Brazil is facing a growing possibility of power rationing as the most severe drought in at least four decades drains dams, the country’s main source of electricity, according to Grupo BTG Pactual. (BBTG11)
Reservoir levels in Latin America’s largest economy may fall as low as 14 percent by November, making some sort of energy rationing between May and October “prudent,” BTG analysts led by Carlos Sequeira in Rio de Janeiro said in a note to clients. Power restrictions may force industry to cut output and hurt Brazil’s fiscal and trade positions, they said.
“There is no question that risks of energy rationing are real and rising,” the analysts said in today’s report. “Demand is now higher and the pace of deterioration is alarming.”
The dry spell has reduced southeastern hydroelectric dam levels to the lowest since 2001, when Brazil last rationed power. The government last week unveiled a 12 billion-real ($5.1 billion) aid package for utilities to cope with record-high spot prices as hydroelectric plants cut output.
While postponing rationing may boost the need for stronger measures in the future, the government may opt to “muddle through with an unstable system” at least until after presidential elections in October, the BTG analysts said.
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