April 16, 2014
Wednesday, December 18, 2013

A hot potato

For years (with varying degrees of seriousness) there have been forecasts of blackouts and brownouts which materialized for some if not for others and were always downplayed by the government. But with the latter finally joining the warning chorus and with random power cuts all over this city, we should be seriously worried about the grid being strained to its limit. With new power consumption records yesterday topping Monday’s peaks, the electricity problem has rapidly overtaken the looting earlier this month as the majority’s most immediate concern. And this virtual emergency arises when we are still technically in spring with a whole summer lying ahead and when industry is working at one of its slowest paces in the “won decade.” It is only in the past couple of months or so that the Brazilian slowdown (with economic contraction in the third quarter) has really started to halt the booming auto industry and it is also only recently that salaries have started to fall behind in the wage-price race, with monetary expansion now contributing far more to inflation than to purchasing-power — think what the power grid situation would be like if there were a “Chinese” growth rate of nine percent, as in various recent years, with a vibrant consumer market.

Yet the shortfalls in industrial consumption would seem to be compensated (or even outstripped) by some four million energy-guzzling air-conditioning units added to demand in the last five years — while prioritizing private households over industry as always, the government (or at least Cabinet Chief Jorge Capitanich) is for once pointing a finger in that direction instead of the futile exercise of blaming and fining the utilities (which then need to be subsidized even more). The huge fluctuations in demand now seem to come from households and retail outlets rather than continuous industrial processes.

The acute strain on the power grid should be telling the government to persist more determinedly with “fine-tuning” subsidies than after the last elections in 2011. Not only do frozen utility rates encourage the squandering of energy while discouraging investment, this is also not a populism which favours the people since the more opulent classes with more power-driven gadgets are the main beneficiaries. But while more realistic utility rates and scaling back anti-democratic subsidies (which also consume almost five percent of Gross Domestic Product) would be a good start, the government should start looking much harder at new sources of energy without waiting for Vaca Muerta shale to come on stream.

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