Documenting Belo Monte Dam's Risks: Buyer Beware

The Belo Monte Hydroelectric Complex – slated to be built on the Xingu River – poses serious financial, legal and social risks to local communities and investors alike. In December 2010, the  Brazilian National Development Bank (BNDES) announced the approval of a "bridge loan" of 1.09 billion reais (US$640mn) to cover Belo Monte's initial costs.  An illegal "partial installation license" was approved in January 2011, despite warnings from the federal public prosecutor (Ministério Público Federal) in the state of Pará that no such environmental license exists under Brazilian legislation .

In January 2011, International Rivers and Brazilian NGO Amigos da Terra - Amazônia Brasileira launched a report based on vast documentation that found a litany of risks in Belo Monte that threaten not only local populations and the environment, but also entrepreneurs, project lenders and investors, and Brazilian taxpayers. The risks include:

  • Uncertainties regarding the cost of construction arising from geological factors, engineering questions and instability in market values.
  • Financial risks related to the project's potential capacity to generate electrical energy, which is far inferior to installed capacity, due to the high seasonality of the Xingu river (that will tend to worsen under scenarios of climate change).
  • High risks associated with legal obligations to invest in mitigation and compensation measures related to social and environmental impacts of the project.
  • Risks due to national and international legal principles on human rights and environmental protection being ignored during the planning and licensing of this complex and highly controversial project.

BNDES Headquarters
BNDES Headquarters
As documented in the report, the Belo Monte Hydroelectric Complex is not apt for financing, due to its lack of economic, social and environmental viability, associated with problems of non-compliance with Brazilian legal requirements and international conventions.

If project construction continues, investors will become jointly liable for ensuing social and environmental damage, with grave risks in terms of negative financial, legal and reputational consequences.

Download the Executive Summary in English.

Download Mega-projeto, Mega-riscos: Análise de Riscos para Investidores no Complexo Hidrelétrico Belo Monte (in Portuguese).