Stalled hydro clearances worry Brazil aluminum industry

Major aluminum producers say they are increasingly worried that production growth in Brazil could slow as a result of insufficient expansion of the country’s hydroelectric generation.

Brazil’s aluminum industry, including multinationals such as Alcoa and BHP Billiton, produced 1.6 million tons in 2006, up 7 percent from 2005.

Companhia Brasileira de Aluminio (CBA), a subsidiary of Brazil’s Votorantim conglomerate, and other firms still plan modest investments to expand their aluminum production and energy generation capacity. But slow environmental clearance is holding those plans back.

“I’m still optimistic about expansion in Brazil’s aluminum sector,” CBA President Antonio Ermirio de Morais said May 22. “It has to grow to keep pace with the economy, but the government lacks the competence and courage to create the conditions for the sector to grow.”

The aluminum industry is highly energy-intensive, and in order to expand output, needs more power. In Brazil, the most common power source is hydroelectric.

CBA purchased equipment for its 144-MW Tijuco Alto hydroelectric project seven years ago but has been unable to begin construction because of slow environmental clearance from the environmental regulator, Instituto Brasileiro de Meio Ambiente (Ibama).

Tijuco Alto was supposed to have a public hearing this month in the final phase before clearance, but Ibama employees went on strike and the hearing was canceled.

The strike was a reaction to President Luiz Inacio Lula da Silva’s order to break up Ibama into two independent bodies. One, still called Ibama, would focus on environmental licensing for major civil works like hydroelectric dams. The other, Chico Mendes Institute, would focus on conservation. (HNN 5/7/07)

The hope is that the new regulator would be more attuned to Brazil’s need for accelerated economic growth, which hinges on a significant increase in energy generation over the next five years.

Several big hydroelectric projects are delayed awaiting permits from environmental authorities. They include two planned power plants on the Madeira River with a total capacity of 6,400 MW. Officials say there is a “window of opportunity” only until the end of June to have them approved or risk indefinite delays.

Brazil energy minister resigns over scandal

The energy industry faced another setback with the resignation May 22 of Energy Minister Silas Rondeau, who denied accusations under investigation by police that he took kickbacks from public works projects.

Rondeau’s action followed a broader police crackdown dubbed Operation Razor, in which almost 50 politicians, lobbyists, and businessmen were arrested, including a senior aide to Rondeau, on suspicion of embezzling money from government contracts.

Rondeau said he resigned but was “absolutely innocent” and had been victim of “cruel lies”. Federal police suspect he received a 100,000 reais (US$51,000) kickback from a construction company that won a government contract to bring electricity to poor households.

The crackdown has raised concerns over Lula’s four-year plan for about US$250 billion of public and private investment in roads, railways, and airports, as well as hydroelectric plants in the Amazon region. Congressional leaders said they now might delay voting on several proposals.

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