Chileans can't seem to buy a break these days. Falling commodity prices have
hammered the huge copper industry, shrinking government revenues and sending
unemployment to a 14-year record. Foreign capital flows have slowed to a
trickle in the wake of the crisis in Brazil. Now, a severe energy shortage
is threatening to deepen Chile's worst economic slump since the early 1980s.
Power outages of three or more hours a day started hitting Santiago in
April. Soon, manufacturers and retailers could face crippling blackouts of
up to 10 hours a day.
Blame this latest calamity on the weather. Last year was Chile's driest in
five decades. That hurts in a nation that draws 60% of its power from
hydroelectric generators. Brief outages in the capital have already ignited
popular criticism of Chile's privatized utilities. Many Chileans are
especially angry about the $2.1 billion sale on May 11 of a controlling
stake in Chile's largest power supplier to Enersis, a utility holding
company controlled by privatized Spanish electricity company Endesa. The
mounting political tensions could not be timed worse for the government of
President Eduardo Frei, whose ruling coalition faces a primary on May 30
and a national election at yearend.
The next few months, when the southern winter's snow and rain ordinarily
fill Chile's reservoirs, are crucial. But the situation looks grim. After a
disastrous 1998--when rainfall was less than a third of the annual
average--La Nina, sister of the El Nino phenomenon, is blocking rain and
snow clouds that normally form over Chile in the winter. Without a serious
drenching and a surge in power supply soon, economic growth this year could
fall almost to zero. Larrain Vial, a Santiago-based brokerage, is already
slashing its growth forecast for next year from 4.3% to 2% if the drought
continues. That's a long climb down for Latin America's star performer,
which averaged growth of 7.3% from 1990-98.
>From food producers to textile manufacturers, businesses are already
smarting. ''I don't want to even think about 8-hour power cuts. At 3-hour
cuts, we were already in a critical situation,'' says Jaime Cifuentes,
secretary general of Chile's Textile Chamber. He says only 13% of the
country's 2,000 major textile producers have the generators needed to keep
production running. Productivity has slumped 14% since the start of the
energy crisis, he adds. And if power cuts grow to 8 or 10 hours, business
leaders say Chile could lose $100 million a month in productivity and sales.
Hundreds of companies could face bankruptcy.
SCRAMBLING. The dry spell is exacerbating other problems faced by Chile's
privatized utilities, which now supply 100% of the country's power. The
outages began in April, after a new gas plant operated by Chile's Empresa
Electrica Colbun Machicura malfunctioned five months after its startup. Some
5,000 residents took to the streets to protest the outages and the Endesa
deal. Although three other gas plants are under construction, only one is
expected to be completed by June, 2000. So without rain, energy will remain
scarce at least until then.
So far, Frei has taken a purely political approach to solving the energy
problem. In early May, he ordered the power cuts suspended as political and
business leaders called for consumers to conserve. Meanwhile, private power
generators are scrambling to install new capacity, most of which will serve
the capital, where shortages are worst. And Endesa is rushing to bring four
small generating plants on line.
But it will take big capital investments to reduce Chile's dependence on
hydropower and its vulnerability to erratic weather. Until that happens,
Chilean citizens and businesses will have to be ready to put up with
blackouts--and all their costs and inconvenience.
By Greg Brown in Santiago
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