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Latin America struggles with energy integration

Though the continent has plenty of energy resources, integrating them into a trans-continental energy network remains an elusive goal for the region’s governments

Latin America is a continent rich in energy resources, but integrating those resources – vast hydrocarbons reserves, as well as substantial wind, hydro and biofuels resources – into a trans-continental energy network remains an elusive goal for the region’s governments. “How far are we from real integration? We are very far away,” Ramon Mendez, Uruguay’s national director of energy in the Ministry of Industry, Energy and Mining, told delegates at WEC Daegu 2013.

There are examples of successful cross-border energy links in Latin America. The Itaipú hydroelectric dam, which produces more electricity than China’s Three Gorges dam, was developed jointly by Brazil and Paraguay on the border section of the Paraná River and sends electricity to both countries. The huge gas pipelines that traverse from Bolivia south to Argentina and Brazil are another example of cross-border energy cooperation. Colombia exports gas across its eastern border into Venezuela.

Those are the exception rather than the rule. Latin America’s leaders have long seen the economic and energy security benefits of integrating their energy networks, with dozens of studies having been carried out and plans drawn up over the years to link the Andean north of the region with the southern cone.

But the complexity of aligning regulatory frameworks, overcoming the region’s dramatic geography and bridging political difference has thwarted those ambitions.

More recently, the political divide that has opened up between resource nationalist governments and more market-oriented governments has also complicated integration, said Jorge Ferioli, the chair of the Argentine national member committee for WEC. “It is important that all the countries of the region have the same sets of laws to provide long-term stability for investors,” said Ferioli. “For the first time the region is split into two different types of countries.

One of those groups includes Argentina, Ecuador, Venezuela and Cuba and the other includes the other countries. So it would be very difficult to integrate these countries that have very different views about the long term and the way to manage energy.”

Other events have poisoned trust between some Latin American neighbours when it comes to energy integration. When Argentina’s domestic natural gas production fell below its consumption, the country abruptly broke its contracts to export gas to its neighbours Chile and Uruguay. “We [Uruguay] had a lot of investment we couldn’t use. What we are doing now is building LNG regasification terminal in order to buy from countries all over the world. This is the picture of the difficulty of our region’s integration: we are in the middle of a continent with a lot of national gas but we are building regasification terminals,” said Mendez.

Not everyone is as doubtful over the long-term prospects of integrations. The successful bilateral projects should provide the building blocks to further integration, said Luis Enrique Berrizbeitia, executive vice president at the Development Bank of Latin America. “We have been talking about integration since our independence. We are still very far away, but I think we are advancing.”

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