The Financial Compensation and the Development of Brazilian municipalities flooded by hydroelectric dams

Abstract

Enhancing the Development of localities affected by hydroelectric dams have been discussed in technical and academic literature recently. One of the legal instruments seen as a promoter of local development is the Financial Compensation (CF in Portuguese). In this context, a question that arises is if CF is associated to the development of Brazilian municipalities flooded by hydroelectric dams. Based on a correlation analysis between the values obtained by the financial compensation and the performance of 155 human development variables, it was verified that, during 2000-2010, for 600 flooded municipalities, there were negatives associations between values of CF and values of development variables. When segregating the data per region, only the North and Northeast regions showed positive associations, which seems to be related to a different institutional environment, in relation to the application of municipal resources. The CF is an important instrument that needs to be improved regarding its formal rules and enforcements, from an institutional perspective. Nevertheless, it can be inferred that informal rules as also regional dynamics can determine the development of territories due to absence of effective formal rules.