|
 Tieta,
Teresa Batista, Gabriela, Quincas Berro Dágua, Vadinho
and Dona Flor. For many of us they are all like family.
We heard through their ears, we suffered and enjoyed life
with them, we learned to watch the world with other eyes.
The man who created all of these people has gone,
but his creations, though, live with us for good.
By Brazzil Magazine
There is by now a laundry list of public benefits that have inured to Brazil because of
its recent electric energy shortage and consequent implementation of rationing. In Brazil
the news remains mostly recriminations. The hard damage is yet to come, or ‘so they
say’.
The recent damage that is evident—higher interest rates and slowing
growth—are effects of the neighboring Argentine depression and general global
economic conditions. Nationalist and populist opposition politicians and press seize on
the electric as “incompetent” government management; on the global slowdown, as
proof Brazil should turn inward in its economic and institutional development—become
“less vulnerable” to global trade and finance. It is as though uncovering
electric sector weaknesses and finally giving some substance to distinctions between the
economic vitality of Brazil, at least compared with Argentina, was not progress at all.
The most important consequence is not new, but of the type that grows stronger with
use. Brazilians gave and continue to give the electric shortage their entire cooperation.
Almost everywhere ration quotas have been surpassed. There are three times the rebates for
under quota use than there are impositions of ‘super rates’ for non-compliance.
Important reservoirs are slowly accumulating depth before rainy seasons even begin because
most individual residences have cut usage. Forty four percent of industrial users too met
quotas in only the first month, reporting ‘no effects on production’ according
to a Getúlio Vargas Foundation report. Business investment plans still show a 6 percent
increase for this year over last, only a 1 percent drop from previous reports. All around,
citizens are acquiring productive habits they could retain when the rains return to
normal. (The awaited cooperative numbers from nature converge at 80 percent of normal
rainfall to June of 2002 before rationing can be put aside.)
This evident price sensitivity is giving the sector new inspiration. An industry trade
group for investors in infrastructure (Abdib) reports member plans for a new US$ 90
billions in the electric sector through 2004. The political dilemmas that have paralyzed
investment have not disappeared of course, but they have been exposed, and hopefully the
government will need less political capital to resolve them. Generators and distributors
will lose US$10-US$12 billion yet this year and only realistic tariffs can keep them
healthy. Aneel, the independent government regulator, has proven itself weak indeed.
Decision makers have been appointed politicians protective of consumer votes, pet
industries and government generators where most of them used to work. They have been
hiding long-standing industry user subsidies behind tough language on privatized
distributor rates to placate the same residential consumers who pay double to cover the
subsidies.
The wholesale market is still weak but now opinion makers understand competitive
conditions can never be introduced into the sector without a strengthened regulatory
structure. The two most financially important issues on the regulator’s plate
(Aneel’s refusal to pass through the increased costs of Itaipu’s dollar
denominated generation and resolution of the so-called ‘Annex V’ clause in
distributor franchise contracts) may end-up in judiciary resolution, but no one doubts
that increased, more supplier friendly tariffs are necessary if Brazil wants electricity
to fuel its handsome desires for economic growth.
Annex V gives a good sense of both Aneel’s importance and its deficiencies.
Franchise contracts provide that in the event of rationing, the generation companies will
buy back from distributors, on the wholesale market, a percentage of the generated power
distributors are under contract to buy from generators. The clause, if enforced, would
yield an over US$2 billion dollar relief to distributor cash flow by December. Since most
generation is by government owned companies, and since the government is under
self-imposed and IMF fiscal pressure to keep inflation controlled, and moreover as the
administration is so far without the political capital to carry through on privatization
of generation, the resistance within government agencies to living by the terms of the
contracts is formidable.
Just as Aneel was unwilling to force Furnas to pay its contractual obligations to
distributors under the wholesale market agreement for failure to deliver Angra II nuclear
energy, Aneel has been impotent in solving this even more consequential problem. The same
kind of endless rounds of government sponsored meetings between distributors and
generators, with imminent promised solutions, now take place about Annex V—though
this time at the highest Ministry levels. The President of the CBIEE (the electric energy
investment trade group) Roberto Lima says, “they [the generators] have to comply with
the contractual clause to guarantee the complete opening of the market in 2003. Right now
the model is failing. They think they are beyond good and evil. Furnas is only paying the
energy for Angra II now that the excess energy is profitable. An affirmed contract
can’t be thrown in the trash can.”
The contrast between electric regulation and the performance in the oil and gas sector
by ANP is every day more striking. ANP is fed-up with Petrobras. They have studied
exhaustively Petrobras performance and conclude, according to its President David
Zylbersztajn, that “natural gas” is “the crucial point in breaking the
monopoly in the whole line from wellhead to the gasoline station". They have
contested Petrobras behavior in the gas sector repeatedly. They have even begun to name
names of the gas sector executives who ANP can prove engage in anti-competitive behavior,
presumably behind the back of the Petrobras board.
They have referred the recent acquisition by Petrobras of Enron shares in the two Rio
gas distributors to CADE, the investigating and enforcement authority for monopoly
practices. ANP has effectively exposed to the public how Petrobras defiantly protects gas
distribution against even ANP orders as evidenced in the Bolivian pipeline disputes with
Enron and British Gas. No one has yet concluded that Petrobras predatory practices in gas
retarded the priority program to institute natural gas generation of electricity and was a
significant cause of the energy crisis, but the facts are there to support the inference
against Brazil’s most popular economic institution, at least for those willing to put
nationalist sentiment aside.
ANP is asking that legislation be amended to keep Petrobras out of further bidding on
gas distribution lines, including a new contemplated connection to Bolivia. Still not one
cubic centimeter of natural gas has yet been consumed in the country except that produced
or bought by Petrobras, though BG has announced a 5 percent reduction in their price to
consumers anticipating finally, after over two years of hassle, receiving Bolivian Gas
through the Petrobras controlled Gasbol pipeline.
If Brazil comes out of its crisis with better competitive conditions in the electric
and oil and gas sectors because the electric shortage focused public attention on
institutional and regulatory insufficiencies, historians might wonder how else the
conditions might have been constituted. In tracking down the enormous slowdown in 2000 by
Aneel in letting bids on transmission projects (the major cause of the energy crisis since
areas with full reservoirs cannot send energy to deficient regions) one notes that in that
year one of the world’s most competent transmission specialists, National Grid,
pulled out of the electric transmission business in Brazil while retaining its telephone
interests.
In discussing the pull out, executives revealed that the contrast between Anatel, the
telecommunications regulatory agency, and Aneel was sharp indeed. Both were seen as
technically competent and tough managers, but at Aneel, “things just didn’t get
done.” For Brazilians the contrast in the sectors is more concrete: long distance
rates to the U.S. are as low as 2 cents (U.S.) per minute, the future in electric is
higher rates for the foreseeable future. If generation and transmission had been timely
privatized, there might be bright lights even for consumer electric prices.
Conrad Johnson, the author, is an American attorney, permanently
residing in Brazil. He writes for various publications on development and legal issues in
Latin America. You can reach him at conrad@alternativa.com.br
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