Saturday, May 27, 2006

Brazil has energy woes, too

Brazil has energy woes, too

The Providence Journal

Brazil, led by moderate-leftist President Luiz Inacio Lula da Silva, has
had an unpleasant lesson in the vagaries of the energy business.

Bolivia, run by new leftist-leftist President Evo Morales, has
nationalized its natural-gas sector, which supplies half of Brazil’s
natural-gas consumption.

And some assert that the nationalization was engineered by Venezuela’s
leftist president, Hugo Chavez, whose best pal is apparently Cuban
dictator Fidel Castro. Chavez, of course, is throwing his weight around,
what with Venezuela’s huge oil and gas reserves and current high energy

Brazil, to its credit, makes much of its fuel from sugar cane. And to
reduce its dependence on oil, many Brazilians have replaced their
gasoline-powered vehicles with those running on natural gas.

But the huge country, like the United States, is still far too dependent
on the whims of other countries – in this case, Bolivia – for its
energy. Brazil’s state-owned energy company, Petrobras, had invested
$1.5 billion in Bolivia, and now that nation demands 60-percent price
hikes for its gas.

There is an irony here in that Brazilians are complaining about their
state-run firms’ assets being seized by another state. In a freer-market
system, these problems would be more localized. But when the government
gets involved, such problems get very big.

When it comes to fuel supplies, you can never be diversified enough! One
wonders about the assertion by Americans that we needn’t worry about our
natural-gas supplies: The Canadians will keep sending the gas to us. Or
will they?

Meanwhile, widespread violence in Sao Paulo has resulted in many deaths.

It has indeed been a very bad month for Brazil.

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