This multi-billion dollar hydroelectric complex threatens one of the Amazon Basin’s main southern tributaries.

Official IIRSA Project Anchor Project Priority Project

*All costs according to IIRSA

Proyect Background

The Madeira River basin covers about one-quarter of the Brazilian Amazon.  The Madeira River project consists of two hydroelectric dams - Santo Antonio (3,150 MW) and Jirau (3,300 MW) - plus locks for a 4,200 km. waterway, permitting transportation of an estimated 28m tons of grains per year. The project also requires a transmission line of approximately 2,500 km. - at a total cost of at least US$24 billion. It would be the largest project in Amazon history, and the one with the highest impact, as well. The project is the cornerstone of the Brazil-Bolivia-Peru hub of the Initiative for the Regional Integration of South American Infrastructure (IIRSA), a blueprint for large-scale infrastructure supported by the Inter-American Development Bank, the Andean Development Corporation (CAF), the Rio Plata Development Fund (Fonplata) and Brazil's National Bank for Economic and Social Development (BNDES).

Company Involvement

Many of the giant construction firms in Brazil are involved in the proposed project complex. The principal proponent is Odebrecht (a major Brazilian industrial group in construction, petrochemicals, mining and oil), which has obtained rights to study the area and initiate environmental licensing procedures. Furnas, a state-owned power generation company, is also sponsoring the project and intends to be the operator of the Madeira power plants. These firms have formed a consortium, but regulatory restrictions may limit their participation in the project. The energy regulating agency ANEEL has the power to grant the final concession for construction and operation. The government has announced that BNDES and Eletrobrás (the state-owned energy holding company) are available to serve as strategic partners to the winning consortium with up to 49% equity participation. Roughly 55% of the project cost would go towards procuring equipment, and Alstom, ABB, GE, and Voith Siemens have already expressed interest in supplying generators and other machinery to the project. Other construction companies such as Camargo Correia, Andrade Gutierrez, along with intensive power consuming companies (such as in the mining sector) are being actively encouraged by the government to form alternative consortia to bid for the project. Few energy companies are likely to be involved, given the probable high prices of the resulting power and the uncertainties in the timing of construction.

Political & Commercial Lobby

The Madeira project relies on strong government incentives and government funding. The Minister of Mines and Energy and his closest aid – who strongly backed the project – had to resign in May, 2007, after being caught receiving cash bribes in the Minister’s office from one of the companies likely to participate in one of the construction consortia. However, the project is also directly promoted by the new Minister, along with the President’s closest aid, Ms. Dilma Roussef, and BNDES. On June 15th, 2007, a big seminar was held in São Paulo, gathering more than 400 people from construction companies, equipment suppliers, government officials and financial institutions. The group heavily pressured the president of the Federal Environmental Agency to issue the license (the Minister of Environment has asked for more time to analyze the environmental studies). BNDES has announced subsidized interest rates, even lower than its usual subsidized rates, via its project finance facility. The construction lobby is extremely active in misleading public opinion, through massive purchase of press coverage in the mainstream press. Odebrecht admits to having already spent more than US$ 100 m in “pre-investment” activities.

Cost

According to IIRSA, the total estimated cost amounts to 7.2 billion dollars, however the real estimated cost of the Madera River Complex, to date, is between 20and 22.6 billion dollars. The cost of Santo Antonio and Jirau alone is between US $12.6 y US$14 billion (officially updated May 2007) the cost of Santo Antonio amounts to 6.7 billion and for Jirau 7.5 billion.The cost of the transmission lines is between US$1.5 billion and US$4.2 billion (data not updated).The hydroelectric plants Guajará – Mirim (bi-national, estimated cost in 2003 added up to US$2 billion), and Cachuela Esperanza (US$ 1.2 billion) that would be necessary to implement the hydroway. Therefore, the total amount of the two dams is between US$14 and US$18 billion, including the transmission lines; and the total amount of the megaproyect would be of at least US$20 billion.