Chavez Plays Politics - Caught Dry, Venezuelan Hydro-Pwr Dam May Mean Lights Out

But with the opposition girding to organize a recall referendum on the mandate of President Hugo Chavez, the government appears loathe to require people to cut back on their electricity consumption. Indeed, Roberto Bottome, editor of local economic newsletter VenEconomy, noted that "state-owned (utility) companies don't bill three-quarters of the population, so there's no incentive to conserve." Apart from the capital Caracas, to which AES Corp.'s EDC unit provides thermo-generated electricity, and Margarita Island, Venezuela's electricity supply is generated by public companies badly in need of investment.

NEW YORK (Dow Jones)--As if a projected double-digit economic contraction weren't enough, Venezuela is also facing the prospect of growing power outages this year.

The South America nation is suffering its worst drought in just more than 40 years, said Esmeralda da Silva, an engineer at the Electricity Industry Chamber of Venezuela, or Caveinel.

The drought, which began in 2001, has reduced water levels at the country's main power generator, the Guri hydroelectric dam, to dangerous lows. On Tuesday, the water level in the dam stood at 249 meters above sea level, Da Silva said, noting that the 248 meters level represents a state of emergency.

At 240 meters above sea level, the Guri, which supplies about 60% of the country's electricity, is at the critical minimum for operations. She added that the dam is losing about 17 centimeters a day, but the daily loss could increase given the cone-shaped nature of dams.

As the rainy season normally begins toward the end of May, Da Silva noted, Venezuela is entering a pivotal period. Since last year, Caveinel has been pushing the government to mount a power rationing program to avoid looming outages. But the government has resisted.

Officials at the Ministry of Energy and Mines declined to comment by telephone, a spokeswoman said. But she noted that authorities would soon open a publicity campaign encouraging people to reduce consumption of water, which is already rationed in the capital of Caracas, and electricity.

The fear is that without an effective rationing program, power outages will become more frequent and severe, and further affect the Venezuela's reeling economy.

Da Silva noted that significant power failures totaled six in all of 2002. The number has sharply increased since the beginning of the year through April 8, with 19 such interruptions. Given its perilously low water level, "rationing is necessary to avoid a collapse of the Guri dam," Da Silva said.

But with the opposition girding to organize a recall referendum on the mandate of President Hugo Chavez, the government appears loathe to require people to cut back on their electricity consumption.

Indeed, Roberto Bottome, editor of local economic newsletter VenEconomy, noted that "state-owned (utility) companies don't bill three-quarters of the population, so there's no incentive to conserve." Apart from the capital Caracas, to which AES Corp.'s EDC unit provides thermo-generated electricity, and Margarita Island, Venezuela's electricity supply is generated by public companies badly in need of investment.

To maintain the nation's electricity grid and keep up with electricity demand growth, Caveinel's Da Silva said anywhere from $1.2 billion to $1.4 billion a year should have been invested over the last five years, but that only about $ 750 million a year had actually been spent.

Bottome reckons $15 billion in investment will now be needed over the next three to six years to keep the lights on consistently.

Yet with the country in midst of political and economic turmoil, few expect foreign power companies to come to the rescue, especially with a regulatory framework that doesn't provide sufficient protections or economic incentives to attract them, analysts say.

The political uncertainty is intense, with the Chavez administration pitted against a multifaceted opposition, which has called numerous strikes and protests for more than a year. It's taken a heavy toll on the economy: After contracting 8.9% in 2002, analysts expect the country's output to shrink another 12% to 20% in 2003.

Even accounting for the impact of the deep recession on electricity demand, Caveinel still expects growth in power demand this year of 2% to 91,000 gigawatt-hours, down slightly from about 1.9% in 2002 and 5.3% in 2001.

Yet electricity supply, it calculates, will only amount to 86,000GWh this year, assuming that Guri can generate 57,000GWh, as it did last year.

As Bottome noted, even if the rains start to return en force next month, it will take time for the Guri to recover adequate water levels.

The necessary private sector investment, though, will depend on more than the weather.

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Venezuela: Reports it bombed Colombia village 'a lie' By Globe Staff and Wires, 4/10/2003 [Full Text]CARACAS - The government yesterday rejected allegations by Colombian border residents that its aircraft bombed a village in Colombia last month in support of leftist rebels fighting right-wing paramilitaries. Vice President Jose Vicente Rangel dismissed the allegations as ''a grotesque lie'' aimed at trying to discredit Venezuela's left-wing president, Hugo Chavez. The two Andean neighbors share a volatile 1,400-mile border.

President Alvaro Uribe of Colombia has ordered an inquiry into the allegations by border residents that Venezuelan military helicopters and planes crossed into Colombian airspace on March 21 and bombed a border hamlet at La Gabarra, in North Santander Province, killing and wounding several people. The residents said the aircraft acted in support of left-wing Colombian guerrillas who were under attack from rightist paramilitary groups. (Reuters) [End]

This is a large problem that has gone unmentioned for the most part. South America is a political timebomb that is going to blow up. You have instability from FARC in Columbia, Brazil, and Venezuela. You have a financial meltdown in Argentina, who is about to put another Peronist in power to spend their way down the rabbit hole. Brazil is teetering on the brink of following Argentina's financial lead. Chile was counting on bilateral trade agreements that have been put off because they shot their mouths off at the UN. Bolivia has been warned of a marxist coup plot. I think that if things go badly there, we could potentially see civil wars / communist takeovers of several countries that are key to our interests. We do a lot of trade with ountries down there and stability would be a good thing. That could turn into the 3rd ball in the air before Korea does

And for all the 'Iraq War = Oil' crowd. If Bush wanted to take over a country for oil, the boat ride to Venezeula would have been much shorter for the 4th ID.

This is safely the understatement of the day.

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