| SAO PAULO
SAO PAULO Jan 31 Even by Brazilian standards -
man, it's hot.
This has been the hottest January on record in parts of
Brazil including its biggest city, São Paulo. The heat, plus a
severe drought, has kindled fears of water shortages, crop
damage and higher electricity bills that could drag down the
economy during an election year for President Dilma Rousseff.
The scorching conditions don't constitute a crisis quite
yet, officials say. Weather has been mostly normal in other
regions including Brazil's soy belt, where a record crop is
still expected. Summer rains could return in February and March
to refill reservoirs, as they did last year when similar
concerns over a possible energy crisis proved to be overhyped.
Still, the risks are considerable because Brazil's economy
is so fragile at the moment. Any disruption to food supplies or
power costs would complicate the government's ability to meet
the center of its 2014 inflation target of 4.5 percent, and the
region's orange and coffee crops are already showing signs of
stress, farmers say.
São Paulo's average January temperature through Thursday was
31.8 degrees Celsius (89.24 degrees Fahrenheit), 0.9 degrees
hotter than the previous January record. Given Friday's
forecast, this is likely to surpass February 1984 as the city's
hottest month ever, according to INMET, Brazil's national
Meanwhile, a high pressure system has blocked normal
tropical afternoon rains during what is usually the year's
wettest month. São Paulo's main reservoir is now at less than a
quarter of its capacity, a 10-year low.
Meteorologists aren't hopeful for a change anytime soon.
"This is the hottest, driest January we've ever had ... and
there isn't much hope for this heat to stop in the next two
weeks," said Celso Oliveira, meteorologist for Somar weather
The weather has been so suffocating that many Brazilians
have envied the so-called polar vortex causing snow and record
cold in much of the United States. Some local meteorologists
have speculated that the hot, dry weather in Brazil may be
related to the same unusual atmospheric patterns.
Those with air conditioning have driven nationwide energy
consumption to an all-time high this week. The strong demand,
which is being met partly through increased use of
thermoelectric power, means that spot energy prices are set to
double in coming days to record levels beyond 800 reais
($326.50) per kilowatt-hour, three electrical industry sources
told Reuters on Thursday.
Those prices could trickle down to energy bills for
customers and factories - a threat to economic growth already
expected to be just 2 percent this year.
"I am very worried (about the weather) and I have been for
the last month," said Jose Francisco de Lima Gonçalves, chief
economist with Banco Fator in São Paulo. "It's a risky outlook
without a doubt - it could affect industry."
MASSIVE CATTLE DEATHS
Other regions of Brazil are also suffering from extreme
weather. The impoverished, less populated northeast is in its
worst drought in at least 50 years, according to Funceme, the
state meteorological agency in Ceará state. Hundreds of
thousands of cattle have died from the dry conditions, local
"I have never seen a drought like this. Everything has dried
up," said 85-year-old Ulisses de Sousa Ferraz, a farmer in
Pernambuco state who said he has lost 50 cows.
There is some good news. Electricity shortages do not appear
likely for now, nor does rationing, which took a huge bite out
of Brazil's gross domestic product in 2001.
Average reservoir levels in the southeast and central-west
regions, which account for 70 percent of Brazil's hydroelectric
generation, fell in late January to 41 percent. That was well
below the 58 percent average for January since 2000 but ahead of
the 37.46 percent level seen in 2013, when fears of power
rationing last flared. Before the government ordered power
rationing in 2001, reservoirs had fallen to 31.4 percent.
A post on President Rousseff's Facebook page on Friday said
that because of federal investments in electrical supply over
the past decade, the risk of shortages had "disappeared."
Water shortages seem to be a bigger risk.
The leading water company in São Paulo, a metropolitan area
of about 20 million people, is already running TV and radio ads
asking customers to limit water use by not cleaning sidewalks
with hoses, for example. Reports of isolated water shortages in
poorer areas have also surfaced in local media.
"São Paulo has a significant risk of water rationing,"
Somar's Oliveira said.
Economists are watching closely because problems here tend
to bleed quickly into the national economy. São Paulo state
accounts for a fourth of Brazil's population and a third of its
GDP. Several key local industries from cellulose to beer and
soda production use large amounts of water.
Farmers in the world's leading exporter of soybeans, coffee,
orange juice, sugar and beef are worried too, though they say it
is too early to talk about any serious losses.
Yields from the 2014/15 coffee crop, which is forming fruit
and will be collected starting in May in the southeastern states
of Minas Gerais and São Paulo, were probably hurt by dry weather
in January, according to the PROCAFE Foundation, an industry
group. Concerns over the lack of rain have kept Arabica prices
in check even allowing for a large global coffee surplus.
The region's sugarcane crop is less at risk, having just
ended harvest, but could suffer if the dry weather lasts for
The drought is also apt to diminish yields on the current
orange crop, but it is too soon to say how this might affect
Brazil's juice production, said Eduardo Savanachi, spokesman for
industry group CitrusBR.
Finally, there's political risk.
Ever since antigovernment street protests broke out across
Brazil last year, problems with the country's infrastructure
have become heavily politicized.
So if there are water shortages, for example, they are
likely to be used against incumbents in the upcoming election as
evidence that federal and state governments have not invested
enough in new sources of drinking water.
Rousseff is running for reelection in October, as is São
Paulo Governor Geraldo Alckmin of the opposition PSDB Party.
"We need to watch it all closely, considering how unlucky
this government is," said Andre Perfeito, chief economist at
Gradual Investimentos in São Paulo.