Continuing his courtship of Latin America, President Hugo Chávez has introduced a bevy of energy proposals over the past months aimed at uniting a region where historical rivalries and economic necessity often trump sound long-term foreign policy. Whether Chávez’s Alternativa Bolivariana para las Americas (ALBA) indeed offers a sound alternative to the U.S.-backed FTAA remains to be seen, but the Venezuelan President has successfully made his case throughout the region by introducing initiatives tailored for each audience.
At a June summit of Caribbean leaders in Puerto la Cruz, Venezuela, Chávez proposed the formation of PetroCaribe, “a body aimed at facilitating the development of energy policies and plans for the integration of the nations of the Caribbean,” according to the text of the initiative. Under the program, non-oil producing Caribbean countries would improve their preferential access to Venezuelan crude originally established by the San José accord of 1980 and the Caracas Agreement of 2001. Once implemented, PetroCaribe would subsidize oil purchases relative to the market price: the higher the price, the larger the discount. Costs related to oil exploration, extracton and distribution would also be subsidized by Caracas.
In the Southern Cone, Chávez and President Néstor Kirchner signed an agreement in September 2004 giving birth to PetroSur. Leaders of the five Andean countries took steps toward enacting PetroAndina in July 2005, with Chávez hoping for final ratification this December. Both PetroSur and PetroAndina offer incentives similar to PetroCaribe. Together, the three regional programs would fall under the umbrella of PetroAmérica, a consortium of all state-owned energy enterprises in Latin America.
Not all countries are convinced. Trinidad and Tobago, the United States’ largest supplier of liquefied natural gas demurred on PetroCaribe. Barbados also balked, citing procedural obstacles but more likely concerned about souring its relationship with Trinidad and Tobago, the exclusive refiner of Barbados’ crude oil production. PetroSur conspicuously lacks Chile’s signature, due to that country’s trade agreement with the U.S., and Colombia—heavily dependent upon U.S. aid and often at odds with Venezuela—could back out of PetroAndina before final ratification.
Like oil, natural gas has proven to be a resource exerting both centripetal and centrifugal forces upon Latin America. Bolivia’s instability, as well as its contentious history with neighbors, continues to frustrate the region’s energy needs. Boasting almost 30 trillion cubic feet of natural gas, second in the region to Venezuela’s 149 trillion, Bolivia hesitatingly agreed to increase exports to Argentina during that country’s 2004 gas crisis, with the stipulation that “not even a molecule” of Bolivian gas would be resold to historical rival Chile, according to an Oxford Institute for Energy Studies report.
But Chile has its sights set on Peru’s promising Camisea natural gas fields and pipeline. The pipeline will, eventually and ideally, unite all of South America in an “energy ring.” If successful, the project would foment increased strategic and economic unity in a region historically divided by its dependence on foreign private investment.
That same foreign investment, touted as the key to development by institutions such as the IMF and World Bank, continues to cause rifts. The government of Peru agreed in July to award Spanish oil and gas giant Repsol-YPF exclusive rights to export gas from the Camisea fields, with the vast majority of exports going to Mexico and, potentially, California. Following the announcement, Chile’s economy minister Jorge Rodríguez told the Miami Herald, “It doesn't make sense for our neighbors to sell gas to customers far away because of the transportation costs…. Camisea's owners [privately-held Peru LNG] will receive a better price by selling the gas to customers who are nearby.”
Although the reality of economies of scale may weaken Rodríguez’s assertion, Venezuela’s Chávez has introduced yet another proposal aimed at bucking international pressure: Gas del Sur. Presented at June’s Mercosur summit in Asunción, Paraguay, Gas del Sur would function as a regional gas conglomerate distributing gas to Latin America and beyond by pipeline and boat. As with his PetroAmérica and related oil proposals, a percentage of profits from Gas del Sur would be channeled toward regional development.
With such ambitious plans, Chávez is undoubtedly comforted by China’s marked interest in Latin America and Venezuela in particular. Approximately 49% of Chinese overseas investment went to Latin America and the Caribbean last year, and Venezuela expects trade between the two countries to reach $3 billion this year, more than doubling figures from 2004. The rising Asian power has recently begun importing Venezuelan oil, operates several oil drilling operations in Venezuela (with eyes on expansion) and is set to begin oil exploration off the coast of Cuba.
Chinese investment in the region has raised eyebrows in Washington, but criticisms have been subdued, perhaps because Latin America and China are playing, more or less, by Washington’s own rules: invest, develop and expand.
About the Author
Steve Liebowitz is a staff assistant at NACLA.
