Fears grow of Brazil power shortages A shortage of rainfall is drying up Brazil's hydropower dams, leading to fears of electricity shortages and the possibility of energy rationing. While President Dilma Rousseff has rejected as "ridiculous" market rumours over rationing, analysts say the system is near the limits of its capacity. "It's not a crisis yet but instead of having a system that has a cushion of safety in it, today there's no fat to burn here," said João Augusto de Castro Neves, analyst for Latin America at the Eurasia Group. The centre-left governments of Ms Rousseff and her predecessor, Luiz Inácio Lula da Silva, have prided themselves on their ability to manage energy supplies in Latin America's largest economy. A shortage of energy in 2001 led to rationing and contributed to the defeat of Brazil's last centre-right president, Fernando Henrique Cardoso, to Mr Lula da Silva in elections in 2002. As a result, energy rationing has come to be seen as a politically explosive issue in the country, similar to the cost of onions in India, which has been known to spark riots during periods of rising prices. Data from Brazil's national electrical system operator, ONS, shows that hydropower dams in the important southeast and centrewest regions are holding on average about 28 per cent water capacity. This is the lowest level since November 2001, when they held 23 per cent. Brazil normally generates about 85 per cent of its power from hydro-electricity. Analysts agree, however, that Brazil's electricity generation system is in better shape to cope with the shortages than in 2001. The country has sharply increased the capacity of its fossil-fuel powered plants since 2001 to offset electricity shortages during periods of low rainfall in the north and northeast, when the country's giant hydropower plants around the Amazon region tend to generate less energy. "I think it is ridiculous to say that Brazil is running the risk of rationing," Ms Rousseff said late last month. There is no energy crisis in the country. But analysts say that although the system is working, the concern is that it looks stretched, particularly if the situation does not improve before the dry season, which normally stretches between April and October. The shortages could also worsen if the economy begins to recover from sluggish growth, estimated by many at just 1 per cent last year. The other concern is the high cost of generating electricity using plants powered by natural gas and other fossil fuels, which are many times more expensive than hydropower. This could threaten an aggressive programme by Ms Rousseff to cut the price of power by 20 per cent this year, which in turn would put pressure on inflation. The price cuts are seen as a key plank of Ms Rousseff's programme to improve the competitiveness of Brazilian industry. However, analysts believe that if the situation is not prolonged, the government will likely guarantee the price cuts by cutting taxes on energy or through other measures.