Dreaming South American Energy Integration

Posted on 12/29/13
By Andrés Velasco | Via Project Syndicate
An oil well off the coast of Tierra del Fuego in Argentina. (Photo by BASF - The Chemical Company, Creative Commons License)
An oil well off the coast of Tierra del Fuego in Argentina. (Photo by BASF – The Chemical Company, Creative Commons License)

Simón Bolívar, the South American independence hero who hoped to weave the continent into a single nation, would shudder at the disintegration that prevails today in the continent’s energy sector. Surely he would understand that no community can be built on so fragmented a foundation.

Peru has gas, which it sells to Mexico. Bolivia also has gas, but it has been under-exploiting it ever since it nationalized the industry in 2006. Argentina used to have a gas industry, but it was decimated by years of misguided government policies. Brazil discovered hydrocarbons deep in the Atlantic Ocean a few years ago and has begun auctioning off rights, but actual production is still years away. Chile has no oil or gas, and no one in the neighborhood will sell it any, so it has to buy its supplies from as far away as Indonesia.

Moreover, South America’s electricity grids are seldom interconnected, and rates for power vary widely. Brazil and Chile have the region’s highest electricity prices (which are also among the highest in the world). The competitiveness of their industries, and consumers’ household budgets, suffer accordingly.

Optimists imagine a scenario in which production is rationalized, pipelines are built, grids are interconnected, and gas from Bolivia, Argentina, or elsewhere fuels growth throughout the continent, benefiting everyone in the process.

But such dreams always hit a formidable obstacle: national rivalries that date back decades – in some cases centuries – and that repeatedly keep mutually profitable energy-integration agreements from being signed. Or, if they are signed, they are often broken when compelling short-term considerations intervene.

 

 Click here to read the complete article.

 

Andrés Velasco, a former presidential candidate and finance minister of Chile, is Professor of Professional Practice in International Development at Columbia University’s School of International and Public Affairs. 

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