THINKING BRAZIL

A Newsletter of the BRAZIL @ THE WILSON CENTER ISSUE NO. 4 NOVEMBER 2001 Latin America’s Giant Forced to Address Causes and Consequences of Energy Crisis

Last spring, prior to the energy rationing scheme announced by the Cardoso government, Brazil @ the Wilson Center held a day-long seminar entitled “Energy and the Environment in Brazil” under the auspices of Texaco. On April 25, 2001, energy sector specialists, academics, and politicians from Brazil and the United States gath- ered at the Wilson Center to discuss the impending crisis in Brazil. The overall concensus that emerged from the conference was that Brazil needed to diversify its energy supply while seeking “clean” sources that will ensure its long-term sustainability. In this last point lie the questions of how to balance the sector’s expansion with the protection of the country’s unique ecosystem.

ince the government of President Fernando their daily routines and modify their habits. S Henrique Cardoso declared an energy crisis Companies and factories have reduced their hours last spring (May 18, 2001), a new word has entered of operations, residents have drastically limited into the conversations of politicians, economists, their use of appliances and lights, the federal gov- industrialists, and everyday Brazilians: “o apagão” ernment has suggested a four-day workweek for all (the big electric ‘blackout’). The convergence of of its employees, and most commercial businesses events, including excessive droughts and a rising have changed or limited their business hours. demand for energy, has forced the government to Pedro Parente, Chief of Staff for President Cardoso declare an energy emergency in the world’s eighth and head of the task force for the energy crisis largest economy. Eighty percent of the citizens in (Câmara de Gestão da Crise de Energia Elétrica), this nation of 170 million have been told the only believes that meeting the specified target of a 20% solution for avoiding the rolling blackouts and reduction will contain the crisis and avoid random unexpected power outages that California suffered, power outages. is for all Brazilians in the affected regions While Brazilians accordingly have adjusted their (Northeast, Center West, and Southeast) to reduce habits to the austerity measures, the decision of their monthly energy consumption by 20%. the Cardoso government to institute the apagão Incentives have been designed by the major energy has led to many criticisms and questions about its companies in the country to offer rebates for resi- effectiveness in preventing the situation. Energy ALSO IN THIS ISSUE dential and small consumers that cut their energy experts blame the depth of the current crisis on The Future of Brazil’s usage by more than the target rate. A secondary poor government planning, (Continued on pg. 3) Energy is in its Past market has even been established for the selling of —page 2 z energy that is “saved” by large companies to be ra i A New Path for Energy l sold to others who have not met the targeted B —page 3 reduction. Apart from these “carrot” approaches, Governor of Acre Visits the Brazil Project “stick” policies have been implemented for all con- —page 7 sumers (commercial as well as residential) that AT THE WILSON CENTER Brazil’s Image in the U.S. impose steep fines and the threat of termination of —page 8 service for failing to meet targeted levels. With the News from Brazil @ WWC implementation of such measures beginning on —page 8 June 4, 2001, Brazilians have been forced to change 2 THINKING BRAZIL demand for energy in Brazil. in energy for demand evolvin and exigencies historical the both meets that strategy sustainable long-term, a develop can industrialists, and sumers, con- residential operators,energy private as such stakeholders key with conjunction government,in the sense, this In power). (hydroelectricenergy of source one on excessivedependence the and reserves, insufficient year), a taxesenergy in rise (6.0% energy of use the for cost consumer rising the include forward going addressed be must slowly.”that issues Outstanding reversibleirreversibleor are that decisions avoid to Brazil’sorder shaped “…in have policy that energy factors the all mind Brazil’s WorkingPaper, WWICS of forthcoming development a policy.the energyin Dr. states As Pinguelli t contributed have that forces historical the recognize taken actions any that importance fundamental of is it reason, this For country.the in oversightfunctions with endowed agencies the of weakness institutio the and failure regulatory of result a was outcome this that seminar the during Dr.commented Pinguelli California. in happened had as distributors the by absorbed being than rather consumers the to transferredwere Brazil in energy of However, country’scosts demand. the rising expanding meeting the for required facilities energy and generators new in ments invest-strategic of absence the to led deregulation Privatizationand Brazil. in occurring was what to and California between similaritie werethere that Mr.signaled Fleury end-users. for structure pricing regulated the of because costs elevated these internalize to had turn, in who, distributors the to prices higher at power supply would Generators occurred. gauging price and increasedenergy for demand the 1990s, state’sthe Followingthe during expansion regulated). economic was tariff end (i.e. privatization for used framework the into disincentive pricing a of inclusion the given capacity installed their amplify to failed facilities generationpower but sector energy its deregulate ardently to began California 1995, In speech. keynote his Mr.during by addressed Fleury also was and Brazil,” in Productionseminar, and the Demand of “Energy sessions the of one framed California of case The subject. the on meeting Center,”day-long @ TheWilson a “Brazilorganize the to of Director Bitencourt, Luisprompted Brazil in situation energy the of sustainability the Woodrowabout concerns Center. 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For oil. of net-exporter a be to them permit to supply energy its for sources new encounter leverageto financial and how”“know international use would Brazil exploration. its promote to means primary the as sector the in investmentforeign sector. increased governmentthe towardviewed The policies official of realignment1990’snew the a during producedstructures economic liberalize and markets open to drive The prices. oil world fluctuatio radical the for buffer providea to and shocks supply-side of threat the end to order in self-sufficiency achieve to Bra for backing popular was There production. oil in self-sufficient become to Brazil for desire the as such policies these of III). II, I, (Anwar plants power nuclear of series bu to decision the and generation,hydroelectric of expansion facilities, oil off-shore of derivative),construction cane sugar (from alcohol-poweredcars of promotion the in Brazil’sresulted sources energyalternative sector.for energyexploration The for changes severalinnovationsand to led crisis monumental this that noted (COPPE/UFRJ) Janeiro de Rio of FederalUniversity 2 Germany.with partnership a under Program.The American Latin the and Project Center” “Brazil@The Wilson the from forthcoming is Dr.which by Pinguelli written 1 supply. energy participant its Seminar of sources the diversifyingtowards shifted policy Brazilian when shocks oil-price 1979 and 1973 the after occurred sector the of ing Latin American Program-WWICS. American Latin T These comments are included in a working paper, Der paper, working a in included are comments These Pinguelli, Luiz. Forthcoming. Der Forthcoming. Luiz. 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B al G al r a as S as z ectors i the hat urred l ns in ns ild a ild only zil l s o nal i- a g under-investment in the sector and the severe drought that has discussed the noted increase in Brazilian energy demand, the reduced by 30% the hydroelectric reservoirs that supply 90 build-out of electrical power generation facilities, options for percent of the country’s power.1 Rainfalls during last summer future production and the environmental implications from cur- were 71% below average levels and the country is experiencing rent policies. In one session entitled “Energy Demand and its worst drought in more than 70 years. Nevertheless, econo- Production,” parallels between the energy suffered by the state mists, the media, and common Brazilians alike have pointed to of California and the looming problems in Brazil were drawn. the Cardoso government’s lack of attention to and investments The day-long seminar, funded by a generous grant from Texaco, in the energy sector. helped to contextualize the historical evolution of the energy President Cardoso’s popularity has fallen to 28 percent from sector in Brazil and the necessary steps required to ensure its 46 percent in April, according to one recent poll.2 Criticism of sustainability. his government emanates from its failure to respond to official technical studies completed on the declining supply of energy ––– over the past five years.3 Ironically, his critics must acknowl- THINKING BRAZIL edge that this excessive demand for energy has been the result The Search for Answers 3 of the country’s robust growth since President Cardoso took office. During the 1990’s, energy demand grew 45% as the The dynamic linkages between a country’s economic growth, its economy expanded although installed generating capacity rose sustainable energy sources, and its environmental policies were by just 28%. The national energy regulatory agency (Agência questioned and explored during the daylong seminar "Energy Nacional de Energia Elétrica, ANEEL) has estimated that to and the Environment in Brazil" held at the Woodrow Wilson meet further growth in demand, Brazil’s generating capacity Center on 25 April, 2001. The underlying premise of the confer- will have to rise by 5.0% a year.4 ence, and the predominant assumption among its participants, was that the causality of their relationships must be understood A Leader in the Debate: Brazil @ The Wilson Center in order to make the appropriate policy decisions for the energy Even prior to the government’s formal declaration of an sector and the country. The Director of Brazil @ The Wilson energy crisis, the issues that were confronting the sector in Center, Luis Bitencourt, originally conceived of the concept for the Brazil could not be ignored. In February, the credit rating seminar because of the faster than expected expansion of the agency of Standard & Poor’s warned that Brazil was at risk of demand for energy relative to existing supplies. Given this con- facing the same energy shortages as were affecting California text and the recent events in California, answers were desperately in the United States.5 It was in this context that the Brazil @ needed about the future of the sector. Interestingly, it was during The Wilson Center spearheaded a debate on the topic by hold- the weeks immediately preceding and following the conference ing a seminar on the issues confronting energy, the environ- that the Cardoso government began to unveil plans for an energy- ment, and its sustainability in Brazil. On April 25th, sector and rationing scheme. country experts were invited to participate in “Energy and the Environment in Brazil.” Speakers included Congressman Luiz Power as a Source of Economic Growth Fleury, former head of the Commission on Mines and Energy in The dynamic relationship between economic growth and reli- the Brazilian Congress, Thomas Lovejoy, Chief Biodiversity able energy resources has been revealed through the current cri- Advisor for the World Bank, and Luiz Pinguelli Rosa, Assistant sis. The experiences of Brazil demonstrate that rationing and Director of the Graduate School of Engineering at the Federal unstable supplies of energy (Continued on pg. 4) University of Rio de Janeiro. Four panels throughout the day

Thinking Brazil is a publication of the Brazil @ the Wilson Center. This Footnotes project is founded on the conviction that Brazil and the U.S.-Brazilian relationship deserve to receive better attention in Washington. Brazil’s 1 Excerpt from Energy Crisis Leaves Brazil in Perpetual Twilight. Sustainable population, size, and economy, and its unique position as a regional Development International On-line. http://www.sustdev.org/energy/Industry%20News/06.01/19.01.shtml. leader and global player fully justify this interest. In response, and in 2 Poll was conducted in Brasília by the Correio Braziliense newspaper . Taken keeping with the Center’s mission to bridge scholarly research and from Energy Crisis Leaves Brazil in Perpetual Twilight. Sustainable Development public action, Brazil @ the Wilson Center sponsor activities designed to International On-line. create a “presence” for Brazil in Washington that captures the attention http://www.sustdev.org/energy/Industry%20News/06.01/19.01.shtml. 3Rohters, Larry. 2001. Brazil, Fearful of Blackouts, Orders 20% Cut in Electricity. of the policymaking community. Brazil @ the Wilson Center is grateful 19 May 2001. New York Times. for the support of the Ministry of Culture of Brazil, ADM, Cargill, Texaco, 4 Brazil Report. 13 March 2001. Latin American Regional Reports. London, FMC, and Raytheon. England: pg. 4. For comments and to request copies of this publication, please 5 Brazil News. Brazil Information Center. July 2001. Washington, DC: Vol. 2 Issue 5. e-mail Alex Parlini at [email protected]. can have severe implications for a country’s expansion. The cur- for the sector. The development of an energy wholesale market, rent shortfall in Brazil’s energy supply is expected by analysts to the stake and participation of the government in utility compa- translate into a two-percent or more reduction in economic nies, the future pace of privatization, and the integration of growth (Gross Domestic Product, GDP) from original forecasts. upstream and downstream operations (i.e. continental integra- Following the economy's erratic expansion in the 1990’s and a tion) will be effected, both positively and negatively. As he cau- downturn in 1999 (-0.1% YOY), the country should witness only a tions, it is critical that during this time of crisis the government slight increase in GDP during 2001 (+2.0%-3.0%) after last year’s steers Brazil away from choosing temporary solutions for long- robust level (+4.2%, 2000). The composition of Brazil’s industrial term problems, possibly undermining whatever advances that base (steel, auto manufacturing, mining) has created a dependen- already have been achieved. The caveat Mr. Ludmer issues, simi- cy upon a reliable and constant stream of energy that current lar to Dr. Pinguelli’s, is that history is most relevant if Brazil hopes sources of power are not able to satisfy. not to repeat past mistakes. The current model of a privatized During the conference, Paulo Ludmer, the Executive Director and competitive service should remain the compass "essential to of the Associação Brasileira de Grandes Consumidores Industriais guide our steps" and to limit the duration and intensity of the cur- THINKING BRAZIL de Energia (Brazilian Association of Large Industrial Consumers of rent "turbulence" that Brazil is experiencing. 4 Energy, ABRACE) explained that his association’s members (53 in This path towards continued privatization and competition total) must have constant access to quality and competitively- appears for many sector observers as the only option to develop priced energy. ABRACE members represent the largest con- Brazil's energy resources. Mr. Neil Burgess, Vice President of sumers of power in Brazil. They account for almost half (45%) of Power and Gasification for Texaco Brasil S.A., signaled how a Brazil’s entire consumption of oil and one-third of the total developing country like Brazil could make the sector more attrac- amount of electric energy used in the country. Mr. Ludmer under- tive for potential investors. First, certain risks must be addressed scored during the meeting that the availability of energy was the before an international investor can enter the market. The coun- key for increasing Brazil’s industrial output. As events would try’s reliance upon one power source (hydroelectric power), an prove, it was a prescient observation. These fifty-three industries, uncertain regulatory environment (e.g. seizure of the semi-priva- mainly operating in the areas affected by the energy crisis, have tized electric generator Cemig in Minas Gerais), and the instability been forced to curtail operations and temporarily layoff workers. of the Real (R$) are some of the risk considerations that an inter- The economic contraction in industrial production has depressed national player like Texaco must define, evaluate and mitigate consumption and produced spiraling effects in related sectors, before investing. This type of risk evaluation has contributed to further hampering the prospects for the country’s growth. Mr. the increased attractiveness of power distributors in Brazil for Ludmer noted that Brazil would most likely experience additional investors rather than other areas that are in desperate need of negative consequences from the apagão not only in terms of capital inflows such as thermal generation. Rigid pricing struc- unemployment and growth but also in reduced levels of tax rev- tures, foreign exchange risk, and mismatches between power pur- enues, trade, and rates of investment. chase agreements and fuel supply commitments have discour- Mr. Ludmer and ABRACE members insist that there is a range aged international incursion into this area of power generation. of secondary effects from the energy crisis that must be evaluated Second, the government must become an active player in the con- struction of "bridges" between establishing an effective regulato- Table 1: Installed Capacity (MW) of Brazil’s Energy Matrix ry environment and creating a competitive market to stimulate participation by international investors. Effective and enforceable government policies serve as the principle mechanisms to reduce Hydraulic 52,039.27 investor risk and promote further privatization of the sector. The Thermal 5,407.83 creation of clear performance obligations, enshrined in long-term contracts, is one method to promote the conditions that will per- Itaipu (50%) 6,300.00 mit both the investor and sector to benefit (in terms of efficiency, Nuclear (Angra 1) 657.00 innovation, and needed capital investments). For Mr. Everton de Almeida Carvalho of INB (Industrias Autoproduction 3,024.56 Nucleares Brasileiras), there have been notable and positive Independent Producers 1,376.18 developments in the energy sector that will help entice interna-

Total 67,804.84 tional companies and reduce their perceived risk of investing in Brazil. Three such changes are the introduction of competition Source: ANEEL 1999. From: Carvalho, Everton de Almeida. Presentation: The into certain segments of the electric sector (generation and distri- Brazilian Sector and the Role of the Nuclear Power Plants. Energy and the Environment in Brazil Seminar. 25 April 2001. Washington, DC: WWICS. bution), the creation of regulatory instruments to enhance market Trends in Capacity and Consumption, 1980-2000

280%

260%

240%

220%

200%

180%

160%

140%

120%

100% 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000

Consumo (80) =100 Cap Inst. (80) =100 THINKING BRAZIL Graph 2: Evolution of Energy Demand and Supply, Brazil 5 Source: D’ Araujo, Roberto Pereira. Presentation: ILUMINA. Energy and the Environment in Brazil Seminar. 25 April 2001. Washington, DC: WWICS.

flexibility (non-discriminatory tariffs and open access to transmis- energy sources. An entire section of the seminar was dedicated sion and distribution systems), and the privatization (partial) of to this topic and it remained an undercurrent throughout all of the the country's distribution and generation networks. The estab- presentations and discussions. Dr. Roberto D’Araujo of ILUMINA lishment of agencies that have the capacity to ensure the efficient (Institute for Strategic Investment in the Electric Sector) explained functioning of the sector will also assist towards these ends. The that ensuring a sustainable supply of power provides for an ener- creation of a national energy regulatory agency (ANEEL), the gy reserve to act as insurance against adverse situations like the Electric Energy Wholesale Market (MAE), and the National current scenario. One source for such a sustainable supply could Electricity System Operator (ONS) will define the scope and be nuclear power. It was within this context that Mr. Carvalho, of improve the effectiveness of the state’s regulatory activities. INB, posed some questions on the increased role that nuclear Nevertheless, the process has not been as dynamic as in other power plants should assume in the energy matrix of Brazil (See sectors in Brazil or neighboring countries that have undergone Table 1). The construction of nuclear reactors in Brazil began in similar privatizations (e.g. Argentina and Chile). The inability to 1975 under a cooperative agreement with Germany to build eight construct more "bridges" between government regulatory and facilities that would produce 10,400 MW by 1990. There have competitive structures has only undermined the productive been only three reactors completed from this agreement and the capacity of the sector. The current energy crisis that confronts program has since been abandoned because of high cost over- Brazil is evidence that the country and its citizens have been the runs. For the three facilities constructed (Angra I, II and III), the biggest losers from the improper management of the sector. As project had exhausted 80% of its total budgeted resources Mr. Burgess reflected at the close of his presentation, "the most (US$10bn) for the eight reactors. costly power is…the power you do not have." Dr. Bitencourt is Nevertheless, nuclear power is being reconsidered as a concerned the government may take measures that address the viable option to meet Brazil's growing energy needs. Given pat- current crisis but fail to present a comprehensive strategy for the terns of global consumption, ANEEL has forecasted that demand country's energy sector. "After this crisis, faced with rationing from residential (+7.0%), commercial (+6.0%), and industrial and depending on rain, a comprehensive plan to address the cur- (+2.5%) consumers will continue the upward trend that began in rent and future energy demand in Brazil must be envisaged." the 1990’s. Current energy demand per capita in Brazil (1.906 Nevertheless there are two major obstacles for such an outcome. kilowatt hours, kWh) is below the world average (2.260 kWh) and First, there is the usual Brazilian aversion to long-term, strategic is significantly less than levels consumed in industrialized coun- planning and, second, is the fact that next year's presidential tries like Germany (5.789 kWh). This rise in demand will place an elections will most likely postpone the resolution of any pending added strain upon an already faltering supply of power (See problems. Graph 2). Mr. Carvalho demonstrated through projections from Electrobrás that investments in the sector (generation, transmis- Viable Energy Alternatives to Meet Demand sion, distribution and generation installations) are expected to The near exhaustion of the country’s energy supplies has led decline over the next four years from US$4.69 bn in 2000 to to a renewed and vigorous quest for encountering sustainable US$3.30 bn in 2004 as demand rises (Continued on pg. 6) 6 THINKING BRAZIL ed upon the dilemma from two complimentary viewpoints. viewpoints. complimentary two from dilemma the upon ed reflect-seminar.He the at presentation his during concerns these to related questions some posed Development), Sustainable SustentávelDesenvolvimento o moving from fossil fuels into other forms of "clean" energy? "clean" of forms other into fuels fossil frommoving by pollution of abatement the for timeframe feasible a there is annually. atmosphere the into released emissions (CO2) dioxide carbon the of 80% for account they Alone polluters. air main the be to tinue con- Brazil, them amongst world, the of economies largest eight The emissions. harmful of excessiverelease an and pollution increased in resultedhave practices production and exploration energyCurrent environment. the on impact their and policies sector re-evaluationof a to led has energy for demand in rise the Balance Environmental An input. primary its of supply sive inexpen- and plentiful a exists there world, the in uranium of ply sup- largest sixth the has BrazilGiven MWh). (US$32-US$40 tors genera- thermal than expensive less significantly are but MWh) (US$20-US$25 facilities hydroelectric than operate to costly more 17% only are studies)) (feasibility MW 1309 - 3 Angra and tion); opera- (trial MW 1309 - 2 Angra (operating); MW 657 - 1 (Angra facilities generation state-owned The Brazil. of region Northern the in areassensitive environmentally in and centers tion popula- from away located increasingly arehydropower projects while Argentina or Bolivia from imported largely and limited is country the of supply (See Tablegas accessible natural The 3). easily is and structure attractivecost an has it although 1999) in (1.0% energy of source used least the is generationpower Currently, Brazil. in powernuclear for demand expanding the satisfy to alternativecompetitively-priced a is generation nuclear energy,of sources competitive the all of noted, he As discussion. future merits that topic a energy, nuclear certainly for is analysis it cost-benefit a completed fully seminar the nor presentation Mr.neither event.Carvalho’srepeated While a not is crisis energy Brazil’sthat ensuring currentby role positive a assume could power nuclear that gap this within is It period. same overthe S Environment in Brazil Seminar. 25 April 2001. Washington,DC: WWICS. April Seminar. Brazil25 in Environment the and Energy PowerPlants. Nuclear the of Role the and Sector Brazilian Presentation: The Almeida. de Everton From: Carvalho, 1999. ANEEL Source: e Table 3: Energy Sources, % Contribution for Distribution for Contribution Table% Sources, Energy 3: c The use of nuclear power and other alternative sources to meet to sources alternative other and power nuclear of use The o n d , what is the medium-term solution for the current energycurrent the for solution medium-term the is what , Nuclear Thermal Hydraulic Nuclear Thermal Hydraulic I s r a e l

K l a b i n , President of the of President , 9920 2009 2000 1999 9920 2009 2000 1999 088. 74.8 87.8 90.8 088. 74.8 87.8 90.8 . . 3.1 22.1 2.9 9.3 1.0 8.2 . . 3.1 22.1 2.9 9.3 1.0 8.2 (Brazilian Foundation for Foundation(Brazilian Fundação Brasileira paraBrasileiraFundação F i r s t , Brazil. 25 April 2001. Washington, DC. WWICS. 2001. Washington,DC. April 25 Brazil. in Environment the Study.and EnergySustentável. Desenvolvimento o paraBrasileiraFundação Case -Brazil Concerns EnvironmentalProduction EnergyPresentation: Israel. Klabin, Source: oa .910020100 1.0 58.0 41.0 0.250 0.002 0.145 0.102 100 6.4 15.6 78.0 9.79 0.63 1.53 7.63 Total Nuclear Renewable Fuel Fossil Table 4: Main Sources of Energy,Tableof Sources Main vs. WorldBrazil4: SOURCE spilled 13,2000 gallons of diesel fuel into the Atlantic Ocean near Ocean Atlantic the into fuel diesel of gallons 13,2000 spilled year,line this July.ruptured of Februaryin a River In Iguaçu the into oil of gallons million 1.1 of release the including spills major fivewere there 2000, During years. two past overthe leaks gas and spills oil of series a suffered Petrobrás,has S.A, Brasileiro Petróleo company oil state The fuels. fossil of distribution and refinement, exploration, the in used infrastructuredeteriorated the of because severalproblems experiencing also is country The follows. that colonization of pace chaotic the from problems Indirectly, generated peoples. has local it of relocation the and areas adjacent of flooding the through environment the on impact direct and negative a created has powerhydroelectric on ency country’sthe (See Tablesourcesdepend- example, energyFor 4). Brazil’sby generated currently principle externalities ronmental envi- negative the of some alleviate as well as energy for demand growing the satiate help could exploitation and development Their sources. energy solar and thermal, (wind), aeolic biomass, to access its given limitless is power "clean" developing of tial poten- the where countries few the of one is Brazil fact, In sions. emis- dioxide carbon highest the with countries of list the in place 20th to 7th movefrom would Brazil forests, of burning and slash the control effectively that policies having by simply that noted Mr.zero. almost Klabin to CO2 of emissions its reduce to Brazil allow would transportation of system basic its modernize and fires, forest limit deforestation, control to ability the dioxide, bon car- of case the In policies. social effective more promoting and sources energy sustainable towardsmoving by sector the in gies environment. the to detrimental and inadequate provemay long-term the in that projects new dissuade to attempt and matrix energy existing the review to important is It ations. consider- these bypass to tend experiencing, currently is Brazil as crisis, of moments during Unfortunately,made Brazil.decisions of realities local the to tailored be must also solution viable any but implemented be can that projects the condition will financing international access to ability the and analysis benefit cost- of use The sources)? alternative and renewable of ration explo- accelerated the and conservation, sinks, carbon (i.e. ment environ- the to impacts negative any minimize will that problem Brazil could gain substantially from exploiting existing syner- existing exploiting from substantially gain could Brazil Primary Energy Primary (10 9 TOE) WORLD TheWorld & 1998 Brazil - O on i equivalent oil = tonne TOE % Total Primary Energy Primary (10 9 TOE) BRAZIL % Total the city of Curitiba in the Southeast of Brazil. The slick, stretching seven miles, contaminated a natural reserve (Mata Atlântica) and five rivers. The latest and most serious accident occurred on March 20, 2001 when Petrobrás’ extensive P-36 offshore platform at the Campos Basin site sank. Three explosions rocked the plat- form before it collapsed into the ocean, spilling an undetermined amount of oil. At the time of the accident, the rig was producing 83,000 billion barrels of oil a day (bbl/d). The environmental impact from these events underscores the importance of finding alternative and "clean" sources of energy in Brazil, an urgency that has been heightened by the government's program of energy rationing. ––– THINKING BRAZIL Governor of Acre Discusses 7 Vision for Amazon The Governor of Acre, Jorge Viana, during his visit to Brazil @ The Wilson Center

On 25 September 2001, Brazil @ The Wilson Center hosted a restore state infrastructure, and another for the creation of envi- discussion on prospects for the sustainable development of the ronmentally-protected areas to develop a viable "forest econo- Amazon. The Governor of Acre, Jorge Viana, and National my." Once these projects are implemented, 70% of the state’s Congressional Senator Marina da Silva offered their visions on the land area will be included in various programs that promote eco- topic and highlighed current policies being implemented towards nomic development while respecting the fragile balance between these ends. biodiversity and natural resource exploitation. Viana expects that Jorge Viana (Worker’s Party- PT) has become well known in these projects, in addition to the areas currently designated as Brazil not only for being the youngest state governor in the coun- "legally defined forest reserves," will extend environmental pro- try but for challenging politics as usual in the Amazon region of tection in one form or another to 80% of the Amazon lands in Brazil. Governor Viana has also gained the attention of interna- Acre. tional NGOs that are concerned with environmental protection of During the meeting, Governor Viana emphasized the impor- the areas of the Amazon that are located within his state. He has tance of promoting sustainable development projects apart from pursued policies for the sustainable development of Acre while their positive environmental imiplications. According to Governor promoting the protection of the Amazon’s sensitive ecosystem. Viana, these new projects will provide a social outlet for the Governor Viana emphasized the importance of designing projects state’s youth as well as employment opportunities that previously for economic development that respect the biodiversity of the did not exist. He sees a positive cycle being created where young Amazon region. He noted that the model used for economic individuals now will be diswayed from criminal pursuits and will development in the region during the 1980’s was based on the enter into more productive activities. He contrasted the current misconception that natural resources were inexhaustible. He con- state of affairs in Acre with the conditions that existed prior to his ceded the inherent flaw in this assumption and explained, "We administration. As he commented, "the state was dominated by are currently in an era of limits…we have been forced to accept organized crime and was a basis for drug trafficking." that we need rationing, control, and (the) recycling of natural Neverheless, many obstacles still remain for the complete resources." impletation of sustainable development strategies in Acre and A strong proponent of creating a "government of the forest," Brazil. Senator Marina da Silva focused on the congressional Viana has coined the term "florestania" (citizenship of the forest). debate over environmental protection legislation. She explained This concept attempts to extend to the people that live in the that although Brazil has a relatively sophisticated legal frame- Amazon (indigenous tribes and small agriculturists) full access to work to protect designated areas, it still lacks regulations on and participation in the economic, political, and civic life of the many issues, such as timber extraction. state. He acknowledges that the Brazilian Federal Government has recently renewed its focus on the Amazon region, as evident in the completion of a joint federal/state development strategy ––– (Economic-Ecological Zoning Plan). As a part of this plan, Viana’s administration has designed two large-scale programs: one to Examining Brazil’s Image the future of Brazil’s image in the U.S. Meeting participant Michael Deaver from Edelman Public Relations signaled that the lack of pre-conceived notions about Brazil will allow the country The source and management of a nation’s image in today’s to construct its own identity. It will be necessary to design a strat- changing international system formed the basis for a conference egy that engages both the public and private sectors. It was also entitled “Moving Forward: Brazil’s Image in the United States” suggested that all sectors facilitate increased access to informa- held on 8 June 2001 at the Wilson Center. The meeting was spon- tion on Brazil. Finally, the importance of coordination and organi- sored by the Brazil Project, the Brazilian Ministry of Foreign zation in these efforts was stressed in order to maintain consis- Relations, and the Inter-American Development Bank. It engaged tency in image. the participation of various experts from the private and public ––– sectors and included top scholars, policy-makers, marketing experts, and representatives from private sector, media, and non- News from Brazil @ The Wilson Center governmental organizations. THINKING BRAZIL These participants gathered to discuss recent surveys, includ- PUBLIC POLICY SCHOLARS VISIT THE BRAZIL PROJECT 8 ing a 1999-2000 poll, that showed Brazil is largely unknown to Three Public Policy Scholars were recently in Washington, DC as part the American public. However, Brazilian Ambassador Rubens of a continuing research program between Brazil @ The Wilson Center and the Brazilian Ministry of Culture. Two Junior (Thais Barbosa cited a more recent Gallup Poll that showed an improved Batibugli and Francisco Rogido Fins) and one Senior (João Paulo M. perception of Brazil over the last two years. He mentioned sever- Peixoto) Public Policy Scholar came to examine various topics of al existing programs and focused on raising the profile of Brazil in debate related to the changing role of the state and its implications for democracy and political culture. As a result of their endeavors, U.S. schools, the Congress, and among prospective U.S. two working papers will be forthcoming (please see below). These investors. recent scholars bring the total to six Brazilian researchers who have Different partipants provided their own insights into the topic. been hosted by this unique program. Later this month, another scholar is expected at the WWC, noted University of São Paulo pro- Media representatives, including Eugene Robinson of The fessor, Amâncio Jorge N.S. de Oliveira who will be investigating com- Washington Post, stressed that a country interested in presenting parative business-state affairs in the U.S. and Brazil. and maintaining a good image internationally should concentrate UPCOMING PUBLICATIONS on achieving appropriate social, political, and economic results domestically. Other speakers explored the growing responsibility Working Paper: Washington Disensus?: In Search for the Proper Role of the State in Brazil After a Decade of Structural Reforms. João of NGOs in shaping Brazil’s image, particularly in sensitive areas Paulo M. Peixoto, Universidade de Brasilia. as the environment and human rights. Steven Schwartzman of Working Paper: Analysis of Brazilian Cogeneration Regulatory Environmental Defense and Thomas Lovejoy of the World Bank Framework, in Light of International Experience. Mauricio T. described the implications from having NGO’s active in Brazil but- Tolmasquim and Alexandre S. Szklo, Federal University - Rio de that are headquartered in Washington, D.C. Participants from the Janeiro. private sector concluded that the government lacks an articulated Working Paper: Deregulation of the Energy Sector in Brazil: A strategy that engages them to promote Brazil’s image abroad. Comparison Between Electric Power, Oil and Natural Gas. Luiz Pinguelli Rosa, Federal University - Rio de Janeiro. The workshop concluded with some insightful observations for

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