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Now that Brazilian industry is growing again, electricity shortages are inevitable. To sustain 4% real annual GDP growth, Brazil will need 6% more electricity each year. During 2000, March through August were record-breaking energy consumption months, exceeding the seasonal peaks of both 1998 and 1999. Sustained growth at this rate will soon outstrip supply.

The expansion of electricity supply has been constrained by political delays in the privatization of the electrical sector. Although the privatization process was formally launched in 1995, endless debate has hampered its progress, especially outside of Sao Paulo and Rio de Janeiro. Debate over the level of equity control to be exercised by private concessionaires is creating uncertainty among electrical operators. At best this is delaying badly needed investment, and at worst, it is chasing qualified investors away.