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September 3, 2021

Dryness in Brazil Impacting Electricity and Water Transport

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

One of the driest periods in 90 years is causing problems for electrical generation and water transport in central Brazil. Brazil is highly dependent on hydroelectric power and the water situation in the nations reservoirs is the worst it has been in nine decades. If current conservation measures prove ineffective in curbing consumption, there is a possibility of electricity rationing according to Vice President Hamilton Mourao. The last time Brazil was forced to ration electricity was 2001.

The Brazilian Minister of Mines and Energy, who oversees the electrical grid, does not foresee the need to ration electricity at this time, but he did ask the Brazilian population to take measures to reduce electrical consumption.

One of the ways Brazil is trying to reduce electrical consumption is by increasing the tax on electricity. On Tuesday, the government increased the tax on electricity to the average consumer and small business by 6.7% in what they called the "low water rate." If the situation deteriorates and they move to the "red rate", the tax will increase by almost 50% from R$ 9.50 per 100 kWh to R$ 14.20. As an incentive, residents and small businesses are eligible for a discount on their electricity bill if they reduce their consumption.

In addition to causing problems for electrical generation, the low water levels on the rivers are also disrupting water transport. The Tiete-Parana waterway, which transports grain from the center-west region of Brazil to the interior of the state of Sao Paulo, has had to restrict barge loading and barge movement. From the interior of Sao Paulo, the grain moves by rail and truck to the Port of Santos.

The company Hidrovias do Brasil, which operates barges on the Paraguay-Parana waterway, has reduced its estimates of annual tonnage to 11.3 to 13.0 million tons compared to its previous estimate of 15.8 to 16.9 million tons. They indicated that the lower volumes were the result of low water levels on the rivers and a smaller safrinha corn crop.