Latin America / the Caribbean
ENERGY AND POVERTY
Article by Mr. Norberto de Franco Medeiros
Energy consumption is widely accepted as a good indicator of economic development. In general, this means the higher the energy consumption, the higher the per capita income and, consequently, the lower the poverty index.
This understanding formed the backbone of energy policies in the developing countries after World War II: modern energy sources should be available, generated at low cost through energy infrastructure for which the government is responsible, with monopolistic suppliers.
In order to adapt to the globalized economy, the emerging nations implemented sweeping reforms in their energy areas during the 1990s. Weak economic performances by government monopolies led to institutional reforms, with privatization and competition replacing government monopolies. It was assumed that these changes would result in lower prices and better power supplies. But just a few years after the implementation of these reforms, the outcome clearly failed to meet these expectations, particularly for low-income communities in the developing countries.
There is a correlation between energy availability and poverty. Desired by all and achieved by only a few, sustained economic development will be attained only when it is possible to offer a decent living conditions to one-third of the world's population, with 90% - around 1.6 million people - living in the developing countries with no access to any type of commercial energy.
These people still depend on energy generated inefficiently by burning fuelwood, dung and plant wastes in devices using primitive technologies. Energy obtained under such conditions is expensive and insufficient to meet even basic human needs for nutrition, heat and lighting, with nothing left over for productive uses that would offer a way out, helping breach the cycle of poverty.
In rural areas, energy supplies are used mainly for cooking purposes, with only small amounts allotted to food production, processing and conservation. Despite all the technological and administrative advances to hand, humankind has proven unable to deal with this challenge. Other than in China, where significant progress has been achieved with rural electrification, only one-third of the rural population of the developing countries has access to electricity: a figure that has remained unchanged for the past twenty years.
Dependence on traditional fuels remains unaltered in these countries, despite technological advances over this same period. Although data on energy use in rural areas remains scarce, it is known that in tropical Africa, the average share held by fuelwood in national energy balances reaches 75%. In some countries in Africa and Asia, the use of traditional fuels in homes tops 95%, and a third of the world's population still cooks with traditional biomass-based fuels.
The poignantly harsh aspect of this process is the vast amount of time spent gathering something to burn, imposing pressures on the environment and resulting in high pollution levels in low-income dwellings comparable with the world's most polluted cities. And who bears this burden? Mainly poverty-stricken women and children living in the developing countries.
In contrast to rural poverty - which consists of traditional lifestyles in the countryside without modern technologies that add comfort and boost productivity - urban poverty is characterized by the limited range of options open to the communities involved, striving to ensure even the most basic living conditions.
As income is both insufficient and unstable, urban poverty may well be even worse than its rural counterpart, reaching a level of real marginality. This is due to shortfalls in job generation in terms of both quality and quantity during the initial stages of the economic development process, to which the urbanization process is closely linked, covering activities such as building infrastructure and homes, shopping centers and factories that demand large labor-forces and consequently attract waves of migrants to richer urban centers.
However, the slowdown in this expansion generates a perverse effect on the urban communities involved. Rural workers migrating to the cities with their families - and more particularly their offspring who grew up within a context of expansion - are now faced with joblessness and inadequate wages, nudging them towards crime. Lacking specialized skills, younger generations for whom there are no job opportunities like those open to their parents are unwilling to return to the land, making them the main losers in this process.
In Brazil, the electrification process was launched in major cities and industrial centers, spreading out to smaller towns and more remote rural communities. The social and spatial imbalances of those times resulted in the co-existence of regions that were well-developed alongside others lacking basic infrastructure. These shortfalls channel flows of migrants to the towns, often settling in their poverty-stricken outskirts. The appearance of urban pockets of poverty triggered an upsurge in crime rates and social tensions that are the outcome - among other factors - of inability to meet their demands for jobs, healthcare and education.
Finding no solution to many rural problems, such as tight labor markets, poor means of production, limited food conservation facilities and drinking water, inadequate maintenance of healthcare centers and few schools offering reasonable levels of education, rural laborers decided to migrate to the major cities. One of the driving forces behind this trend was attaining equal access to modern types of energy, particularly electricity.
In Brazil, providing poorer areas with electricity has not been tagged as high priority by either the private concessionaires or their state-run counterparts. But for low-income rural communities, adequate energy supplies are a crucial factor for breaking away from the trap of poverty and its consequent hunger. The recent rural electrification program (Luz no Campo) run by Eletrobras is striving to minimize this problem.
For families subsisting in the poverty-stricken outskirts of major cities, the problems are even more complex, because solutions require the establishment of adequate living conditions that would draw them back to their original homes in the countryside.
However, after years of living in urban centers, even under extremely poor conditions and often with only clandestine access to electricity, a move of the sort would be quite unthinkable. Consequently, projects providing the countryside with electricity would constitute stepping-stones towards progress by rural communities, while also easing urban poverty by encouraging a return to the land among low-income families clustered around major cities.
But for this to occur, it is crucial that there should be sufficient political will to alter the current situation. And what should be done in today's Brazil?
There a few options for spurring the nation's GDP growth and attracting the necessary investments in the energy area. While avoiding any return to inflation, GDP growth will depend on better job generation, capital inventory and rising productivity. With the current situation of chronic joblessness, higher employment rates are not a limiting factor; however, increasing the capital inventory will depend to a great extent on savings. At the domestic level, this will depend on forecast tax reforms and restructuring the social security system, while at the external level this hangs on the possibility of a positive outcome for talks on the FTAA, leading to new exports. It is also estimated that cuts in government consumption would result in savings of 1% of the GDP, allocating these funds to the poorest 11.5% of the population that today receives less than 1% of the nation's revenues, which could well double this income.
Over the last seven years, small and medium businesses generated 96% of the formal jobs in Brazil, and today account for 25% of its GDP, 2% of its exports, 50% of jobs with signed workbooks and all work in the informal sector. Absorbing a large proportion of the labor-force, they constitute a significant vector for creating wealth, due to their bootstrap effects on underprivileged segments of the population. As an example of job creation policy that would also help reduce poverty, efforts could be channeled to expanding access by the poorer communities to steady supplies of electricity at an acceptable quality and price.
Over the past ten years, there have been sweeping changes in the energy sectors of the developing countries. Among other factors, privatization, restructured utilities, deregulation and environmental controls have reshaped their institutional frameworks.
However, in most of these countries, large sectors of their populations - mainly rural - still lack access to modern types of energy and are consequently unable to enjoy the possible benefits of these restructuring processes.
In brief, access to modern types of energy may basically be understood as a service to be rendered in each developing country to its marginalized communities, as a way of helping eliminate poverty and hunger.
In order for this to occur in Brazil, political will is required to eradicate poverty, while always bearing in mind the old Chinese proverb:
"It is not enough to give a man a fish; it is important to establish the conditions for him to learn how to catch it himself."
Norberto de Franco Medeiros
Chair, Brazilian Committee, World Energy Commission
Director, World Energy Council, London