From: Raymond Colitt and Denise Luna, Reuters
Published April 21, 2010 06:16 AM

Belo Monte going forward?

Brazil awarded a domestic consortium on Tuesday rights to build the world's third-largest hydroelectric dam in the Amazon rain forest in a chaotic auction amid criticism the dam is an environmentally hazardous money loser.

President Luiz Inacio Lula da Silva likely faces a prolonged battle over the 11,000 megawatt Belo Monte dam that he has heavily promoted despite opposition from a range of critics including Hollywood director James Cameron.

Government leaders say the project, due to start producing electricity in 2015, will provide crucial power for Brazil's fast-growing economy, but environmentalists and activists say it will damage a sensitive ecosystem and displace around 20,000 local residents.


State power regulator Aneel said a consortium including state electric company Eletrobras and a group of Brazilian construction companies -- considered the weaker of the two consortia that participated -- won the bid.

Those results were blocked from being announced for more than two hours because a last-minute injunction trying to halt the project on environmental grounds.

The results of the auction are unlikely to affect overall electricity rates in Brazil because most of the electricity is already set aside for specific clients, with only a small remainder entering power markets.

Financial analysts say the government set an artificially low price for the power to be generated by the dam, adding it faces considerable risks including cost overruns and the likelihood that protests will frequently halt construction.

Native Indians in the area are already promising just that.

Luis Xipaya, a local leader speaking to Reuters from the city of Altamira near the proposed dam site, said 150 Xikrin Kayapo Indians will move to a new village on the construction site by Wednesday.

"There will be bloodshed and the government will be responsible for that," Xipaya said.

Environmental activist group Greenpeace organized an early morning dump of several tonnes of manure at Aneel's gate to visually demonstrate "the legacy that the Lula government is leaving by insisting on this project."

The auction has for weeks been a stop-and-start process that by Tuesday had already been halted twice by court orders that the government quickly overturned.

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