Analysis of the Electricity Sector

More than denouncing the disrespect of human rights of dam affected people, MAB aims to demonstrate that hydroelectric mega-projects do not benefit the general population but the multinational companies which generally generate few job vacancies where they operate. In the following section we present some elements that prove the exploitation of the general population inside the current energy model.

     The Brazilian energy model is serving the banking sector and big multinational companies    

1. Capitalists consider energy a very profitable commodity. Since the privatization of the Brazilian energy sector, it has been controlled by multinational companies and the current value of the market reaches R$ 100 billion per year. Between December 1995 (beginning of the privatization spree) and end of 2006, the National Electricity Agency (Aneel) increased domestic electricity tariffs by 386,2%, two times more than the official inflation index for that period.

2. Private capital domination has disastrous consequences for the Brazilian people due to the privatization of water and energy resources which has compromised their wellbeing and just assisted wealthaccumulation especially by big energy consumers. The Brazilian electricity sector was employing more than 200.000 people before being privatized and more than half of them have lost their jobs since then.

3. Furthermore, the companies consuming large quantities of energy are those generating less job vacancies. Current data demonstrate that export oriented companies are those mostly growing nowadays. As you can see in the following table, a food industry can generate 70 job vacancies with a certain quantity of energy. A metal industry (export oriented and electrointensive) on the other hand, generates just two job vacancies with the same amount of energy.

4. In Brazil, more than 80% of electricity is produced from hydropower which has one of the lowest production costs among energy sources. To a large extent, the low production cost is a consequence of the disrespect to the rights of dam affected people demonstrated by dam construction companies. Today, more than 70% of dam affected families are ignored consistently by construction companies and are left without land, residences and other property. Another factor contributing to the low production cost is the unwillingness of construction companies to repair or even consider the severe environmental consequences of their actions.

Study of the Institute for Strategic Development of the Electricity Sector ILUMINA

on electricity tariffs

1. Slovak Republic

11. Hungary

21. Greece

2. Poland

12. Mexico

22. USA

3. Portugal

13. Italy

23. Iceland

4. Denmark

14. Korea

24. Ireland

5. Brazil

15. Austria

25. Swiss

6. Japan

16. Belgium

26. Sweden

7. Holland

17. Spain

27. New Zealand

8. Germany

18. Luxemburg

28. Finland

9. Turkey

19. UK

29. Canada

10. Czech Republic

20. France

30. Norway

This study calculated energy prices x purchasing power of local currencies

Despite its low production cost, the price of electricity (based on hydropower) stopped been determined by its real production cost and passed to be defined by the price of the energy with the highest production cost and dominating in most countries: thermoelectric energy. This means that the Brazilian energy model is organized in a way that permits mainly multinational companies to dominate the energy sector and operate with the highest possible profit margins (super-profits).

5. Consequently, we pay one of the highest energy tariffs in the world, higher than many countries where consumers have average salaries a lot higher than the average Brazilian. For example, Brazilian consumers pay on average twice as much as the consumers in the US, where the primary energy source is hydropower and the companies involved in the market are the same operating here in Brazil.

6. The tendency for the forthcoming years, if no transformation through popular mobilization occurs, is to accelerate the construction of hydroelectric dams throughout the Brazilian territory and in the Amazon region in particular. The plan to construct hydroelectric dams on Rio Madeira is an example of that tendency. For MAB, these dams are the prelude of what the government and private capital plan ahead, which will follow the same line of the current energy model and therefore will continue having severe social consequences. Fighting against this model is the moral, social and political duty of all Brazilian people. This is not an obligation of only the people displaced by dam reservoirs; everyone is affected one way or another by the high energy tariffs, by the privatization of water and energy resources and by the financing strategy of BNDES. Therefore the struggle for a socially fair energy model has to become a popular project, a project for the sovereignty of our country.

7. The supposed imminent danger of energy shortages or national blackout has been the main instrument in order to justify the construction of new dams, energy tariffs increases and public financing for these projects through BNDES. At the same time, the global energy crisis affects principally the central countries of the capitalist system (United States, Europe and Japan) which consume around 70% of the global energy resources while hosting just 21% of the global population. Analysing these numbers makes clear that the central issue is not the amount of energy produced but rather the consumption and living patterns in these countries which makes the reproduction of that model worldwide impossible. In other words, it is impossible to achieve a sustainable energy production model which would be sufficient for these consumption patterns.

There is sufficient energy for the whole Brazilian population. A recent study by Prof. Dorival Gonçalves Junior from the Federal University of Mato Grosso (UFMT), points to a surplus of more than 8.000 MW. This surplus equals the production of the Itaipu hydroelectric dam which is the biggest in Brazil and the second biggest in the world. In the same study Prof. Gonçalves Junior points out that with the current national growth rates there is enough energy for years to come even if the government does not construct any more dams.

8. We know that the Brazilian energy model has been adapted to the logic of the financial capital, seeking its expansion and domination. Currently the “owners of energy” are conglomerates of national and multinational banks (Santander, Bradesco, Citigroup, Votorantim, etc.), multinational energy companies (Suez, AES, Duke, Endesa, General Electric, Votorantim, etc.), mineral and metal multinational companies (ALCOA, BHP Billiton, Vale, Votorantim, Gerdau, Siemens, General Motors, Alstom, etc.), construction companies (Camargo Correa, Odebrecht, Andrade Gutierrez, Queiroz Galvao, etc.) and big agribusinesses (Aracruz, Klabin, Amaggi, Bunge, Stora Enso, etc.).

9. The profits of big energy companies have been increasing constantly. In a recent study, engineer Jose Paulo Vieira (USP) concluded that: Brazilian people pay annually R$ 15 billion more on energy tariffs than before the privatization of the sector. The study demonstrates that privatization, followed by the fragmentation of the sector and continuous readjustments on tariffs and taxes, increased significantly the light bills of the general population. In this context, the privatization of the Brazilian energy sector did not fulfil the majority of the promises made to achieve public approval for the plan.

Construction and energy companies on the other hand, have profited enormously not only with energy production, but also by exploiting illegally and unethically the territory and resources of our country. They have dammed our rivers and became illegitimate owners of our land and water. Unfortunately this trend will continue with the current growth plan for the country which foresees 1443 new dams throughout Brazil.

10. All hydroelectric plants have been constructed or financed with public money. The whole national electricity system has been set up by the state. Afterwards, during the administrations of presidents Fernando Collor, Itamar Franco and Fernando Henrique Cardoso, a privatization spree followed during which, the majority of the country’s assets were given out to private companies of the sector.

Many companies were privatized during that period, like Eletropaulo, part of CEEE and Eletrosul. Even if some are still considered state companies, big part of their capital is private. The Brazilian people should not forget that although many companies and dams are considered private, they have been financed by the government with public money. In most cases, public money is used exclusively during the implementation of these projects. The profits from selling electricity are usually covering the construction cost within three or four years and then they have another ten years to pay back the loan to the government, while they have another 30 years of exclusive ownership on the energy produced by the dam.

A prominent example of this tendency to inject public money to big private companies is the Hydroelectric Complex of Rio Madeira which foresees the construction of two dams (Santo Antonio and Jirau) on Brazilian territory. The table below shows the partial and total cost of the complex:

ProjectsCost

02 Hydroelectric Power
Plants (Santo Antonio/Jirau)

R$ 25,76 billion

Reservoirs

R$ 1,38 billion

Restricted Interest Interlinks

R$ 0,93 billion

Energy Transmission Lines

R$ 15 billion

TOTAL

R$ 43,07 billion

BNDES has already announced that it will finance up to 75% of the construction budget. State energy company Furnas, which participates in the consortium will also cover a big slice of the construction cost. This way, the private companies of the consortium will become owners of the dams and profit enormously from selling the energy, while they will not have contributed almost nothing for the implementation of the projects.

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