Thomas White Global Investing
Green Reports

July 6, 2011

The Green Report


Brazil’s Belo Monte: The Quintessential competition between growth and sustainability

Brazil’s Belo Monte: The Quintessential competition between growth and sustainability

Brazil plans to build Belo Monte, one of the world’s largest dams on Xingu, a tributary of the Amazon. In the planning for three-decades, Belo Monte will also address the concerns over the livelihood of native Indians and the dam’s impact on the Amazon forests.

 

Does building a big dam across a river help or harm the environment? In the 21st century, when humankind’s hunger for resource competes with the need to preserve the earth’s nature, this is the quintessential question with a definitive answer perhaps as elusive as the Holy Grail.

Yet, every time a blue-print to build a big dam is unfurled, this uncomfortable question undoubtedly arises. And the issues become even more complex when the big dam is to be built over one of the world’ greatest rivers and the largest reservoir of oxygen and freshwater: the Amazon of Brazil. It is now Brazil’s turn to address and balance the issues of development and preservation, as the country prepares to build the Belo Monte dam over Xingu, one of the Amazon’s numerous tributaries.

The proposed Belo Monte is no ordinary dam. If built as envisaged, the $17-billion dam will be the world’s third largest after the Three Gorges dam of China and the Itapu dam on the Brazil-Paraguay border. Belo Monte is expected to produce nearly 11,200 megawatts of power by 2015 and contribute substantially to the Brazil’s energy security. The dam promises not only to light up remote households that would otherwise be smothered in darkness, but will also provide power for Brazil’s booming mining industry.

However, along with the great size and huge benefits of the dam comes the great responsibility of managing the interests of a wide-ranging number of stakeholders. These stakeholders range from the bow and arrow-wielding natives tribes, who stand to lose their hunting and fishing grounds to Belo Monte, to the vast polity of Brazil, who are set to gain immensely from the dam. As a result, Belo Monte is as much a lightning rod for criticism for environmentalists as it is a modern marvel to technocrats.


Brazil’s government is planning to build the world’s third largest
hydroelectric power plant, Belo Monte, on the Amazon. The $17-billion
project is an exercise in balancing the interest of native Indians in the
Amazon basin with the country’s power needs.

Occasionally, tensions flare between the two polarized groups, with reports of executives involved in the dam being attacked by poisoned arrows from native Indians. These days thousands of native Indian tribes frequently skewer the government for constructing the dam on their ancestral land. Words such as “war” and “bloodshed” are increasingly common in the speeches of Indian leaders’ response to the government and the dam.

Understandably, all these protests have forced Brazil’s government to move extremely cautiously to implement the project. The original plan to build Belo Monte dates back to the 1980’s, when Brazil was controlled by the military. According to that plan, a series of three dams were to be built on the Xingu tributary to generate power. However, as the feasibility of the project came under question and as the impact of the dam on the environment was assessed to be huge, the plan was substantially scaled back over the last three decades. The project has been taken to court by various interest groups many a time, and decision-making has been painfully slow.

Consequently, over the course of the last three decades, the scope of the dam has shrunk drastically to accommodate the interests of various stakeholders. Finally, in June 2011, Belo Monte got off to a cautious start. The current scaled-back Belo Monte project contains only one dam instead of the three originally planned. The dam has also been designed as a run-of-the-river model that will use the natural course of the river to produce power. The run-of-the-river model, though less efficient, will reduce flooding of forest lands by a third compared to the conventional model of the dam.

Citing these efforts, Brazil’s government now claims that it has addressed the concerns of a majority of stakeholders and that only a “small minority” now opposes the project. The government also says environmental clearance for the project has been awarded only after ensuring the funds required for development activity have been set aside. Carlos Minc, Brazil’s environment minister, has said that the government requires companies involved in building of the dam to spend nearly $800 million on various projects such as healthcare, sanitation and rehabilitation for Native Indians.

Still, not everyone seems to be content with the arrangement of Belo Monte. Native Indians are apprehensive about the fact that even the reduced dam will submerge nearly 520 sq km of their native land. The Guardian newspaper quoted Mokuka Kayapó, the Indian leader as saying, “I do not accept the Belo Monte dam”. He added “The forest is our butcher. The river, with its fish, is our market. This is how we survive.” Many notable personalities support him. The Oscar-winning Hollywood director James Cameron stands by Mr. Kayapó. The British-born musician, Gordon Sumner aka Sting, champions the cause of the Native Indians by organizing protest concerts.

On the other hand, technocrats supporting the dam too are critical of Brazil’s government. They blame the government for compromising on the project and settling for a much-reduced and less efficient dam, which makes it economically and environmentally unsustainable. They argue that the less electrical output generated from a hydro-power plant like Belo Monte, the greater the chance for fossil-fueled power plants to mushroom. Furthermore, marking a setback to the government, key private players have either left or been removed from Norte Energia SA, the consortium that has been formed to construct the Belo Monte. Yet, determined to move ahead with the project, Brazil’s government has directed the state-owned mining giant, Vale, to take a stake in the consortium at a cost of $1.4 billion.

Still, for all the negative publicity, the government is winning small but significant support from the native Indians. In Altamira, the largest town in Xingu, locals have been enthused by the news that nearly 20,000 jobs would be created from the construction of Belo Monte.

Despite the ups and downs, Belo Monte, even after three decades since the genesis of the idea, reminds us the significance and the importance of hydropower. And unlike the Three Gorges dam in China, in which millions of people were displaced and the very scale of the project has given rise to potential problems, Belo Monte’s reduced size actually looks much safer on paper. Now the cautiously-treading Brazil will have to prove the sustainability and success of the project in real time.

 

 


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