of Rio-based energy consultancy CBIE. The government will try to get big industrial consumers to cut use; you might see short power outages in some areas, but theyll stay away from the word rationing. Any electricity and water shortages could prove to be an embarrassment during the monthlong soccer World Cup tournament that Brazil will host starting on June 12 in São Paulo. Local authorities are already rationing water to most of the 1.3 million residents of Guarulhos, a São Paulo suburb that is home to the regions major international airport. Were hosting the Iranian national team here in Guarulhos, and lots of other teams and visitors will be coming through the airport too, said Guarulhos Mayor Sebastião Almeida. Its not fair that we have to receive all these visitors while dealing with this situation. Ms. Rousseffs drought headaches were exacerbated this week after Standard & Poors cut the credit rating for Brazils long-term bonds to one notch above junk, citing slowed growth and deteriorating government accounts, in part a result of aid to the power sector. That didnt go unnoticed by her political rivals. I think this is the responsibility of the current government for not having maintained the macroeconomic pillars that have brought us this far, said Aecio Neves, of the Brazilian Social Democratic Party. A top aide to the president, Ideli Salvatti, criticized the ratings agency, saying the government was working in the interests of the majority of the population and of protecting the Brazilian economy. And to be sure still polls ahead of any potential rival in the coming election. View Slideshow Weeks of under-average rainfall has left the Jaguarí Dam outside São Paulo city cracked and dry. REUTERS Since the start of the year only about 40% of the normal amount of rain has fallen in São Paulo, Rio de Janeiro and Minas Gerais states, which are home to about 40% of the countrys population and about half of its economic output. The dry spell has already hurt agricultural in São Paulo and Minas Gerais states, which produce most of the countrys oranges, sugar cane and coffee, and could threaten other heavy water users. For example, half of General Motors GM +0.85% water-thirsty production occurs in São Paulo state. The state government has said its not considering rationing, but the issue worries us, said Jaime Ardila, president of General Motors South America, adding the company has no Plan B if its water use is curtailed. Brazils two biggest cities, São Paulo and Rio de Janeiro, are squabbling over water. São Paulo asked the national water agency for permission to divert some water from a source that is also used by Rio, a move Rio officials strenuously oppose. Ill never permit them to take water that supplies the people of the state of Rio de Janeiro, Rio Gov. Sergio Cabral said on his Twitter TWTR +4.25% account, his office confirmed. Analysts at the investment bank Brasil Plural say the government will almost surely ration power this year, saying rain forecasts and the generational ability of non-hydro plants are overly optimistic. Ms. Rousseff has good reason to be wary of rationing. Her predecessor, Luiz Inácio Lula da Silva, was helped in his first presidential election victory in 2002 by citizen anger at the government for introducing power rationing amid a water shortage. Ms. Rousseff was Mr. Silvas first energy minister responsible for the governments response to those problems and a new power-industry framework that is used today. Having learned the political lesson from 2002, Ms. Rousseff is loath to raise power prices as a way to access more costly, non-hydroelectric power sources—such as diesel fuel, natural gas and some biofuels. Such a move also risks stoking inflation, which at an annual pace of 5.68% in February is already worrisomely high. Instead, the Rousseff administration said this month it would pay $5.6 billion to help the electric utilities meet the higher costs, but not raise utility bills to help pay for it until 2015. Some big industrial consumers could cut power usage voluntarily and are less concerned than others. With just a bit of rain and the other power plants there will be enough electricity, said Alfredo Bonduki, chairman of thread-maker Bonfio in São Paulo, which employs about 400. Im more worried about the electric bill next year, when rates finally go up. Government officials have played down the possibility of power rationing, saying generating capacity has risen more rapidly in recent years than demand. Meantime, the water problems are driving creative solutions, too. São Paulos textile industry has already managed to reduce its water use by 90% in the past decade, said Mr. Bonduki, who is also president of São Paulo states textile trade association. Were using cleaner technology, and weve learned that sustainability is profitable, he said. In Guarulhos, meanwhile, many apartment buildings and homes have built water tanks to keep water shortages at bay. Cicera da Cruz, who lives with three family members, said she has two water tanks and reuses water when possible. But the people who dont have tanks are really feeling it because every other day their taps are dry, she said. —--Rogerio Jelmayer, Matthew Cowley and Paul Kiernan contributed to this article
Posted on: Fri, 28 Mar 2014 08:40:03 +0000
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