Julia Tierney Infrastructure in Crisis: Energy and Security Challenges Final Paper Submission – December 13, 2010 The Controversial Belo Monte Dam Project: Is Brazil’s Thirst for Hydroelectricity Damming the Amazon? Introduction to the Belo Monte Controversy: The construction of the Belo Monte dam in the Brazilian Amazon underlines the inherent tension between expanding Brazil’s economy and preserving its natural resources. Brazil’s development achievements have long been intrinsically linked with its water resources. Possessing some fourteen percent of the world’s fresh water, it is a country rich in water resources, but with almost three- quarters located in the Amazonian Basin, tapping this hydraulic potential has been a technically complex and environmentally contentious undertaking. (World Bank 2010) This is especially true for the controversial Belo Monte project. Although the plans for the dam were initially prepared in the late 1970s under the military regime, the environmental licenses and bidding procedures were only approved some three decades later under the leftist 1
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Julia TierneyInfrastructure in Crisis: Energy and Security Challenges
Final Paper Submission – December 13, 2010
The Controversial Belo Monte Dam Project: Is Brazil’s Thirst for Hydroelectricity Damming the Amazon?
Introduction to the Belo Monte Controversy:
The construction of the Belo Monte dam in the Brazilian Amazon underlines the
inherent tension between expanding Brazil’s economy and preserving its natural resources.
Brazil’s development achievements have long been intrinsically linked with its water
resources. Possessing some fourteen percent of the world’s fresh water, it is a country rich
in water resources, but with almost three-quarters located in the Amazonian Basin, tapping
this hydraulic potential has been a technically complex and environmentally contentious
undertaking. (World Bank 2010) This is especially true for the controversial Belo Monte
project. Although the plans for the dam were initially prepared in the late 1970s under the
military regime, the environmental licenses and bidding procedures were only approved
some three decades later under the leftist administration of President Luiz Ignacio Lula da
Silva. Designed to link Brazil’s rising energy needs with the Amazon’s tremendous
potential to supply renewable hydropower, Belo Monte will require as much earth moving
as the Panama Canal to become what is envisioned to be the world’s third largest dam
complex. It has proven to be so controversial because it pits the necessity of Brazil’s rising
energy requirements in the midst of its economic resurgence against the importance of
preserving the Amazon as a region of biodiversity and indigenous culture. The conflicting
sides are inherently justified but seemingly diametrically opposed. On the one hand, Brazil’s
recent economic boom has lifted more Brazilians out of poverty than at any other time in the
country’s history, but additional energy generation is essential to fuel this growth. On the
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other hand, the Amazon’s unquantifiable value as the natural habitat of immense
biodiversity and the native homeland of myriad indigenous tribes is threatened by the
construction of dams that will dislocate its rivers and force its people to resettle. Despite the
validity of both sides, the vitriol of their arguments makes it virtually impossible to examine
the Belo Monte dam from a neutral perspective, but this essay will attempt to do just that
through an analysis of the historical, economic and socio-environmental aspects of the
project. There is no question that the dam’s impact will be devastating on the people and
wildlife in the environs of the Xingu River where it will be constructed, but now that the
government is determined to undertake Belo Monte, the question is whether the overall
benefits for Brazil’s increased energy consumption will outweigh these immense costs.
Background to Amazonian Development and Energy in Brazil:
Beyond a pure distillation of the natural environment and untold resources, the
Amazon has long been a site of conflict between nature and prosperity. International
environmental opinion has frequently claimed some degree of tacit sovereignty over the
Amazon, but this view has been contested in Brazil. The Brazilian government, from the
military regime, which spearheaded development of the region, to the administration of
President Lula, which is currently carrying through some of the military’s envisioned
schemes, has long linked the development of the country’s vast natural resources as a
prerequisite for national planning. Extending without interruption from the foothills of the
Andes to the shores of the Atlantic Ocean, the Amazon region appears as an expansive,
undifferentiated swath of forest. The dense tree canopy disguises the immeasurable diversity
of life within its boundaries. The river basin also encompasses myriad cultures within its
seven million square kilometers that stretch across nine national states. Most of the forest
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and river is located within Brazil, and for the Brazilians, Amazônia has long been a
reference point for their nation’s national image. Brazil attempted to tame the Amazon not
only as a means of strengthening its territorial control but also as a source of economic
wealth. Fearing encroachment by other empires, the Portuguese objective of colonizing the
Amazon prefigured those of the Brazilian generals who seized power in 1964. The
incorporation of the Amazon into Brazil over the course of Portuguese colonialism (1500 to
1822) to Brazilian empire (1822 to 1889) and later independence (1889 to the present) was
constantly tinged with violence that seems not to have disappeared to this day with the
ongoing destruction of the rainforest. (Burns 1993) The country’s military leaders recalled
past conflicts when setting out their bold vision of incorporating the Amazon into Brazil’s
territorial and economic development. One of their first initiatives was the creation of the
Amazon Development Agency that provided incentives, concessions, subsidies and
investment funds for large projects to develop the Amazon’s entrepreneurial future. For
example, the highway between Belém, the capital of the Amazonian state of Pará, and
Brasilia (itself built in the middle of the country as part of the colonization of the interior)
was a product of this vision, as was the construction of the first major Amazonian dam in
Tucuruí. (Teixeira 1996) Although the military dictatorship established the precedent of
intense nationalism over the Amazon region, these xenophobia tendencies have persisted
since the transition to democracy in 1985. For example, the administration of President Lula
was divided over the issue of reducing emissions from deforestation and degradation at the
United Nations Framework Convention on Climate Change in Copenhagen in late 2009.
While the Ministry of the Environment called for Brazil to exert a more proactive position,
the Ministry of Foreign Affairs resisted calls to internationalize the Amazon by underlining
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Brazil’s dominion over its rainforest. Around the same time, the military also held a meeting
in Brasilia where they outlined their agenda for maintaining Brazilian sovereignty in the
Amazon through increased economic development. (Zhouri 2010) Although much of the
criticism of Amazonian development comes from within, this historical background to
contestations over the Amazon is an essential aspect of the current controversy over Belo
Monte because in many ways the project’s proponents view it as essential to maintaining
Brazil’s dominion over its own natural resources.
Given its potential to energize Brazil’s economic growth, the Amazon continues to
be an integral part of Brazil’s development agenda, especially as Brazil has committed
significant levels of investment in enhancing its energy infrastructure. Forecast to become
the world’s fifth largest economy by 2014, Brazil has been growing at an annualized rate of
almost 5 percent under the leadership of President Lula. (IMF 2010) A former unionist
leader born into poverty, Lula has focused on reducing poverty and inequality and
enhancing infrastructure investment against the backdrop of macroeconomic growth and
stability. Economic prosperity has been accelerated through the flagship Growth
Acceleration Program (Programa de Aceleração do Crescimento, or PAC), which is
expected to invest more than BR$1.5 trillion (approximately US$900 billion) in various
types of infrastructure over the period from 2007 to 2014. More than 50 percent of this
investment is focused on the energy sector, and specifically 15 percent of the total (BR$200
billion, or US$120 billion) is devoted to electricity generation, mainly by financing
hydroelectric dams and power plants. (Financial Times 2010) Given Brazil’s dependency on
hydropower for its electricity needs, these investments will most likely target the Amazon’s
tributaries, as this is where virtually all of Brazil’s hydroelectric power resides, especially in
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the state of Pará where Belo Monte will be built. (Redclift 1994) Brazil’s current fiscal
flexibility following years of economic growth means that the projects initially designed
years ago under the military government but put on hold due to economic considerations,
such as the case of Belo Monte, have been restored under the Lula administration as a means
of fueling Brazil’s economic transformation.
Although Brazil is a vanguard in terms of renewable energy, further investment is
essential to reduce its precarious dependence on limited hydroelectric sources. From ethanol
to fuel its cars to hydroelectricity to power its industries, Brazil has long depended on
renewable energy resources. It is the tenth largest consumer of energy in the world but one
of the cleanest in terms of carbon emissions. More than 40 percent of its total energy
production is from renewable sources, with 85 percent of the total installed electricity
capacity generated by hydroelectricity. (Energy Information Administration 2009) This
makes Brazil the second largest consumer of hydroelectricity in the world behind Norway.
(Financial Times 2010) Yet despite leadership in renewable energy development, Brazil’s
growing economy has placed mounting strain on its energy sector. It has been estimated that
Brazil’s annual energy generating capacity increases at only 3 percent compared to its
annual energy consumption growth of 5 percent. This energy deficit has been partially
masked by the reliance on hydropower, but increased investment is crucial to avoid
disruptive shortages in the face of projections that energy demand will soon outstrip
installed supply. (Carvalho 2006) This energy deficit has become an ongoing source of
insecurity, especially in the face of climactic events such as droughts and floods that are
only forecast to increase in intensity and frequency with global warming. For example, an
unseasonable drought from June 2001 to March 2002 forced the slowdown of the Itaipu
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hydroelectric dam, the world’s second largest dam on Brazil’s border with Paraguay and the
supplier of approximately one-quarter of Brazil’s electricity. This caused devastating power
shortages that blacked out some sixty million people in São Paulo and Rio de Janeiro and
resulted in emergency measures to reduce electricity consumption, branding the past
administration the blackout government and contributing to its downfall as energy scarcity
crippled the economy. On the other extreme, massive downpours were behind last year’s
disruptive but brief power outage, when heavy winds and strong rains forced the temporary
shut down of the Itaipu dam and the loss of power across Brazil’s largest cities and the
entire country of Paraguay. (Financial Times 2010) Brazil consumes all of its generated
hydropower, but with a projected doubling of electricity consumption over the next decade,
the need for new sources of energy supply is undeniable. (BNDES 2010) Moreover, as two-
thirds of Brazil’s hydroelectric capacity is located in the Amazon Basin, the construction of
dams to harness this potential is at the forefront of the debate over how to secure these
energy needs. (Conservação Estratégica 2006)
Historical Development of Belo Monte Dam:
Despite ongoing controversies over damming the tributaries of the Amazon River, its
enormous hydroelectric potential means that the region has long been perceived as crucial to
Brazil’s energy development. Towards the close of the military dictatorship, Eletrobrás, the
state electricity agency under the Ministry of Mines and Energy, developed a controversial
plan outlining Brazil’s energy future. It envisioned the building almost three hundred dams
across the country, of which almost one-third were to be located in the Amazonian basin.
(Fearnside 2006) If implemented this plan would have had immense environmental impacts,
as the damming of most of the major tributaries of the Amazon River for hydroelectricity
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generation would have flooded more than 10 million hectares, representing 2 percent of the
legal Amazon region and 3 percent of the originally forested area. (Fearnside 1995) Among
the many planned dams was Belo Monte; however, there were extensive protests among the
indigenous peoples of the Xingu River where it was to be built as well as on the part of
environmental organizations. At an infamous meeting in the local town of Altamira a
Kayapó woman threatened the representative from the state electricity company (now the
president of Eletrobrás) with a machete. The opposition successfully lobbied the World
Bank, the main funding source for Belo Monte as well as several other dams, to cancel their
loan. A combination of the environmental and indigenous protests and the dire situation of
the Brazilian economy (which spiraled downwards in the late 1970s until its default in the
Debt Crisis of 1982) meant that the federal government was both unwilling and unable to
undertake most of the dams envisaged in the energy strategy. (Carvalho 2006) Eletrobrás
implied that it would reexamine several of the projects by undertaking a “resurvey of the
fall” on the river, but it never officially removed the dams from the overall energy policy. It
is important to note that a resurvey of the fall refers to re-measuring the topography along
the river, possibly altering the location, height and other engineering characteristics of the
dam, but not signifying that the dams would never be built, nor that they would not flood
forest areas or indigenous land. (Fearnside 2006) While the government’s seeming
abandonment of many of these Amazonian dams was seen by many as evidence that the
intense opposition would prolong the dams so long that they would never be built, the real
reason behind the delay was more related to financial constraints than to social and
environmental concerns.
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Now on more stable macroeconomic footing, the Brazilian government under Lula
reevaluated Belo Monte as an essential addition to Brazil’s hydroelectric generation capacity
though with some compromises to enhance its socio-environmental viability. Initially
developed towards the end of the military dictatorship, Belo Monte recently underwent a
series of revisions in the hopes of making it more environmentally and socially palatable to
the local people who would likely be devastated by its impact. The preliminary design was
based on two dams on the Xingu River (Babaquara/Altamira and Kararaô/Belo Monte),
which would flood an area of more than 14,000 square kilometers and generate 14,700
megawatts from five generating plants. This colossal project would have inundated the
entire Paquiçamba indigenous reserve, thus entailing the resettlement of more than 6,000
indigenous people, but this was only the project’s first stage. The second proposed part
involved building four additional dams (Iriri, Ipixuna, Kakraimoro and Jarina) that would
deluge a total area of 22,000 square kilometers in the Xingu basin, directly affecting twelve
indigenous groups. (Carvalho 2006) For example, the Kaiapó indigenous group was
indigent that a dam named after one of their religious words (Kararaô) would threaten to
destroy their natural habitat, forcing the government to change the name of the original dam
to Belo Monte (beautiful hill). (Fearnside 2006) The outcry over the extensive negative
environmental and social impacts of the original plan meant that it was taken off the table
soon after the transition to democracy in 1985. Far from being completely discarded, the
project was revised by Eletrobrás to reduce Belo Monte’s flooded area to from 14,000 to
440 square kilometers under an elevation of about 100 meters. (Scholz 2005) Nevertheless,
the revised plan still means that, if finally built, Belo Monte would be the third largest dam
in the world, behind the Three Gorges in China and the Itaipu on the Brazil-Paraguay
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border. Powered by the diversion of the Xingu River through the excavation of two large
canals 500 meters wide and 75 kilometers long, it would require unearthing more land than
was involved in building the Panama Canal. (Amazon Watch 2010) Despite its much-
reduced size, the revised Belo Monte project will still entail large environmental and social
impacts. The government believes these costs are justified because the generated electricity
will boost the energy supply needed to power Brazil’s growing economy, especially as other
regions have exhausted their hydroelectric potential. Moreover, the low demographic
density of the Xingu River means that the flooding of the Belo Monte reservoir will have
lower social impacts compared to other locations. (Conservação Estratégica 2006)
Technical Analysis of Revised Belo Monte Design:
Despite the vociferous objections of the indigenous peoples whose land would be
flooded, in many ways the siting of the Belo Monte dam would be ideal. Belo Monte would
be located on the Xingu River, a major Amazon tributary, with a watershed of more than
500,000 square kilometers representing 14 percent of Brazil’s inventoried hydroelectric
potential. The Xingu River takes a dramatic detour near the city of Altamira, forming the so-
called great bend (volta grande) that has long made it an attractive site for hydroelectric
development. (Conservação Estratégica 2006). Rather than the traditional design, with the
powerhouse located at the foot of the dam (as was the case under the original project), the
current blueprints for the dam would divert the bulk of the water laterally through a series of
canals and flooded streambeds to a main powerhouse at a lower elevation downstream of the
great bend in the Xingu River, thus gaining the benefits of the fall in elevation and only
requiring the construction of two smaller dams (though the totality of the entire complex
would make it relatively immense by dam standards). The first dam would be situated on the
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main river channel formed by the large reservoir (Sítio Pimental), from which the water
would be diverted to a second dam. (Eletrobrás 2009) The generation plant would be built at
the end of this second dam. As one of the engineers involved in the planning of the dam
expressed, “God only makes a place like Belo Monte once in a while. This place was made
for a dam.” (Fearnside 2006) Even its most prominent environmental critics have noted that
the Belo Monte site is “hard to beat.” (Fearnside 2006) The project would also include the
building of transmission lines, port, locks, as well as access roads and a bridge over the
plant’s outlet channel. The overall design is based on the total quantity and velocity of the
water flow, thus the number of turbines in operation would basically depend on the natural
water inflows into the powerhouse. Although the dam’s potential installed hydroelectric
capacity would total 11,000 megawatts, the average estimated electricity generated by the
main plant would realistically be closer to 4,600 megawatts because the reduced reservoir
size would mean that seasonal differences in water flow would significantly lower water
levels in the dry months. (Eletrobrás 2009) This reduced generation potential is a result of
the significant changes incorporated in the design of the dam since its original proposal met
with such strident opposition from environmentalists and affected indigenous tribes. The
reservoir was diminished by a factor of three by placing the main dam above the confluence
of the river, thus avoiding the flooding of the local protected indigenous area by reducing
the size of the reservoir. While this has detracted from its technical viability, the decades’
long delay in the implementation of Belo Monte has actually enhanced the project from a
socio-environmental perspective, as the dam’s direct impacts on the natural and indigenous
environs of the Xingu River are far from what they would have been under the original plan.
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Although its adverse socio-environmental effects have been curtailed, the Belo
Monte dam is complicated by the possibility that an even larger hydroelectric complex will
be required upstream to compensate for the smaller reservoir and amplify much-needed
energy generation. The main technical problem with Belo Monte is that it would operate
without a sizable reservoir, meaning that during the dry season the dam would be subject to
shutdowns. This would reduce the power plant’s generation capacity to below an
economically viable threshold. (Carvalho 2006) Thus, among environmentalists with a
knowledge of dams, Belo Monte has been described as just the tip of an iceberg because the
reduced flooded reservoir and seasonal variation in water flow would necessitate the
construction of a chain of large upstream dams, first a large one at Altamira (with an
hydroelectricity generation capacity of 6,588 megawatts) and additional smaller dams all
initially envisioned under the original Amazonian hydroelectric development plan (Ipizuna,
with 1,900 MW; Kakraimoro, with 1,490 MW; Jarina, with 620 MW and Iriri, with 770
MW). (Fearnside 2006) These dams were all originally part of the military government’s
aforementioned energy development strategy for the Amazon, but there are currently no
blueprints for the construction of the upstream dams from Belo Monte. Nevertheless, the
current government’s analysis of the economic feasibility of the Belo Monte attests:
The study in question considers only the existence of the Belo Monte Hydroelectric Complex on the Xingu River, which means that this dam does not gain any benefit from upstream regulation (of stream flow). Although the studies of hydroelectric inventory of the Xingu River carried out at the end of the 1970s had identified five hydroelectric dam sites above Belo Monte, the choice was made not to consider them in the evaluations developed here because of the need to reevaluate the inventory from a new economic and socio-environmental perspective. We emphasize, however, that the implementation of any hydroelectric development with a regulating reservoir upstream of Belo Monte would increase the energy capacity of this power plant. (Fearnside 2006)
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The government has maintained the separation between the standalone Belo Monte dam and
the larger hydroelectric complex looming in the background, but the upstream dams were
originally proposed as part of a unitary system and there are strong indications that they
would all become essential given the limited power capacity of Belo Monte.
Although it remains uncertain that Belo Monte would entail the construction of an
upstream hydroelectric complex, the history of past dam construction in the Amazon sheds
some light on their socio-environmental effects. The first Amazonian hydroelectric power
plants came into service during the military dictatorship when public debate was severely
restricted. Brazilian requirements for environmental studies were not enacted until 1986,
with the National Commission for the Environment (CONAMA) Resolution 1 that required
all infrastructure projects to undergo an environmental impact study as well as a briefer
document for public distribution known as the report on environmental impact. (Fearnside
2006) The transition to democracy combined with the publication of these environmental
analyses meant that the three main Amazonian dams undergoing construction at this time –
Tucuruí, Balbina and Samuel – later garnered considerable opposition as a result of their
negative socio-environmental effects. With a flooded area of 2,430 square kilometers and a
hydroelectric potential of 4,240 megawatts, the Tucuruí dam in the state of Pará is currently
the largest dam in the Amazon and the fourth largest in the world. Environmental impact
assessments were not obligatory under Brazilian legislation when it began construction in
the late 1970s. The need to increase its reservoir to fulfill the expected electrical potential
furthered the destruction of numerous animals and plants in the flooded area. (Conservação
Estratégica 2006) The alteration of the river’s path led to significant carbon emissions,
contamination of downstream water, overpopulation of insects and forced relocation of
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24,000 people. (Teixeira 1996) In addition, untold numbers of fishermen were forced to
migrate to the dam’s upstream reservoir because of severely diminished fishing catches.
(Manyari and de Carvalho Jr 2007) Although much smaller than Tucuruí, the Samuel dam
in the Amazonian state of Rondônia was a direct result of the construction of the
controversial highway 364 from São Paulo through the Amazon which opened the region to
a flood of migrants (its disastrous consequences catalyzed the establishment of the
environmental unit at the World Bank). The socio-environmental impacts of the dam were
similar to those at Tucuruí though on a smaller scale. In addition to the loss of over 400
square kilometers of forest that was flooded, there were also high levels of sedimentation
and soil erosion, alterations in the aquatic species composition, lowering of the water
quality, emission of greenhouse gases from the dead trees, increase in mosquito population,
release of mercury in the soil and the resettlement of more than 1,000 people (Fearnside
1995) The experience of these hydroelectric projects underlines some of the foreseen
consequences of further dam construction in the Amazon. Moreover, evidence points to the
fact that Belo Monte would likely pave the way for further hydroelectric construction. For
example, during the building of the Balbina dam outside of Manaus the state electricity
utility announced that it would only fill the reservoir to 46 meters before undertaking a
water quality assessment; however, the filing process did not stop until the reservoir reached
capacity at 50 meters and the environmental analysis was never undertaken. In the case of
Tucuruí, the environmental impact study for the expansion phase was truncated when the
state utility went ahead without its completion and also raised the water level by two meters
higher than was originally planned. (Fearnside 2006) If one can learn from these past
experiences, it appears that with the design for further upstream dams already on the table,
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these will likely be undertaken following the construction of Belo Monte despite the known
negative socio-environmental impacts resulting from such large hydroelectric complexes.
Economic Viability of Belo Monte Dam:
The economic analysis of the Belo Monte dam further substantiates the
argument that the construction of a larger hydroelectric complex upstream is the only
means of making the project feasible from a financing perspective. The Brazilian unit of
the Conservation Strategy Fund, a non-governmental organization that employs
economic analysis to conserve nature, conducted a cost-benefit analysis to determine
the economic viability of the project under three different scenarios. The first case
examined only the internal costs and benefits of Belo Monte exclusively as an energy
project, thus excluding the impacts and costs on the environment. The second case
included the estimated energy benefits as well as some external costs related to the
environment, namely tourism losses, negative impacts on water supply and fisheries
and reductions in water quality during the construction process. The third case
included these same external costs and estimated energy benefits based on an
alternative reservoir operation simulation model known as HydroSim, which was
originally developed in Brazil. The results of the three scenarios are summarized
below:
Indicator Scenario 1 Scenario 2 Scenario 3Net Present Value (US$) 1,624,880.117 1,436,159.306 (3,558,796.969)Internal Rate of Return 14.86% 14.53% 3.87%
(Conservação Estratégica 2006)
Belo Monte appears economically feasible in the first two scenarios, with positive net
present values in the range of US$1.5 billion and rates of return in excess of the discount
rate (which for Brazil was estimated at 12 percent given the country’s relatively high
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interest rates). This result seems to indicate that the internal costs and benefits of the project
significantly outweigh the external costs as valued by the traditional cost-benefit analysis.
However, the HydroSim modeling under third scenario predicts a much lower electricity
generation capacity and yields very different results in terms of large economic losses. The
inescapable conclusion from this third analysis is that more water storage is necessary to
fully take advantage of the massive Belo Monte power plant. As the authors of the report
underline in their main findings:
Whether or not the Belo Monte project is feasible as a stand-alone project, it will create enormous pressure to build upstream storage dams with much larger reservoirs. According to the generation estimates used in this analysis, Belo Monte’s guaranteed generation – for which it can sign sales contracts – would be between 20 and 40 percent of its installed capacity. That’s because the dam is subject to the Xingu’s highly seasonal flows. If storage reservoirs could bring that figure closer to 80 percent (the level at which the Itaipu dam operates), gross annual revenues would rise by between $1.4 – $2.3 billion, enough to justify investing $11 – $19 billion in upstream storage. These figures make highly unrealistic the scenario of a “sustainable” Belo Monte – a single, highly productive reservoir flooding a small, already impacted area. (Conservação Estratégica 2006)
Thus, although it reduces potential socio-environmental damage, the standalone, smaller
Belo Monte project appears to necessitate further upstream dam construction if the
investment is to be feasible both from a technical and an economic point of view.
The questions surrounding the economic viability of the project have compelled the
Brazilian government to enhance financing conditions as a means of attracting private
investment. Given that large infrastructure projects, not only in Brazil but also around the
world, have long been notorious for underestimating their true cost, there have been doubts
raised as to the reality of the stated cost estimate for Belo Monte, which is currently forecast
at BR$19 billion (about US$11 billion). The uncertain generating capacity during the dry
months could damage cost recovery and raise the true cost to upwards of BR$30 billion
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(US$17.5 billion). (Financial Times 2010) In addition, the extensive transmission lines
linking Belo Monte with the national electricity grid in the neighboring Amazonian state of
Tocantins, some 800 kilometers away, would decrease efficiency and increase costs by
some BR$2 billion (US$1.3 billion). (Carvalho 2006) While the social and environmental
outcry over the project initially caused some private sector investors to reconsider their
participation so too did the uncertainty over the true project costs. For example, while the
French infrastructure conglomerate Suez pulled out of the construction bidding process
following environmental protests, Odebrect and Camargo, two of Brazil’s largest
construction firms, planned to bid together but decided against it because they believed that
the maximum tariff set by the government for Belo Monte’s electricity was too low. The
government established a price of BR$83 per megawatt hour as the upper limit for the
electricity sold to distribution companies. For this tariff to be viable then the total project
cost would need to be no more than BR$19 billion, and not the BR$25 to BR$30 billion that
some analysts say would be more realistic. (Financial Times 2010) The Brazilian
government has announced its support of private sector investment through the national
development bank (Banco Nacional de Desenvolvimento Economico e Social, or BNDES),
which will provide up to 80 percent of the necessary financing at subsidized interest rates
for private firms that take part in construction. As the project is considered a long-term
infrastructure investment, with high initial implementation costs, the repayment terms
extend up to 30 years. Financing conditions also benefit the private sector through enhanced
private majority share control. (BNDES 2010) Despite the financing concerns, several of the
private companies that hesitated during the bidding process are currently exploring ways to
participate in the construction process, either as risk investors or as contractors. (Financial
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Times 2010) Government financial backing for Belo Monte seems to have provided
sufficient reassurance that the project will be implemented in the coming years despite the
socio-environmental and economic contingencies. Arising from a lucrative combination of
Brazil’s mounting energy needs and the Amazon’s hydroelectric potential, the certainty of
the Belo Monte dam has been almost guaranteed by explicit government financial support.
Environmental Opposition to Belo Monte:
Although the government has overcome the technical and economic obstacles to
initiating construction on Belo Monte, there is still outspoken environmental criticism. The
environmental impact analysis totals more than 35 volumes of 20,000 pages, but according
to outside experts it contains significant omissions. (Magalhães and Hernandez 2009)
Nevertheless, the current environmental study represents an improvement on the past one,
which was undertaken by the University of Pará as part of a flawed procurement process
that went all the way to the Supreme Court. The high court’s decision was to stop the project
until all irregularities had been addressed, but their ruling was overturned in 2005 when
Eletrobrás secured support from both houses of Congress to authorize the dam’s
construction pending the technical viability and environmental studies by the federal
agencies. The published environmental studies produced by Eletrobrás, the state electricity
agency, represent a marked improvement on the past ones yet they are still deficient
according to the critics. (Fearnside 2006) Moreover, the controversy over the environmental
assessment was deepened when two employees of the government’s environmental agency
resigned over pressure to approve the document and the Minister of the Environment
similarly stepped down over disagreements with the administration over the development of
the Amazon. (CSIS 2010) The environmental study concurs that there would be both
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downstream and upstream effects from the damming of the Xingu River at Belo Monte, but
the dam’s opposition believes that the consequences are much deeper than implied by
official documents. The interruption of the natural flow of the river is envisaged to provoke
distortions on the downstream riverside ecosystems. Predictable effects include erosion,
destruction of natural habitats, hardening of the riverbed, extinction of native species and
salinization of river water. Dams also exert a type of geo-chemical control that prevents all
particles except for ions from continuing downstream, thus destroying riverside ecosystem
biodiversity and diminishing the productivity of fishing and agriculture. (Manyari and de
Carvalho Jr 2007) As the dam will act as a barrier between upstream and downstream
movement, the Xingu River’s luxurious levels biodiversity – it has been estimated to have
about four times as many fish species as the whole of Europe – will be threatened.
(Magalhães and Hernandez 2009) Another notable effect of the dam is that the flooding of
the reservoir would provide a permanent carbon source for the emission of methane, thus
contributing to global warming despite the veneer of sustainability linked with renewable
energy in the form of hydroelectricity. (Fearnside 2006) The government responded to these
criticisms by mandating that the construction consortium set aside a reserve of US$800
million to protect the environment, but according to Belo Monte’s opposition, there has
been virtually no consultation with those most directly affected by the project, notably the
indigenous peoples living in the environs of the Xingu River. (CSIS 2010)
Social Opposition to Belo Monte:
Probably the most delicate issue affecting the Belo Monte dam is its impact on the
numerous indigenous peoples living in and around the Xingu River. Overall, the number of
indigenous peoples in Brazil is estimated at more than half a million, with more than half of
18
these living in the Amazon region. The dam is expected to affect a number of indigenous
tribes in the vicinity of Xingu River, namely the ones listed below, as construction will
occur virtually on the limit of their officially demarcated territories:
Indigenous Tribe Municipality Territorial Size (ha)Paquiçamba Vitória do Xingu 4,348
Trincheira/Bacajá Senador José Porfirio, Pacajá and São Felix do Xingu
Araweté/Igarapé Ipixuna Altamira, Senador José Porfirio and São Felix do Xingu
946,900
Apyterewa Altamira and São Felix do Xingu 980,000Arara Altamira, Medicilândia and Uruará 274,010
Cachoeira Seca do Iriri Altamira, Uruará and Ruropólis 760,000Xipaia Altamira Under studyCuruá Altamira 19,450
(Eletrobrás 2009)
The protection of indigenous peoples in Brazil is guaranteed by Article 231 of the
Constitution, which recognizes indigenous rights to, “their social organization, their
customs, languages, beliefs and traditions and the original rights over the lands they
traditionally occupy.” (Zhouri 2010) The government’s critics claim that it has been
untruthful about the number of people that would require resettlement by underestimating
the average family size of indigenous households, which tend to comprise between 5.5 to 7
people in contrast to the national average of 3.14 individuals. If this miscalculation is
factored into the estimates of the potential number of people that will need to be resettled,
then the true number is closer to twice as much as the government’s initial estimate,
meaning that up to 40,000 may require resettlement, with more than one-quarter of those (up
to 12,000 people) indigenous peoples. (Magalhães and Hernandez 2009) Even the people
not forced to resettle will still have their livelihoods disrupted by the dam because they
would lose access to the river during the dry season. Although no indigenous territories will
19
be directly flooded the forced diversion of the Xingu River, the modification of the river’s
flow will impose a “permanent summer” on the environs of the Xingu and its tributaries that
will destabilize the livelihoods of the people who depend on the river for their economy,
transport and sustenance. (Magalhães and Hernandez 2009) Another social impact would be
the increase in migration to the area as has long been the case for other Amazonia
development projects. Moreover, while most of these social costs would be concentrated in
the Xingu River basin, the benefits of the Belo Monte project would be diffuse, as they
would primarily serve the growing demand for energy in southeastern Brazil where most of
the economic resources are already located in and around large cities. As an indication of
the government’s intentions, the BNDES, the main financier of the project, has noted that
the power plant will be capable of supplying power to more than 26 million people, “in
other words, more than the residential consumption in the São Paulo metropolitan area.”
(BNDES 2010) Thus, the ultimate question surrounding the Belo Monte dam is whether the
very real benefits to the Brazilian economy, especially the residents of major cities such as
São Paulo, which accounts for about one-fifth of Brazil’s entire economy, justify these
negative socio-environmental consequences on the people of the Xingu River Basin.
Conclusion: Balancing Economic Development and Environmental Preservation
The dilemma with Belo Monte is moving beyond its very likely destructive socio-
environmental consequences towards reaching a compromise with the government over
Brazil’s very real energy needs to fuel its rapidly growing economy. Those who protest the
construction of dams in the Amazon have a strong case from a social and environmental
perspective, but they have failed to provide alternative sources of energy of sufficient size
and scale to meet Brazil’s needs. This is not to deny the necessity of implementing tools that
20
moderate these escalating energy requirements, but the rationalization of energy demand
cannot significantly detriment Brazil’s economic potential, especially as economic growth
has made significant inroads into reducing poverty. It is crucial that the disruptive
experience of the energy shortages of 2001-2002 not be repeated. The shutdown of the
Itaipu hydroelectric plan forced the government to impose severe restrictions disrupting
people’s lives, especially the poor who suffered the most from electricity shortages, and
negatively affecting economic growth. Residential and industrial customers were compelled
to reduce their electricity consumption by about 25 percent or risk potentially large fines and
imposed energy cuts. The opposition Worker’s Party (now the governing party under
President Lula and his elected successor Dilma Rousseff) accused the previous government
of biasing the poor because they were most vulnerable to cuts in basic services. (Financial
Times 2010) Part of the reason for this devastating experience was Brazil’s precarious
dependence on hydroelectricity for the vast majority of its electricity needs (85 percent), a
situation made more tenuous by projected increases in climactic instability such as droughts
and floods that disrupt hydroelectric power generation. What is essential is to enhance
Brazil’s energy security as part of the foundation for economic growth. Energy security will
require the expansion of power generation capabilities as well as measures to control energy
consumption. Although measures to enhance energy efficiency, such as retrofitting
hydropower plants and reducing energy losses, as well as steps to moderate energy demand,
such as building more efficient electric motors and installing low consumption appliances,
are important, they are far from sufficient to meet Brazil’s vast energy needs. (World
Wildlife Fund 2006) Hydropower is a relatively clean energy technology so long as the
construction of more dams in the Amazon does not impose unduly high environmental
21
costs. One of the only means of balancing these important concerns over the environment
and the economy is negotiation and compromise on the part of both the Brazilian
government and the defenders of the Amazon. This is not to deny the inherent power
imbalances between the government and the opposition to the dams but the sitting around
the negotiation table will hopefully end in a more economic and environmentally palatable
solution than would have resulted in the absence of discussion. The government needs to
realize that its dependence on hydropower is itself a source of energy insecurity that must be
dealt with over the long-term. Moving away from hydropower as the sole source of most
Brazil’s electricity is important but it cannot compensate for the need to increase the supply
of electricity today. The defenders of the Amazon must come to terms with Brazil’s dire
short-term needs for more energy. The rest of the country outside the Amazon has virtually
been tapped of its hydroelectric potential, thus it seems that some development will need to
take place in the Amazon to boost hydroelectric generation over the coming years. A more
long-term approach will involve a negotiated balancing of the Amazon’s tremendous
hydroelectric potential with its inherent cultural diversity and environmental resources.
Although the Brazilian government justifies Belo Monte from the perspective of
economic development, it has essentially failed to articulate its reasons to environmental
activists and indigenous peoples whose fears are focused on the socio-environmental
devastation of the Xingu River and its Amazonian environs. Due to the chronic energy
shortages that Brazil has faced over the past decade, the government has been under
significant pressure to address a potential future energy supply crisis, a calamity made ever
more likely by the skyrocketing consumption of energy that severely outpaces the growth of
the Brazilian economy. Not since the military regime developed the Amazon with paved
22
highways, urban settlements and hydroelectric dams has Brazil experienced such a conflict
between economic development and environmental conservation. Initially designed in this
past era, Belo Monte now comes at a very different time in Brazil’s history, but the country
continues to struggle to find a balance between the need of exploiting natural resources in
the name of fueling growth and the importance of protecting fragile ecosystems and
indigenous peoples. Ironically, Belo Monte has been shaped by the lessons of this past,
designed and redesigned to cull the power of the Xingu River without drying it completely
and flooding its environs entirely. The difficulty of developing the Amazon while also
preserving it is one of the most pressing challenges facing Brazil. If built, Belo Monte could
represent up to 10 percent of Brazil’s total power generation, an undeniable necessity in the
midst of Brazil’s growing economy when more people have been raised out of poverty
under President Lula than at any other time in history. (Barrioneuvo 2010) Investing in
power generation is essential and promoting renewable energy sources is responsible given
the global concern over climate change. Currently, Brazil is one of the world’s cleaner
energy economies with some 40 percent of total energy production from renewable sources
and lower per capita consumers of electricity with only 2,300 kilowatt-hours compared to
14,000 in the United States. (Downie 2010). Brazil is naturally endowed with tremendous
water resources that can be channeled into renewable energy sources. The inevitability of
Belo Monte appears virtually certain, with President Lula declaring before the construction
auction, “You can be certain of one thing: we are going to build Belo Monte. Loud and
clear, let there be no doubt about that.” (Financial Times 2010) What is essential for the
government is to better engage with the forces opposing Amazonian dams so that a
consensus can be reached on the optimal design that lowers the inevitable social and
23
environmental costs. This may be impossible with the current project given its contentious
history, but with the sustainability of the Amazon caught in the conflict between economic
development and environmental protection, the future of Brazilian hydroelectric dams
cannot be forced through in the same way as Belo Monte.
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