Powering Up: Latin America’s energy challenge
(with Tanya Harmer) LSE IDEAS CENTRE
L atin America’s energy sector has become especially relevant at both a domestic and international level, but arguably not at a regional level. In the last decade many of the countries in the region benefited from rising commodity prices that impacted oil and other exports. At one level this has played a significant role in the development of domestic politics and redistributive policies. At another, it has made the region an important one to watch in the global energy market. On the one hand Argentina gained support at the recent summit between the region’s presidents following its spat between Buenos Aires and London over British firms’ prospecting for oil off the Falkland Islands/Las Malvinas. On the other hand, such solidarity remains far from institutionalised or sufficiently integrated within the energy sector. As a result, the region’s countries face difficult challenges ahead. Over the past decade this has included growing domestic demand and insufficient supply, reflected in shortages and blackouts and brownouts from resource-hungry Brazil to oil-exporting Venezuela.
These shortages and the failure to create effective regional mechanisms appear counterintuitive, especially given Latin America’s status as a net oil exporter and the bargaining and effective coordination of demand and supply through organisations such as OPEC. Dig deeper and it becomes apparent that once Venezuela, Mexico and Brazil are excluded not only is Latin America effectively a net oil importer (despite holding the second largest proven reserves in the world after the Middle East), but that regional integration is hampered by significant country variations. Overall proven gas reserves and their production, along with that for electricity, are below that of other regions of the world, while Bolivia remains a significant gas exporter and Mexico – which 20 years ago was an oil exporter – is now a net importer.
