FACTBOX-Brazil's plans for the Belo Monte Amazon dam

April 20 Tue Apr 20, 2010 12:13pm EDT

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April 20 (Reuters) - Brazil is planning a massive hydroelectric dam in the Amazon region that has sparked controversy over its environmental impact and its displacement of residents.

President Luiz Inacio Lula da Silva insists the 11,000-megawatt Belo Monte dam, which would be the world's third-largest, will provide much-needed power for Brazil's fast-growing economy. [ID:nN20217050]

* The project calls for a massive hydroelectric facility on the Xingu River, a tributary to the Amazon, designed to provide power to local industries and eventually all of Brazil.

The dam is the flagship project of an $878 billion public works crusade that is a key campaign platform of Lula's ruling party candidate, Dilma Rousseff, in this October's presidential election.

* Activists estimate as many as 20,000 people, including 800 native Indians, will be displaced by the dam, which will flood 400 square kilometers (154 square miles) in the area.

Critics, including Hollywood director James Cameron and actress Sigourney Weaver, say thousands of fishermen and forest dwellers in the area will be indirectly affected by changing water flows.

They say the project will require as much concrete as was used to create the Panama Canal in order to make two channels that will move the water from the main dam toward the turbines.

* The project was originally conceived in 1975 during Brazil's military dictatorship, as part of a larger group of five dams that would generate power throughout the year, even when river flows fell during the dry season.

Due to environmental concerns, authorities in 1994 decided to scrap the four other dams originally slated for construction there, reducing the total area to be flooded.

But during the dry season the river slows to a trickle and will leave the dam generating only a fraction of what it does during the rainy season. That means on average it will supply only 4,600 megawatts or a bit more than a third of its capacity.

* Private investors have described the project as highly risky due to the chance of lawsuits and protests halting progress of the operation. Analysts also say the government's cap on the price of power to be sold from the dam is too low, meaning the project offers low returns.

Official estimates show the project costing 19 billion reais ($11 billion), though private sector estimates say the figure could be as much as 30 billion reais ($17 billion).

* Two of Brazil's largest infrastructure companies walked away from the project this month due to complaints of low financial returns.

The government at the last minute sweetened the deal with a 75 percent income tax reduction and an improvement in the terms of the financing from the state development bank, helping convince more companies to join the bid.

The first consortium, called Belo Monte Energia, includes Brazilian miner Vale SA (VALE5.SA), the world's largest iron ore producer, construction company Andrade Gutierrez, utility holdings company Neoenergia, and a division of industrial conglomerate Votorantim.

The second consortium, Norte Energia, includes state energy company Eletrobras (ELET6.SA) subsidiary Chesf, along with a group of energy construction companies.

(Reporting by Denise Luna in Brasilia, Writing by Brian Ellsworth; Editing by Raymond Colitt and Bill Trott)

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