Study: Fast economic growth could see power shortages in 2005

Brazil could suffer power shortages as early as 2005 if the economy grows by at least 5% a year because the country's new sector model is unlikely to be a strong magnet for new investment, newspaper Valor Economico reported, citing a study by consulting firm CBIE. Increased government power in sector planning and the lack of clear detailed rules in the decrees that instituted the new model on December 11 mean that investment will be concentrated in the government's hands, especially through electricity holding company Eletrobras, CBIE president Adriano Pires said. Eletrobras has an annual investment capacity of 3bn-4bn reais, around a quarter of estimated power investment needs, Socopa Brokerage analyst Marcos Paulo Pereria told BNamericas. CBIE considers this investment insufficient, saying that because the holding's 2003-2010 investment plans are not enough to supply extra power needed, power shortages will come in 2007 with economic growth of 2% a year, or in 2006 if the economy grows at 4.1% a year. Power demand grows at about 1.5 percentage points for each percentage point GDP growth. Analysts are estimating economic growth of 2-4% in 2004. An additional issue for investors is what the Supreme Court decides about the new model after opposition political parties filed four different suits alleging the measures are unconstitutional, the newspaper reported.