Global General

Venezuela rations power as energy crisis worsens

(China Daily)
Updated: 2010-01-14 10:03

CARACAS, Venezuela: Venezuela's government has imposed blackouts of four hours every other day throughout the country to combat an energy crisis, which experts say will further jeopardize the country's worsening economy.

Economists fear that the rationing will plunge Venezuela still further into recession, after posting its third consecutive quarter of negative growth last month. The economy contracted 2.9 percent in 2009 even as most other countries in the region began to recover from the global downturn.

Starting on Tuesday, Venezuelans will face rolling blackouts for five months as the worst drought in 50 years threatens to shut the nation's biggest hydroelectric plant and collapse the power grid.

President Hugo Chavez has said rationing is necessary to prevent water levels in Guri Dam - the cornerstone of Venezuela's energy system - from falling to critical lows and causing a widespread power collapse. Drought has cut the flow of water into the dam, which feeds three hydroelectric plants that supply 73 percent of Venezuela's electricity.

The entire South American country of 28 million people depends to a large degree on the massive Guri Dam, which holds back the Caroni River in southeastern Bolivar state.

The blackouts are another economic blow after President Chavez devalued the nation's currency by as much as 50 percent on Jan 8 as he struggled with cash flow and a growing budget deficit. The overall economic situation may keep Venezuela mired in recession and erode Chavez's popularity in the run up to legislative elections in September.

"With these measures, we're trying to keep Guri from taking us to a very critical situation at the end of February, from creating let's say a total shutdown of the country," Electricity Minister Angel Rodriguez said on Monday night.

"The drought has exposed what was already a seriously overstretched grid and years of underinvestment," said Patrick Esteruelas, a New York-based analyst at Eurasia Group. "The government is going to try to soften the blow by spending very aggressively from now until voters go to the polls."

Energy experts reject Chavez's claims that the weather phenomenon known as El Nino caused the crisis. They accuse the government of mismanaging the sector, with more than a decade of underinvestment and a failure to maintain existing infrastructure.

Victor Poleo, a former vice-minister for electricity under Chavez, blames corruption for less than a third of the funds assigned to electricity projects reaching their intended destination.

AP-Bloomberg- Financial Times