New Rules and Proven Programs

Apr 29, 2004

Brazil and Mexico have chosen different approaches to deal with looming electricity shortages. The outcome of their plans will have far-reaching consequences.

There is nothing like the risk of power shortages and blackouts to concentrate the minds of politicians. In Brazil, years of underinvestment have forced the government of President Luiz Inácio Lula da Silva to unscramble the very rules governing the country's power industry that many blame for the decline in investment. Officials hope a new set of regulations will attract a large chunk of the $7 billion in annual investments needed to keep the lights on and the factories across Brazil working.

Congress passed legislation in March that Lula's center-left government hopes will deliver the best of both worlds (see box, "In Need of Institutionalization"). It seeks to bring in billions of dollars in private sector financing for new hydroelectric dams and simultaneously reassert government control over the market. The government says tighter official oversight is vital to avoid a repeat of the power shortages that aborted a...

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