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 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.

Now on more stable macroeconomic footing, the Brazilian government under Lula

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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

border. Powered by the diversion of the Xingu River through the excavation of two large

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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

main river channel formed by the large reservoir (Sítio Pimental), from which the water

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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.

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

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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)

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

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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

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

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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,

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:

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 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 3

Net 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

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

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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

(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

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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

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

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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

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,

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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

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 1,650,939

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 Felix do Xingu
Koatinemo Altamira 387,304
Kararaô Altamira 330,837
Araweté/Igarapé Ipixuna Altamira, Senador José Porfirio and 946,900
São Felix do Xingu
Apyterewa Altamira and São Felix do Xingu 980,000
Arara Altamira, Medicilândia and Uruará 274,010
Cachoeira Seca do Iriri Altamira, Uruará and Ruropólis 760,000
Xipaia Altamira Under study
Curuá 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

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

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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

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

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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

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

21
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

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

22
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

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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