Oil and gas in Latin America. A political analysis of international relations based on Venezuelan politics (DT)


Energy has become one of the main issues of global concern. Today – as much or more than the major pandemics (AIDS, Avian Flu), ecological threats (devastation of rainforests, global warming) and issues such as migrations – energy is at the center of the concerns of newspapers, academies and of discussions in governments, multilateral organizations and companies.

After the Cold War, scenarios of possible confrontations that do not arise from ideological disputes but over the supply of gas and oil and the safety of the roads to transport it have become more relevant. In this framework, a map of eventual conflicts puts renewed interest in places such as the Persian Gulf, the Caspian Sea, Nigeria, Angola, Algeria, Sudan, northern Siberia, the South China Sea, Indonesia and Venezuela.

As a consequence, in part, of the above, the focus of energy matters has been changing, as technical and market studies (reserves, prospecting, exploitation) have been adding, with force, analyzes formulated from a political perspective, making expressions such as “petropolitics” or “petrodiplomacy” more frequent in the media. At the same time, when making decisions about energy projects and initiatives, technical or economic feasibility studies – being very important – sometimes have to give way in favor of strategic considerations or power among States. In the Hemisphere, hydrocarbons play an important role in relations between the United States and Venezuela, but also in those between Mexico, Cuba, Venezuela, Colombia, Brazil, Peru, Ecuador, Argentina, Bolivia or Chile. to name just a few key countries. The discovery of oil or gas reserves, or the depletion of others, is causing changes in the relative importance and in the relations between States that, in some cases, seem to influence more than variations in military power, diplomatic and diplomatic strategies. even the stability of their governments.

This paper analyzes the influence that oil and gas are creating on relations between Latin American states. Given the activism that President Hugo Chávez displays in these matters, he will approach it based on Venezuelan politics and the possibilities that the use of oil as an instrument of power has significant importance in the area, altering regional balances. The study is based primarily on political, geopolitical and international relations considerations.

Under the name of oil policy, two types of situations are usually covered. One, that it is effectively the result of the application of force and hegemony given by the management of that resource. Another, the exercise, sometimes naked and arbitrary, of the wealth that oil originates to act on other States. They are different realities, but they must be analyzed in parallel because although easy to distinguish intellectually, in concrete political life they go together, complementing and reinforcing each other.

The first type of situation occurs when oil or gas, by themselves, can create dominance and subordination among states; for example, when nations that lack this resource develop a dependency on others that have an abundance of hydrocarbons, which is reinforced if the existence of subsidized prices or privileged financing is added. In order to clarify these situations, it is necessary to identify in the region the countries that are large producers of crude oil and those that, because they do not have this resource, or do not have it in sufficient quantities, are net importers.

In these relationships between exporters and importers, it should also be considered that the possibilities of establishing a dependency are less to the extent that the type of oil or gas in question is a commodity that is traded in relatively perfect markets, with a variety of actors whose offers and demands set prices, which are transparent. There are types of crude, the lightest, which are effectively a commodity demanded by many countries and whose prices are set in the market. On the other hand, ultra-heavy crude oils are difficult and expensive to produce and require the existence of complex refineries, which are also scarce, which means that they are traded in restricted markets and at prices that are not set automatically. Natural gas is not aAs a commodity, its market is limited to countries with a certain physical proximity, with which there are also gas pipelines and their prices are set by agreements of the States or companies. On the other hand, liquefied natural gas (LNG) reaches broader markets, although it is limited to nations that have de-liquefaction plants in their territory and their prices are more competitive, in the sense that they can be tendered.

The second type of situation to which we have alluded takes place when oil-producing countries that have enormous wealth decide to apply part of these resources to gain influence and power in other States, acting directly on their governments or on opposition groups or movements. These activities are also considered part of the so-called “oil policy”; but it would be more appropriate to say that we are dealing with the exercise of the power that wealth gives and that it does not have much significance if its source is oil, diamonds or a powerful manufacturing industry. A government can use vast sums of money to intervene, either directly or through covert operations, in the politics of other states, even trying to destabilize their governments,

The situation that has been described would not be complete without warning about the other side of the coin, because although oil prosperity can provide the producing countries with resources to act in the internal affairs of other States, that same wealth attracts interest. of powerful nations to control those natural resources, intervening in their political systems. Oil producers are under the constant attention and, at times, open pressure, of the great powers. This reality is facilitated because most of the oil reserves are located in poorly developed nations, with characteristics such as corrupt societies divided by civil wars or politically unstable or ruled by strong dictatorships.

This analysis will focus your attention on the first of the situations just alluded to; however, it will refer to relationships of the second type, taking care, in each case, to specify the disparate nature of the links they create.

Given that this work is limited to the analysis of oil and gas policy in Latin America, it does not address –except for brief references– the relations between Venezuela and the United States, a matter of great importance that should be the object of detailed studies.

Finally, the possibilities of an international oil policy are greater to the extent that oil prices are higher. We assume that they will remain high for a long time, because “this time prices do not reflect a geopolitical disruption but rather the continued success of globalization (to be more specific the flourishing of China and India) and a world economy that is doing very well” (in the words of Daniel Yergin). These upward pressures are reinforced by factors such as political instability in Saudi Arabia, Iraq and Nigeria and the conflict over nuclear energy between the United Nations and Iran, issues that are not easy to resolve, at least in the short term. Additionally, prices are pushed up by the deficit in refining capacity that exists worldwide,

I. Dependence on oil and gas in Latin American countries

The possibilities of using oil as an instrument of power in the relationship with other nations in the region are facilitated if the supply is highly concentrated in one or a few large suppliers and a variety of countries that produce zero or zero oil and that, therefore, they are dependent on foreign suppliers.

Latin America does not favor a scheme like the previous one for several reasons. The first, because excluding Central America and the Caribbean, it is a region rich in energy. In oil, it has 10% of the world’s conventional reserves, compared to 2.5% in North America (excluding Mexico), 9.3% in Africa, 8% in Eastern Europe, 4% in Asia and 1.6% from Western Europe. In gas, the situation is less satisfactory, since it only has 4% of proven world reserves, but its consumption levels are also below that figure.

Second, because in terms of supply and demand for crude oil and gas, the area has a plurality of situations. Without reaching the enormity of Venezuela’s reserves, Mexico, Colombia, Ecuador and Trinidad and Tobago are also oil exporters. Argentina and Bolivia produce enough to meet the needs of their domestic market. Peru and Brazil present a slightly different situation as they are heading towards self-sufficiency, which tends to change the energy map of the region. Thus, the list of net crude importing countries in South America includes Chile, Paraguay and Uruguay and in Central America and the Caribbean all the Central American and Caribbean nations with the aforementioned exception of Trinidad and Tobago. In this area, only Cuba and Guatemala produce oil,

Oil exporting countries

In addition to Venezuela –whose industry, in its strengths and weaknesses, will be analyzed in the next issue–, Mexico, Trinidad and Tobago, Colombia and Ecuador have the status of exporting countries.

Ecuador has 0.4% of the world’s crude oil reserves. The significance of oil in the economy is enormous, representing, according to ECLAC, more than a third of the country’s exports, specifically an average of 36.4% between 1993 and 2003. If Venezuela is excluded, there is no other economy region where the contribution of oil is so high in the export matrix.

Ecuador has PetroEcuador, a state company that is the main company in the country. Its operation is criticized for its low levels of efficiency and its production has been falling for the last ten years.

Colombia is a net exporter of energy resources. It exports oil in significant quantities. It has an abundance of gas that will allow it to supply the western zone of Venezuela for seven years. It has huge reserves of high-quality coal and has abundant water resources that, together with gas, will allow it to be a significant player in energy integration programs, especially with Mesoamerica.

However, the Colombian industry has been showing a worrying decline. Its production, which in 1999 was 820,000 barrels per day, fell sharply in the following years to levels of around 520,000 bpd between 2003 and 2005. The above data led to the idea that the country would lose its status as a net exporter of oil on a date that was estimated to be 2010. The issue is of greater importance because between 1993 and 2003, Colombian crude oil exports represented 25.6% of the country’s total exports.

Mexico , together with Venezuela, concentrates the bulk of the available reserves in Latin America. Mexico represents 1.4% of them worldwide and exploits the resource intensively since, despite the percentage of reserves indicated, it produces 5% of the world supply; Venezuela, on the other hand, with 6.8% of reserves, contributes 3.9% of production. Given that Mexican domestic consumption is high, its crude exports are just over half of those of Venezuela, representing, between 1993 and 2003, 9.3% of the country’s total exports.

Countries that are self-sufficient in oil

Argentina and, with limitations, Bolivia have this status. Starting this year, that would also be the characteristic of Brazil, whose situation is analyzed among the hydrocarbon importing countries.

Argentina represents 0.3% of the world’s crude oil reserves. Strictly speaking, it is a country that has been a net oil exporter up to now. Between 1993 and 2003, Argentine crude exports represented 11.5% of the country’s total exports. However, oil exploitation in Argentina is not growing at the rate of domestic demand, so the trade balance for this item will decrease.

Regarding gas, in the mid-1990s Argentina was considered a country with a large surplus of gas for export. A decade later, it is estimated to be close to being a net importer of this hydrocarbon; However, this last statement is made on the assumption that investments in exploration continue to be paralyzed, since it is assumed that Argentina has significant undiscovered gas reserves and even others discovered but not declared.

Bolivia has a hydrocarbon production that in 2005 was equivalent to its consumption. It produces an amount of oil that is not enough to fully cover its needs, forcing it to import crude oil that are not significant. Between 1993 and 2003, Bolivian oil exports represented 3.9% of total exports, while its imports of these same products were 4.8%.

However, since 1998, Bolivia’s gas reserves have increased tenfold, becoming a major player in that market. Its destiny is to be the main supplier for Argentina, southern Brazil and Chile if political reasons do not prevent it.

Oil importing countries

In South America, Peru, Brazil, Chile, Paraguay and Uruguay have this condition. In Central America and the Caribbean, all countries are, with the sole exception of Trinidad and Tobago.

Brazil has 0.9 of the world’s crude oil reserves. It is the largest oil importer in the region, but these cover only a quarter of its consumption; the other three-quarters are produced domestically. In natural gas, Brazil produces two-thirds of its consumption, importing the rest from Bolivia. In terms of coal, Brazil has the largest proven reserves in South America, almost doubling those of Colombia, which are the next in importance. It is also a world leader in ethanol production, where together with the US it produces 70% of this type of fuel.

However, what is interesting about Brazil is not its relative energy weakness, which made it responsible for 58% of oil imports in the South American region between 1993 and 2003, but rather the aggressive policy that it has promoted in terms of Petrobras development. , the notable increase in its investments and the increase in its production of oil and gas, also of ethanol and coal, in such terms that its results are changing the geopolitics of energy in the region. These issues are discussed below when discussing politics in the Southern Cone.

Chili. Its energy weakness is beyond doubt as it produces no more than 5% of the oil it consumes and a portion of natural gas that does not exceed 20%.

Between 1993 and 2003, exports of Chilean crude oil and derivatives represented 0.7% of the country’s total exports, while imports of crude oil and derived fuels, in the same period, were 10.3 % of national imports. Chile, between 1993 and 2003, was responsible for 25% of the total oil imports of South America, an amount that is enormous for the size of its economy.

Reacting to the seriousness of its oil and gas shortages, Chile is developing an interesting policy of diversification of its energy matrix, a matter that will be analyzed later.

Peru. In 2005 it produced 78% of the oil it consumed, the remaining 22% being imports.

Between 1993 and 2003, Peruvian crude oil exports represented 5.8% of the country’s total exports, while imports of crude oil and derived fuels in the same period were 10% of national imports.

However, the energy situation in Peru has changed very favorably since the discovery, in 1984, of the Camisea natural gas fields, the exploitation of which began last year. The proven natural gas reserves are 4.7 times the crude oil reserves.

Paraguay does not produce oil. Between 1993 and 2003, Paraguayan crude oil exports represented 0.2% of the country’s total exports, while imports of crude oil and derived fuels in the same period were 9.5% of imports. nationals.

If hydroelectric production is considered, Paraguay – despite oil demands that are essential – is energy independent, since it consumes an amount of energy that is well below the hydroelectric capacity available for the country from Itaipu (Brazil-Paraguay Agreement) and Yacyretá (Argentina-Paraguay Agreement).

Uruguay does not produce oil. Between 1993 and 2003, Uruguayan crude oil exports represented 0.72% of the country’s total exports, while imports of crude oil and derived fuels in the same period were 10.45% of national imports .

Uruguay is, energetically speaking, the most vulnerable country in South America.

Central America and the Caribbean. In this area the situation is very different from that of South America. If we exclude Mexico, Venezuela and Colombia, which are part of the Caribbean basin and are oil exporters to which we have already alluded, the only hydrocarbon exporting nation is Trinidad and Tobago. All the rest do not have oil reserves, with the exception of Cuba and Guatemala, which, however, are net importers.

II. Strengths and weaknesses of Venezuelan oil

Oil diplomacy has been a constant in Venezuelan politics since the country was committed to OPEC in the early 1960s. In this sense, it can be said that the existence of a “petropolitics” of that Caribbean country is not something new. But this is a half-truth if it is not added that the Chávez government has taken the use of hydrocarbons, as a rhetoric and an instrument of foreign policy, to levels unprecedented in Venezuelan history. Furthermore, it would be difficult to find in Latin America a similar case of such open use of a raw material in the international political arena.

The possibilities of President Hugo Chávez to turn to oil as an instrument in relations between states depend on the quantity and quality of oil reserves, on the fact that Venezuela maintains a relevant situation as a producer and exporter of crude and on the solidity of the industry that make it an expanding activity, with high efficiency, high levels of investment and in the framework of high prices. On the contrary, if those circumstances do not exist, those possibilities are reduced.

It should be noted that the analysis of the Venezuelan oil industry has been becoming increasingly difficult due to the lack of reliable figures. During this year PDVSA announced that it will stop submitting annual reports of figures to the US Securities and Exchange Commission (SEC). In turn, Moody’s withdrew its ratings on PDVSA’s debt, arguing that it had no “indications that PDVSA intends to provide audited financial statements either publicly or privately.”

The enormity of the reserves

If conventional crude oil is considered, Venezuela has 6.8% of the world’s proven reserves, this is 80,000 million barrels, which makes it the sixth-richest nation in oil, after Saudi Arabia, Iran, Iraq, Kuwait and Abu dhabi If ultra-heavy crude oil is added, this figure rises by 270,000 million barrels, which makes the South American country the largest oil reserve in the world, surpassing Saudi Arabia. The question is: what is the most appropriate figure to consider and compare? Today, the conventional crude reserves; but to the extent that technological development advances, the second. The exploitation of heavy crude oil is difficult, requires greater investments that mature in longer periods, has lower profitability and, above all, It requires special refineries in the places of exploitation to raise the API grade of the crude (to a higher grade lighter) and usually in the destination countries. Venezuelan ultra-heavy crudes (8º API) cannot be treated by a conventional refinery, a circumstance that makes them not acommodity , which has political implications that will be discussed later.

A stagnant production

But although the enormity of its reserves is clear, so is the Venezuelan inability to increase its supply of crude. ECLAC indicates that the country’s GDP growth in 2004 was 17.9%, a figure that is essentially a recovery from the sharp decline in 2002 and 2003. For 2005, preliminary figures indicate a new increase of 9 ,3%. However, as these studies point out, “the expected increase in GDP is not in oil production, which has not been able to recover the production levels that existed before the general strike as a consequence of the low investment to which it has been subjected. the state oil company. These conditions have led the country to produce even below the ceiling agreed in OPEC. The dynamism of the oil sector will depend solely on the increase in international prices,

Specifying how much that fall is is not easy given the lack of figures by PDVSA; Thus, while the Venezuelan state company claims to have recovered the production levels of 2000 and 2001 –that is, about 3.1 million barrels–, independent studies maintain that in 2005 it did not exceed 2.7 million.

Underinvestment in oil

The Venezuelan oil industry requires large annual investments, especially in exploration and exploitation, that allow it to at least maintain its current production levels. Everything indicates that PDVSA is far from reaching the minimum investment necessary for this. PDVSA’s 2005-2010 Plan supposes an annual state investment of 6,300 million dollars and an additional private one of 2,500 million. Regarding the first goal, despite the lack of official figures, estimates for 2005 indicate that it will reach a little more than half, that is, a sum of no more than 3,500 million dollars. Materialized private investment is estimated to be equally far from the goal, due to the climate of uncertainty regarding the government’s policy towards foreign ownership and investment. Given the estimated levels of investment,

The comparison with the investment levels of other state oil companies in the region is adverse for PDVSA. Thus, it was estimated that by 2003, PEMEX’s investments would double those of its Venezuelan counterpart and those of Petrobras would exceed it by more than 150%. Furthermore, recent announcements by the Brazilian state company speak of annual investments in the order of 12,000 million dollars between now and 2010, which is equivalent to tripling PDVSA’s current levels.

The fall in the quality and managerial capacity of PDVSA

The majority of PDVSA’s technocracy committed itself to opposing Chávez in the 2002 “employer strike”. Once he was defeated, a very significant group of high-level technicians was expelled from the company, causing a loss in their leadership that has not been recovered until today. In conjunction with this, Chávez established political control of the company, creating a close dependence on the Presidency of the Republic and making use of part of its resources to finance government social initiatives (“the missions”). This deviation of spending towards social programs is one of the explanatory causes of the inability of the state oil company to reach the required levels of investment. As of November 2004, the positions of Minister of Energy and Petroleum and President of PDVSA were merged in the same hand,

PDVSA’s lack of high-level managerial capacities has become more critical as the government has been committing it to a large number of new tasks. The decision to transform 32 Operating Agreements with foreign companies into 32 joint ventures under majority control of PDVSA (60% share ownership) obliges the latter to take over the administrative, financial, operational and technical management of 32 companies; To this must be added other burdens on its already weakened business management capacity, such as, for example, advising YPF Bolivianos, the delivery of subsidized oil to the municipalities under Sandinista control in Nicaragua and the FMLN in El Salvador, and the study of the Gas Pipeline. from the south.

Little development of natural gas

Venezuela has the largest natural gas reserves in Latin America. However, until very recently it had no interest in developing this activity. It is estimated that with reserves of 4.2 trillion cubic meters, gas exploitation does not exceed 40,000 million. In addition, an important part of the gas it extracts is associated with oil, which cannot be used for uses other than the exploitation of crude oil. There is no doubt that in the future Venezuela will be a great gas exporter; but today it can only be in limited quantities. The best proof of the latter is the agreement with Colombia to build the Transguajiro Gas Pipeline, which will go from La Guajira to Maracaibo and which during its first seven years of operation will transport Colombian natural gas to Venezuelan consumers. Venezuela has a very incipient development of gas pipelines, which has made the country’s commercial and residential consumption very low; in fact, an oil zone as important as Zulia does not have networks that allow the consumption of residential gas. Only in the late 1990s did Venezuela enact a legal framework for the industry, the Gaseous Hydrocarbons Law, and in 2000 it created the National Gas Entity (ENAGAS).

Heavy crude

Venezuela produces light, heavy and ultra-heavy crude. Light crude is defined as one that has more than 30º API; heavy crude that of less than 30º API; and ultra-heavy the one with less than 16º API. In the market, the most desired crude oils are light ones, such as Brent (45º API) and WTI (47º API). Those of grade less than 16 have restricted markets as they require special refineries in their extraction sites and normally in the destination countries. The ultra-heavy are difficult and expensive to transport by gas pipeline given their high viscosity, so their first treatment must be close to the exploitation wells until they are transformed into heavy crude oils. Only then are they exported to specialized refineries. In general, there are few refineries with infrastructure to refine this type of crude.

Regarding this work, it can be said that the use of heavy crude oil as an instrument of power is restricted. In the case of light crude oils, an exporting country could cut off the supply to an importer, sure that this product would be located in other markets. The same would not happen with ultra-heavy crude if the importing country has the few specialized refineries in the treatment of these hydrocarbons, because in this case by cutting off the supply and not being able to place the product in the markets, it would be self-inflicting damage equal to or greater than the one who pretends to cause his adversary. The latter is largely the relationship between Venezuela and the US. Venezuela exports heavy crude to the US, because this country has a high number of refineries capable of processing oil of these characteristics. This makes it very difficult to use this type of supply as a pressure instrument. Furthermore, it could even be said that the power equation is, in this case, more favorable to the United States, since the refining capacity of heavy and high-acid crude oils is scarcer than their availability.

In the same sense, it can be argued that PDVSA’s search for associations with state or private oil companies from other countries, in projects that import both the exploitation of ultra-heavy crude in Venezuela and, at the same time, the creation of refining capacities of In their countries of destination, they should be seen as situations in which normally a conflict would not be of a negative sum – the exporter wins and the importer loses – but of a positive sum because, if the exchange continues, both win, and if they interrupt it, both lose. .

In short, Chávez’s “oil diplomacy” takes place in a specific framework, under many adverse concepts, as indicated by stagnant levels of production, under-investment, the inability to attract significant levels of private investment, politicization and mismanagement of PDVSA and the presence of ultra-heavy crude. In these conditions it depends on the current high oil prices and it is only possible as long as this situation continues. A significant drop in prices could not be offset, at least in the medium term, by increases in crude oil production. Much less because of the dynamism of other sectors of the economy, since the Chavista regime has not been able to use the current favorable price situation to finance a self-sustained development of other sectors of the economy.

III. Oil Policy in Central America and the Caribbean

Of all the places in Latin America, this is the region where the importance of oil and gas as a policy instrument may be greatest. The reason is obvious, it is an area with large oil producers and more than twenty nations that are net importers of crude oil and gas, completely lacking these resources. Indeed, two world-class producers converge there, namely Venezuela and Mexico and another two –Trinidad and Tobago and Colombia– which, not reaching the production levels of the previous ones, are large at the regional level. The twenty-two nations to which we have alluded are Haiti, the Dominican Republic and Cuba, plus the six Central American nations –Guatemala, Nicaragua, El Salvador, Honduras, Costa Rica and Panama– and thirteen of the fourteen members of CARICOM. Only two of them, Guatemala and Cuba,

In this region the dependence on oil and gas is greater than in any other in the Hemisphere and, therefore, the opportunities for “oil diplomacy” are also higher.

Central America and the Caribbean, in turn, is an area where various powers and subpowers have historically sought to exert influence. Of course, the US, but also Mexico, Venezuela and Cuba, particularly under Castro. Additionally, Brazil has been giving the region increasing importance to the point that Lula has already made two official visits to the Caribbean. The area is important for many reasons: its population, its market, its proximity to the United States that gives it geopolitical interest, its electoral power in the Inter-American System (the CARICOM countries gather fourteen votes in the OAS General Assembly and the South Americans just ten). Consequently,

In this framework, the following can be mentioned among the axes or main lines through which oil and gas policy passes in the region.

The San José Agreement

For at least a quarter of a century, the countries of Central America and the Caribbean have been seeking international collaboration to face the difficulties created by their lack of oil, a circumstance that has been aggravated with each price surge.

In August 1980 this task was assumed, in collaboration, by the governments of Venezuela and Mexico through the San José Agreement, in which they each agreed to supply 80,000 barrels per day of crude oil or refined products to eleven countries in the area (Belize , Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama, Haiti, Dominican Republic, Barbados and Jamaica) at international market prices but with the help of credit lines that covered between 20% and 25% of the total cost fuel. This agreement, until now, has been renewed annually, although it has been questioned by Chávez, due to its not being extended to Cuba.

The Caracas Agreement

Venezuela’s criticism of the San José Agreement led it to create, in October 2000, the Caracas Agreement, which was proposed as a parallel to the previous one. It was signed between Venezuela and ten countries in the region (all of the previous agreement, except Jamaica) and commits a daily oil supply of 80,000 barrels – the largest quota being that of the Dominican Republic, of 20,000 barrels, and the smallest those of Barbados. and Belize of 1,600 and 600 barrels, respectively – at international prices, but with a payment term of up to seventeen years and an annual interest rate of 2%.


Five years later, in June 2005, Venezuela took a new step by creating PetroCaribe, which comprises Caribbean nations not included in the aforementioned agreements, Antigua and Barbuda, Bahamas, Cuba, Grenada, Guyana, Saint Kitts and Nevis, Saint Lucia , Saint Vincent and the Grenadines and Suriname, plus three, Belize, Jamaica and the Dominican Republic, which were.

Crude oil is sold to demanding countries at market prices, without subsidies. The interesting thing is that they are given long-term financing that is in relation to the increase in international prices, that is, the higher the price per barrel, the greater the part of the oil bill that enjoys financial facilities, which reaches 30 % when the price is greater than 40 dollars; 40% if the barrel costs more than 50 dollars; and 50% if it reaches 100 dollars. If the price of crude remains below 40 dollars, the term and interests are the same as those of the Caracas Agreement; but if it exceeds them, the term is increased to 25 years. The oil sold in this way can only be used for domestic consumption in each country, prohibiting its re-export.

This agreement has, at least, two other features that distinguish it. One is that it creates a permanent organization, based in Caracas, with a Ministerial Council and an Executive Secretariat corresponding to Venezuela. The second is that it creates a Fund called ALBA-Caribe destined to finance economic and social development programs, which begins with a Venezuelan contribution of 50 million dollars. Additionally, the Chávez government wanted to link the PetroCaribe agreement to ALBA (as an alternative to the FTAA) with uncertain results since that proposal has not been accepted, as happened, for example, at the IV Summit of the Association of Caribbean States (AEC ), held in July of last year, where, against the pressure of Venezuelan diplomacy, all reference to ALBA was deleted.

These agreements of Venezuela with countries of Central America and the Caribbean are, without a doubt, an aid for the nations of the area. But without ignoring the Venezuelan effort to help alleviate the situation of the Caribbean countries, burdened by the cost of their oil purchases, the questions about the degree of dependence that this aid can create and the willingness of the offeror to use it are valid. pressure instrument. Strictly speaking, there are contradictory indications. In the vote to elect the president of the Inter-American Bank, countries receiving aid from PetroCaribe voted in favor of the Colombian candidate, who was strongly resisted by Chávez; An opposite example of extreme rudeness, albeit prior to PetroCaribe, was Chávez’s decision to cut oil exports to the Dominican Republic in 2004.

The Venezuela-Cuba Agreement

The Venezuela-Cuba Agreement is the narrowest international action program that exists between two countries in the Hemisphere. Its political base is the rejection of the US and an “anti-imperialist”, “anti-globalization” and “anti-neoliberal” rhetoric. As a model of society that is proposed, at least until today, there is a difference between a vague “21st century socialism” proposed by Chávez and the “real socialism” implanted by Castro.

The material basis of this agreement is oil. The lack of transparency that characterizes the Castro and Chávez regimes makes it difficult to specify the terms of the existing agreement between both nations; however, various publications (including Erickson, Corrales, Falcoff, and Schifter) point to the following. Venezuela ships 90,000 barrels per day to Cuba at a price estimated to be two-thirds of the market value. Cuba consumes 120,000 bpd, two thirds of which it produces internally. Therefore, of the 90,000 barrels that Venezuela delivers, 40,000 are destined for domestic consumption and 50,000 are re-exported to world markets. Thus, Cuba not only obtains the advantage of using a subsidized raw material for its internal consumption, but also of re-exporting part of it.spot , capitalizing the difference in your favor.

In exchange for oil aid, Venezuela receives between 30,000 and 50,000 Cuban professionals, especially in the areas of medicine, education and sports, which have been essential for the Chávez government to carry out assistance programs (the “missions”) of literacy training, polyclinics in poor neighborhoods, sports training and identification cards and, most likely, although the latter is not made public, advice for the strengthening of intelligence and security services and for the reform of the military apparatus. The magnitude of this exchange is recorded in ECLAC reports which, based on figures provided by the Cuban government, show an increase in output of 11.8% in 2005,

Venezuela’s effort in favor of Cuba is not minor, even though it is difficult to calculate it precisely, both because the terms of the agreements on which it is based are not public and because their amount depends on the fluctuating price of oil. All in all, it can be estimated that under the conditions of this year 2006, the sum of subsidies, re-exports and financing allows a greater income to the Cuban regime of not less than 1,400 million dollars annually and even more. Even though Cuban collaboration in the implementation, by the Chávez government, of assistance programs of popular impact has been decisive, the monetary value of this consideration is not clear, since it consists of non-tradable professional services to which, in addition, it is difficult to measure its efficiency. But beyond these calculations,

These agreements are the subject of no minor considerations and criticism. Without ignoring the sovereignty of the government of Hugo Chávez to deliver that aid to Cuba, it is questioned that given its enormous amount it can be maintained over time and, more harshly, the rationality of spending of that magnitude by a country that is not a leading power and, furthermore, beset by huge problems of poverty, unemployment and underinvestment in its own oil industry. Legally, this agreement has been complemented by the recognition to the Cuban regime of jurisdiction over workers and technicians of that nationality who, due to this agreement, must live in Venezuela, a matter that adds ethical questions to this exchange of “workers for oil.” Finally,

The cheap oil agreements with politically related municipalities of El Salvador and Managua

The attempt to use oil as a weapon of political interference in the electoral struggles of other states is present, and in a flagrant way, in two recent agreements signed by Chávez. In El Salvador, the agreement with the organization of mayors belonging to the Farabundo Marti Front, aimed at delivering oil through PDVCaribe, a PDVSA subsidiary, at a discounted price and paying municipalities up to 40% in agricultural products. The other is a similar agreement in Nicaragua, with Sandinista mayors who support the candidacy of Daniel Ortega, whom Chávez has publicly endorsed as his candidate in the upcoming presidential elections.

Mexico, Colombia and the Puebla Panama Plan

In June 2001, the presidents of Mexico, Belize, Guatemala, Honduras, Nicaragua, El Salvador, Costa Rica and Panama announced the Puebla Panama Plan (PPP), aimed at accelerating the integration of the so-called “Mesoamerica”, that is, the nine southern states of Mexico and the seven countries of Central America.

This idea did not arouse very active interest in Mexico during its early years and it was mainly concentrated on the development of road infrastructure. However, as the action of Cuba-Venezuela on the subregion has become more evident, Mexicans have returned to the initiative with a more concrete geopolitical interest.

In what matters here, the PPP today has, as one of its central concerns, energy and oil. In mid-2005, an international tender was called for the construction of the “Electric Interconnection System for Central America” (340 million dollars of investment). In addition, collaboration with Mexico and Colombia to take advantage of the oil and gas resources of these two countries is proposed.

Finally, in November 2005, the Central American and Mexican presidents, within the framework of the PPP, agreed to promote construction in a Central American country (it cannot be in Mexico because the Constitution prevents them from building refineries with private capital on its land). ), from a plant capable of processing between 350,000 and 400,000 bpd. That refinery, with an estimated cost of 6,000 million dollars, would have capital contributions of 40% by the Mexican State, 20% by the Central American nations and 40% by private investors. If the initiative is carried out, the countries of the region would have access to a greater variety of oil markets.

Colombia, motivated by geopolitical concerns similar to those of Mexico, has joined the PPP as an observer, committing to play an active role. This collaboration may become important in the energy issue given the possibilities of that Andean nation to be both a supplier of hydroelectricity and of gas, oil and coal.

The reform of the Mexican oil and gas sector

Energy policy in Central America and the Caribbean is inextricably linked to what happens with Mexico, which, although it does not have the largest reserves, is the largest producer in the area. PEMEX, the Mexican state company, has a monopoly on the exploitation, refining and distribution of hydrocarbons and is by far the largest contributor of tax resources to the country. PEMEX’s efficiency is questioned, since its reserves are decreasing, its investments in exploration are insufficient, it lacks adequate refining capacity for heavy crude, it lags behind in exploration and exploitation in deep waters and has high administration costs. It is true that in terms of investment, PEMEX is double its Venezuelan counterpart, but it is also far from reaching levels that would allow the required production increases. The foregoing has raised the need for Mexico, in the energy sector, to open up to national and even foreign private investment. However, this is a very difficult issue to place in the public policy debate, as shown by the fact that during the recent presidential campaign even the right-wing candidate rejected any eventual termination of PEMEX’s monopoly on the oil sector. However, in recent times, although not resolved by constitutional and legal reforms, there has been, as shown by the fact that during the recent presidential campaign even the candidate of the right rejected any eventual termination of PEMEX’s monopoly on the oil sector. However, in recent times, although not resolved by constitutional and legal reforms, there has been, as shown by the fact that during the recent presidential campaign even the candidate of the right rejected any eventual termination of PEMEX’s monopoly on the oil sector. However, in recent times, although not resolved by constitutional and legal reforms, there has been,de facto , an opening to the private sector in the area of ​​natural gas – where Mexico has already become an importer – through the granting, by the Energy Regulatory Commission, of gas distribution concessions and, later, through the called multiple service contracts (CSM), of blocks for the exploitation of natural gas. In turn, within the framework of declarations in favor of maintaining the PEMEX monopoly, the winning candidate in the last presidential election, Felipe Calderón, has made insistent declarations in favor of a modernization whose meaning, however, is not specified. Certainly these are developments that should be carefully considered in the years to come.

IV. Oil policy in the Andean region

The Andean region is characterized by two features whose consideration is essential for the analysis made here. One is your energy wealth; the other the seriousness of its political, social and ethnic crisis.

The first feature makes it the area of ​​America where “oil diplomacy” can have the least impact. The opportunities for influence that oil and gas give are greater when there is an asymmetry in the relations between States, where there is a large supplier of the resource and several others that lack it. This type of relationship, which opens doors to dependence, does not occur within the Andean zone for the reason that the countries that compose it are net exporters of energy to the world; they have huge reserves of oil, gas, coal, and hydroelectricity. The self-sufficiency of energy in these countries means that the levels of integration in the area are almost non-existent and slightly significant in terms of electricity.

The second feature, on the other hand, opens the door to the influence of powers, large or medium, that want to gain power within other States on the basis of intervening in them by financing political actions, open or covert, tending to destabilize their governments or that they try to support parties or candidates that are related to their interests and projects. In this case, as we pointed out in the considerations made at the beginning of this work, we are not before an “oil diplomacy” but rather before the crude exercise of the power that gives the wealth of a State not having greater significance if its origin is oil or no.

The countries of the Andean area are vulnerable to this type of political intervention, as they face governance problems resulting from deep flaws in their political systems. They make up an area traversed by various attempts at State reforms, by crisis or the threat of institutional crises, by the re-emergence of a political role for the military and, in some of these nations, by the problems created by violence, the guerrillas, drug trafficking, the economic crisis and the poor results of their economies, which have made per capita income at the beginning of this decadeof their populations are lower than they were in 1990. The fundamental cause of the current crises in these countries is located in the field of politics: in their Constitutions, party systems, electoral laws, the type of social relations civil with the political system, the behavior patterns of its ruling classes and the high levels of corruption. In three of them, in addition, the indigenous population represents more than a third of the inhabitants, a reality that, since it has not been addressed by coherent and effective policies, has created an ethnic divide that affects governance.

Interventions of this second type, that is to say, not typical of an “oil diplomacy” but of clear political intention, would be the case of repeated actions by Chávez and which will be briefly alluded to, since they are not the main object of this report.


In the field of energy, Colombia is independent from Venezuela and from any other country. It is a net exporter of energy resources: oil, gas, quality coal and abundant water resources.

Given the sharp decline in oil production that has been registering in recent years, Colombia, under Uribe’s presidency, has made an effort to reverse this situation through policies that are at the opposite of those that Venezuela and Bolivia follow today. and, in a way, Ecuador. They are pro-business and are oriented towards increasing security, controlling the guerrillas, reducing kidnappings, sabotage, and illegal exactions by the guerrillas and paramilitaries; a reduction in the government’s share of taxes and royalties to 50%; the authorization of gas exports; and allow exploration contracts with Ecopetrol of 50% -50% to pass to a 70% -30% partnership. Further, Colombia has prestige as a country where there is respect for contracts and stability in the rules of the game. Regarding the reform of Ecopetrol, Colombian policy is similar to that carried out by Brazil with Petrobras in the 1990s: it has transferred the regulatory functions that previously belonged to the state company to a new body, which is the National Agency for Hydrocarbons and has just announced the privatization of 20% of Ecopetrol’s property. All of the above is aimed at a strong increase in the search for and production of hydrocarbons, given that currently 80% of the country’s territory has not been explored. In this effort, the main regional partner of Colombia is Petrobras, which is already the fourth largest producer behind Ecopetrol,

With regard to energy relations with Venezuela, it can be said that in the current state of the oil and gas situation, it is Venezuela that needs Colombia the most and not the other way around; that there are initiatives that are of more interest to the Chávez regime than to the Uribe regime. One is the Transguajiro gas pipeline, which is 330 km long and between 2007 and 2011 – and even 2014 – will transport Colombian gas to supply Venezuelan consumers. The project is of such a priority for the Chávez government that it has assumed its construction cost. The issue illustrates the low development of gas in the Venezuelan economy. The other project, not yet in execution, is the pipeline with which Venezuela wants to transfer its crude oil to the Pacific Ocean coast, as a way of promoting exports to Asia and especially to China.

At the political level, the fight against the Colombian guerrilla has created some tensions between the two countries and, at some point, reciprocal accusations of violation of the territorial space of their States. However, in the last year the relations between Chávez and Uribe have normalized. In addition, it must be added that the attractiveness of Chávez and the Fifth Republic Movement is marginal in Colombia, with no groups claiming identity with the “Bolivarian revolution.”


In the same vein as Venezuela under Chávez, although to a lesser degree, Ecuador has been applying an aggressive policy against foreign investment that, in part, is a reflection of a country where the rules of the game are constantly changed and that, in addition It has a great institutional weakness –one of whose expressions has been that between 2004 and 2005 it was fifteen months without a Supreme Court of Justice. Currently the oil sector is going through a series of conflicts, such as the long dispute over tax debts –Value Added Tax payments– from private oil companies; and recently, the implementation of the reform to the hydrocarbons law, which means a change in the contracts of the oil companies, forcing them to share 50% of the excessive profits from high oil prices. But perhaps the most delicate incident has been the government’s revocation of the contracts with Occidental Petroleum, which produced around a fifth of Ecuadorian oil and which was accused of an unauthorized sale of 40% of aoil block in the Amazon to a Canadian company.

However, in what may be a new contradiction, the Ecuadorian Minister of Energy pointed out in the final days of May two measures that imported an opening to the participation of foreign oil companies in Ecuador. One was the announcement of the tender for oil exploration areas with reserves of more than 1,000 million barrels to foreign companies, but especially state companies; The second is that in the next 45 days, Block 15, whose concession was canceled to Occidental, would be handed over for exploitation to a foreign oil company, ideally state-owned, mentioning among them ENAP, Petrobras and Ecopetrol.

Venezuela’s relationship with Ecuador is more complex than that with Colombia. In 2005, when attacks on the Ecuadorian oil pipelines prevented that country from fulfilling supply contracts, Chávez made a gesture to Ecuador that was well received and that consisted of what was called an “oil loan” aimed at allowing it to honor its commitments. Negotiations between Ecuador and Venezuela have recently failed, by virtue of which PDVSA took over the exploitation of Block 15, committing, in exchange, to deliver refined products to Ecuador. This new drop is added to previous proposals, which have not yet materialized, in which Venezuela, which has idle refining capacity, has offered to treat Ecuadorian heavy crudes.

At the political level, there have been approaches by Chávez whose results are difficult to assess. At the beginning of the government of Lucio Gutiérrez, given the military origin of both caudillos, an attempt was made to establish a closeness between the two, which did not bear fruit. After the fall of Gutiérrez and in the inaugural months of his successor, Vice President Palacio appointed a cabinet that sought a collaboration with Chávez through the Minister of Foreign Affairs Antonio Parra and, above all, the Minister of Economy, Rafael Correa, who characterized his management by an “anti Bush-IMF-WB” rhetoric, to which Venezuela replied with offers to purchase bonds of the Ecuadorian debt and a loan for 500 million dollars, which was later reduced to 200 and, finally, not it materialized.

Ecuador is currently facing a presidential election whose first round will take place in October this year. One of the candidates is Rafael Correa, who has been trying to create, with uncertain results, a coalition of left-wing forces and the Pachakutik indigenous movement. Correa has received the support of Hugo Chávez.


Despite being an oil importer, given the small magnitude of its deficit, it is independent of what happens with this resource, a situation that has been reduced to a minimum due to the entry of gas from Camisea, which places it in the double condition of being , on the one hand, a demander of small quantities of oil in the international market, but a significant supplier of natural gas.

Peru has projected Camisea’s exports to liquefied natural gas, for which it has decided to build a liquefaction plant at a cost of 3,200 million dollars, in association with Hunt Oil and Repsol-YPF, for export to the markets. from Mexico and the US.

An interesting integration initiative – unfortunately so far unsuccessful – and in which Peru plays the key role is the so-called “energy ring”, proposed in June 2005 at the meeting of Mercosur presidents. It is an interconnection of gas pipelines, some already existing and others to be built, that would link Camisea, northern Chile crossing to Argentina, Paraguay, Uruguay and, finally, connecting with southern Brazil. The project, however, has encountered two difficulties. The first, the policy of Peru, which considers that the current Camisea reserves only ensure the supply of domestic consumption and the liquefied natural gas project; the second, the resistance of Bolivia to collaborate – as long as its maritime claim is not addressed – with an initiative that would alleviate the Chilean demand for hydrocarbons.

Peru is not dependent on energy neither on Venezuela nor on other countries. However, Chávez actively intervened in Peruvian politics in recent months, committing himself to the candidacy of Ollanta Humala. Even in reaction to a provocation from Alan García, he became involved in a tough controversy with who is the current president of Peru. The incident ended in the withdrawal of the ambassadors of both countries.


The arrival of Evo Morales to the presidency of the republic, in January of this year, has redefined the country’s attitude in two crucial matters that matter to this work: a policy of nationalization and another of revision of natural gas export prices.

The nationalization of hydrocarbons is not surprising considering that it was Morales’s main electoral flag and the mandate of a plebiscite, held in 2004, which ordered the State to “regain the property, possession and total and absolute control” of those means.

On May 1 of this year, Morales issued a nationalization decree that set a period of 180 days for oil companies that decide to continue in the country to sign new contracts with the State that guarantee state control and direction of their activities. The measure was accompanied by changes in the participation of companies in the product of the exploitations, which was redistributed so as to deliver, in the case of the fields with the highest production, 82% to the Bolivian State and 18% to them. In the case of smaller deposits, these percentages vary between 60% and 40%. In this process, the two companies most affected were the Spanish Repsol-YPF and Petrobras.

The fact of having nationalized the investments of the Brazilian state oil and gas company has had an impact beyond energy, causing Evo to distance himself from Lula da Silva, a matter that is delicate since Brazil is the most economically important nation for Bolivia. Being the buyer of 70% of its gas, it is the main source of investment both in the oil and gas sector and in the agrarian economy of Santa Cruz de la Sierra and the main supplier of industrial products. Brazil and Bolivia, despite differences of interests, are complementary economies, destined for broad collaboration.

The Brazilian reaction has been harsh. At the Mercosur meeting in Caracas, Lula refused to meet with Morales, claiming that the discussions on gas prices were not a matter for the president of Brazil but for Petrobras. But the most serious thing is that the Brazilian government has said that its main strategic objective is to be independent, in the shortest term, from Bolivian gas. And to demonstrate the seriousness of his attempt, he has adopted four measures, already in progress. First, it suspended the expansion of the Bolivia-Brazil gas pipeline in a sign that it is not considering increasing gas purchases from its neighbor. Second, it ordered the construction of two large LNG plants – there is even talk of a third – indicating that it will acquire gas in countries such as Trinidad and Tobago, Nigeria, Angola or Indonesia. Third, tripled current investments in natural gas exploration and exploitation. And fourth, it canceled Petrobras’ commitments to invest $ 5 billion in the next five years (2007-2011).

The advice given by Chávez to the nationalization decreed by Evo Morales – a matter referred to below – has strengthened energy cooperation between La Paz and Caracas, an issue that, with regard to energy, does not seem appropriate, especially if it has been done at the price of a term of collaboration, in these matters, with Brazil. Bolivia has a smaller oil deficit that, due to its magnitude, could supply it in various markets and, of course, Argentina and even Brazil. Bolivia and Venezuela are not energetically complementary but rather competitive since both are the largest natural gas reserves in the region. Complementary from an energy point of view, on the other hand, are the economies of Brazil, Argentina, Uruguay and Chile, which are gas importers. At the same time,

In energy matters, the most formal relations between Chávez and Bolivia are contained in the “Cooperation Agreement in the Energy Sector” and the “Caracas Energy Cooperation Agreement”, signed the day after Morales took office and which essentially establish , that: (1) Venezuela supplies “up to 200,000 barrels per month or their energy equivalents”; (2) indicates that this supply will be “up to the volumes required to satisfy domestic demand”; (3) creates forms of payment and financing in favor of Bolivia; (4) accept payment with Bolivian products or provision of services; (5) financing, like PetroCaribe, increases as the price of a barrel of oil increases; (6) Venezuela commits PDVSA’s support to the restructuring and modernization of YPFB and the “formation of joint ventures between YPFB and PDVSA for the development of hydrocarbon exploration, production, refining, distribution chains, processing and industrialization projects”; and (7) raises the “creation of PDVSA Bolivia and the opening of its office in Bolivia …”.

Analyzed on their own terms, these agreements are minor. They comprise a small amount of oil, about 6,600 bpd, which is insignificant compared to the 90,000 bpd to Cuba. It can be deduced from the foregoing that the financing effort is also reduced since it is done on an oil bill of around 13 million dollars a month. At the same time, the margin of maneuver for payment with Bolivian products is not very great if it is considered that in 2005 Venezuela’s purchases from that country reached a total amount of 160 million dollars, of which only a small part could be object of exchange for oil. Finally, PDVSA’s support and partnerships with YPFB is not the best option given the weakness of the former’s managerial capabilities.

Almost in conjunction with the nationalization, the Bolivian government proceeded to renegotiate the prices in the gas supply contracts with Argentina and Brazil, a matter in which the Bolivian government is right, since the price of that hydrocarbon, paid by Brazil and Argentina, it was far below those of the market. However, for Evo Morales it has been an unpleasant coincidence that this struggle for prices broke out almost at the same time as the nationalization, aggravating the already existing tensions with Brazil and creating new ones with Argentina, nations that are responsible for 100% of Bolivian exports. Of gas.

Obviously, changes in the magnitude of nationalizations affect the industry in terms of investments for gas exploration and exploitation, while price increases and, eventually, insecurity in the fulfillment of supply contracts, stimulate current or potential gas buyers to develop alternative energy sources. These issues –the tensions created by the price negotiations, as well as the responses towards the diversification of the energy matrices– will be analyzed in the next issue, which refers to energy policy in the Southern Cone.

Less than seven months after the nationalization, the government of Evo Morales has begun to learn, the hard way, that issuing a decree of nationalization is something simple; but taking over nationalized activities, a huge task. Clearly, YPFB has neither the organization, nor the human and capital resources to keep the gas industry running and develop by itself. This is what the Bolivian Minister of Hydrocarbons has had to acknowledge when pointing out that the full effect of the nationalization of oil and gas will be “temporarily suspended” while facing the restructuring of YPFB and funds are identified to finance the required investment increases.

On another level, Chávez’s greatest influence on Bolivia does not come from the side of energy dependence, but rather his instruments are political and ideological and affirmed in a cooperation program that reproduces the one existing between the Castro and Chávez regimes, consisting of the dispatch of Cuban and Venezuelan technicians to implement in Bolivia assistance programs similar to the “missions” that Chávez launched.

Chávez financed part of Morales’ electoral campaign. Elegido Evo, the day after its inauguration, agreements were signed between Venezuela and Bolivia that established a broad collaboration defined in the textual quotes that follow.

“(…) we will collaborate in education, identification services and health” … “The Parties, by mutual agreement, may invite other countries of the region…”.

This provision was the way to extend this company to the Cuban regime, a matter that was done in the following weeks.

“Support for the decision to confront illiteracy and its consequences within 30 months, taking advantage of the experience that the Venezuelan government has developed in this matter …”.

Two months after the agreements were signed, the literacy campaign was inaugurated with the presence of President Evo Morales and the ministers of education of Cuba and Venezuela.

“Exchange of coaches, technicians, specialists and experts in the area of ​​sport.”

“Training of Bolivian personnel within the geographical space of the Bolivarian Republic of Venezuela, within the framework of the 5,000 scholarships offered to the Republic of Bolivia, by the Bolivarian Republic of Venezuela.”

It is worth noting the high number of scholarships, although their characteristics, length and beneficiaries are not specified.

“The Bolivarian Republic of Venezuela, together with the prominent Cuban medical mission in Venezuela and Bolivia … undertakes to grant the benefit of the ‘Miracle Mission’ to Bolivian patients suffering from the following pathologies …” .

“The Parties agree to an effective exchange of experiences in matters of citizen identification, taking into account the Venezuelan practice of the ‘Identity Mission’ carried out by the Ministry of the Interior and Justice (Venezuelans), in order to guarantee the right to identity of the population”.

This is a matter of particular concern. On the one hand, the identification (delivery of identity cards) of the poorest people is a great asset and a very felt aspiration of these sectors; However, in Venezuela, according to complaints made by the opposition, this mechanism was a way to adulterate the electoral roll, giving the right to vote to those who did not belong.

In the first days of July, the elections for the Constituent Assembly took place, where, again, there were strong denunciations of Chávez’s participation in the financing of this electoral process. The interesting thing will be to see if the concepts that are the pillars on which the Constitution of the Bolivarian Republic of Venezuela, approved in 1999, were built will be present in the drafting of the new Fundamental Charter.

V. Oil policy in the Southern Cone

In terms of energy, as has been said, the situations in the Latin American regions are different. In Central America and the Caribbean, the possibilities of using oil and gas as policy instruments are greater because there are several large energy producers with more than twenty countries, almost all economically small, that lack the resource. The Andean zone, on the other hand, is the opposite, since in it all nations are producers of hydrocarbons in terms of satisfying not only their domestic demand but also producing a favorable trade balance in the area.

What happens in the Southern Cone is different. There are Brazil and Chile, which demand more than half of the hydrocarbon imports from all of Latin America; however, the situation in these countries is diverse. While Chile produces 4% of the oil it consumes; Brazil produces 75% of what it needs to serve its domestic market. In addition, Brazil, in 70% of its crude imports, is supplied from suppliers outside the region (Nigeria the main one, Algeria and countries of the Asia Pacific); Chile, on the other hand, buys 70% of its imports from countries in the region, but has in its favor having a good refining capacity. A third country, Argentina, which despite the fact that its reserves have been decreasing is, until today, self-sufficient in oil and gas. Finally, We should add two smaller countries –Uruguay and Paraguay– that do not produce oil and gas; But Paraguay is independent in terms of energy, given the abundance of hydroelectricity it has.

Regarding what is not properly an “oil diplomacy”, but rather the application of resources by Venezuela to gain political influence in the nations of the Southern Cone, its results seem unlikely if the political importance is taken into account. , economic and international, especially Brazil and Argentina, which make them nations within whose interior it is difficult to establish a leadership or consecrate a certain hegemony a country of minor relative importance such as Venezuela. In the case of Chile, its economic dimension is similar to that of the Caribbean nation – greater or lesser depending on the variations in the price of crude oil – but its macroeconomic stability and diversification of its productive structure, its greater political development and its international and international prestige. the markets do it, like Argentina or Brazil, relatively invulnerable to operations from Caracas. Something similar can be said of Uruguay, which, although economically smaller, is one of the most advanced political systems on the continent.

The analysis of energy problems in the area focuses mainly on the following topics: Brazil’s efforts to achieve self-sufficiency in oil and gas; Chile’s policy to diversify its energy matrix in order to achieve its independence from gas from Argentina and Bolivia; tensions over the price of gas between Bolivia, Argentina, Brazil and Chile; and the relations with Venezuela of the Southern Cone countries around the exploitation of heavy crude from the Orinoco Strip and the so-called “Southern Gas Pipeline”. Finally, the consideration of energy problems in the area is not possible without reference to Bolivia, the poorest nation in South America but which has an overabundance of natural gas that allows it to meet the needs of Brazil, Argentina, Uruguay and Chili. Bolivia is,


It is interesting that in the last decade, the country that has developed its hydrocarbon industry with the greatest strength and success has not been a large producer – neither is Venezuela nor Mexico – but a net importer, which is Brazil.

Brazil, in the 1990s, proceeded to deprive Petrobras of its regulatory functions, handing them over to the then newly created National Petroleum Agency; later the state monopoly ended by opening the sector to private companies. Petrobras, in which the State has 30% of the property but 55% political rights, has proven to be an instrument of remarkable efficiency, having fields – such as exploration in deep waters – where it is prominent in the world. On the other hand, as a recent Report (Karl Royce, “Business News Americas. Energy Intelligence Series”) states, the activity carried out in the international arena is made by the leading state-owned company in this field: since 2004 Petrobras has bought shares in concessions exploration in Equatorial Guinea, Nigeria and Libya; what’s more, bought Shell’s distribution assets in Colombia, Paraguay and Uruguay; signed a memorandum of understanding associated with the purchase of a refinery in the US; created a Methanol import subsidiary in Japan; it was awarded an offshore gas exploration in Venezuela and it did the same in Colombia; bought the natural gas distributors Gaseba and Conecta in Uruguay; and has made discoveries in the Gulf of Mexico, where in 2004 it began to produce deepwater natural gas, winning 53 gas exploration concessions the following year. bought the natural gas distributors Gaseba and Conecta in Uruguay; and has made discoveries in the Gulf of Mexico, where in 2004 it began to produce deepwater natural gas, winning 53 gas exploration concessions the following year. bought the natural gas distributors Gaseba and Conecta in Uruguay; and has made discoveries in the Gulf of Mexico, where in 2004 it began to produce deepwater natural gas, winning 53 gas exploration concessions the following year.

Despite recent criticisms that under Lula the Brazilian state company would be subject to a politicized management – a matter that has been denied by the government -, the company reveals high standards of efficiency and, in turn, a very high level of investment that in 2004 was $ 7.7 billion. Petrobras has recently reported that for the next five years its investments will exceed, on average, 11,000 million dollars per year.

Brazil has made two important announcements this year, which are changing the geopolitics of energy in the region.

The first is that in the matter of oil it has reached self-sufficiency. At the end of April, Lula declared that this year Brazil would cease to be a net importer of crude oil. Brazil’s consumption is estimated at 1.85 billion bpd. In 2005, the country’s production reached 1.7 billion bpd, but it is estimated that in 2007 it will rise to 2 billion bpd. Brazil’s goals are extremely ambitious as they seek to reach 3,400 million bpd by 2011, for which it has announced investments of 56,000 million dollars in the five-year period 2005-2010. Even though this objective seems difficult to achieve, what is beyond doubt is that Brazil will probably achieve this year, and certainly in 2007, the status of a country that is self-sufficient in oil.

The second is the spectacular increase in its natural gas reserves, especially as a result of the discoveries in the Santos basin which, according to Petrobras, are the largest discovery made by the country in its history. According to these latest data, gas reserves, which at the end of 2002 were estimated at 70,000 million cubic meters, today have risen to 400,000 million cubic meters.

The oil deficit did not link Brazil to Venezuela but to Africa. Its largest supplier of crude oil is Nigeria and another essential is Algeria. With both, it has tried to balance trade balances on the basis of using oil imports to boost its exports of manufactures, for which it has made important lines of credit available to Nigerian and Algerian businessmen.

But if oil brought Brazil to Africa, gas linked it to Bolivia, creating a very close relationship with it. Petrobras is the largest foreign company in the production of Bolivian gas, with 43% of the country’s proven and estimated reserves and having invested 1,500 million dollars in the sector since 1994. Brazil is the main importer of gas among the two countries, with the largest gas pipeline network in the region.

A rational design of the general policy of the country by the government of Evo Morales should have deepened these links, since to the previous factors were added the political closeness between presidents Lula and Morales and other more permanent ones such as the complementarity of the economies and that Brazil is the main source of investment in Bolivia. In defiance of these criteria, Evo Morales nationalized the Petrobras gas fields.

As has been said previously, it is true that this measure could be foreseen, but its form was improperly rude in relations with friendly governments such as Spain and Brazil. The nationalization was carried out without prior information and the affected fields were occupied by the military.

In the nationalization of oil and gas by the Bolivian government, Chávez’s advice has not been hidden, which has had a very important consequence for regional politics, which is the distancing between the governments of Brazil and Venezuela. In this matter Chávez acted recklessly. Morales made the announcement of the nationalization on May 1, as soon as he got off the plane that brought him from a meeting in Cuba with Chávez and Castro. In the following 48 hours, Chávez organized, in Puerto Iguazú, a summit to analyze the issue where, in addition, Kirchner and Lula met and which he went with Morales to whom he picked up the night before. During those days, the press reported profusely that Venezuelan lawyers were sent by Chávez to advise the nationalization process and PDVSA’s advice to YPFB was put into rapid execution. To make this connection more evident, the form of contract offered by the Morales government to companies operating in Bolivia today is almost identical to that of the operating agreements imposed by Chávez on foreign companies in Venezuela. Twenty days after the nationalization of the gas fields, Chávez, on his second visit to the country that month, declared his intention to invest 1,500 million dollars in the Bolivian energy sector, even without specifying terms or projects, a sum that -of materialize – it seems important, although it is far from offsetting the 5,000 million dollars of investments that Petrobras had in progress, and to which the nationalization abruptly ended. The form of contract offered by the Morales government to companies operating in Bolivia today is almost identical to that of the operating agreements imposed by Chávez on foreign companies in Venezuela. Twenty days after the nationalization of the gas fields, Chávez, on his second visit to the country that month, declared his intention to invest 1,500 million dollars in the Bolivian energy sector, even without specifying terms or projects, a sum that -of materialize – it seems important, although it is far from offsetting the 5,000 million dollars of investments that Petrobras had in progress, and to which the nationalization abruptly ended. The form of contract offered by the Morales government to companies operating in Bolivia today is almost identical to that of the operating agreements imposed by Chávez on foreign companies in Venezuela. Twenty days after the nationalization of the gas fields, Chávez, on his second visit to the country that month, declared his intention to invest 1,500 million dollars in the Bolivian energy sector, even without specifying terms or projects, a sum that -of materialize – it seems important, although it is far from offsetting the 5,000 million dollars of investments that Petrobras had in progress, and to which the nationalization abruptly ended.

Faced with the nationalization, the Brazilian Foreign Minister, Celso Amorím, accused Venezuela of intervention; The Lula government suspended indefinitely the execution of five memorandums of understanding on energy issues that included investments for hundreds of millions of dollars and suggested postponing a visit to the country announced by Chávez until later.

Despite this distancing, it is convenient to pay attention to the development of two projects that are still in force and that will be carried out through a partnership between PDVSA and Petrobras. One, the exploration and production by Petrobras of ultra-heavy oil in the Orinoco Belt; and another, a consequence of the above, the installation of a heavy crude oil refinery in Brazil, in Pernambuco, with an investment of 2,500 million dollars.


Chile’s energy situation is considerably more compromised than that of Brazil. Starting from the fact, already mentioned, that it produces less than 4% and 20% of the oil and gas it consumes. But, in addition, the energy relationship with its neighbors is the subject of varying degrees of disagreement and even conflict.

Starting in 1997, Argentina became the largest and only supplier of natural gas to Chile, allocating 77% of its hydrocarbon exports to that market. Over time and as a consequence of the crisis, Argentina entered a vicious circle in which pricing, by making gas an extremely cheap fuel, had the contradictory effect of, on the one hand, stimulating consumption and, on the other hand, the other is to discourage investment in exploration, exploitation and transportation. In these circumstances, the Kirchner government had to face the dilemma of restricting domestic consumption or reducing export volumes to Chile, opting for the latter. Beyond the controversy in which Chile has accused Argentina of breach of contracts and Kirchner justified his decision by stating that he could adopt it if the objective was to ensure domestic supply, what is clear is that Argentina will cease to be a net exporter of this hydrocarbon in the next two years, Chile will have to find a new supplier or substitute natural gas for some other type of fuel. Buenos Aires already this year has increased its imports of Bolivian gas from 5 million to 7 million cubic meters per day.

However, the most complex conflict that Chile has had to face is with Bolivia.

In the early years of the current decade, Bolivian governments considered the idea of ​​moving gas to a Chilean port, liquefying it and sending it to the markets of Mexico and the United States. This project, whose economic rationale seemed beyond doubt, was made impossible for political reasons. Since the governments of Carlos Mesa and Evo Morales, politics, in its energy relationship with Chile, has been adjusted to the slogan of “not a gas molecule while there is no sea.” The foregoing has meant, for Chile, the end of the Bolivian offer. However, in recent weeks, by signing Argentina contracts to import Bolivian gas, it has been able to give Chile relief, through a “Victorian” solution in which “molecules” of Bolivian gas supply the consumption of Argentines,

Finally, in the relationship with Peru, the possibility of a gas pipeline connecting Camisea reserves with the north of the country – a project that awakens the enthusiasm of Chilean companies – does not interest Peru, since it estimates that the sum of domestic consumption plus the LNG project does not leave gas available to sell to Chile.

Under these conditions, Chile has developed an active policy of diversification of its energy matrix that translates into a renewed boost to hydroelectric plants in the south of the country, the strengthening of coal-fired thermoelectric plants, especially in the north, and combined cycle. A new law on incentives for investment in power plants (Short Law II) has meant that in the last year the available information shows the existence of 26 new generation initiatives that add up to an investment of 2.17 billion dollars. It has just announced the discovery of natural gas in its extreme south and even though there is some skepticism regarding its magnitude, it is expected that during the last half of the year the dimensions of these reserves will be specified. ENAP, in agreement with British Gas, has begun the construction of a plant in the center of the country for the dewatering of natural gas that will come into operation in late 2008 or early 2009, thereby ensuring greater independence for gas from Argentina and Bolivia. Finally, in mid-August, the agreement between two companies – the French Suez Energy and Gas Atacama – was announced to promote an LNG terminal to supply electricity to the large mining companies in the north of the country.

To carry out its energy policy, Chile has ENAP, a state company that enjoys international prestige in the refining area and has investments in the downstream markets in Ecuador and Peru. In addition, it participates in the exploitation of oil in Ecuador, has sold its rights in Colombia and is exploring investment possibilities in Venezuela.

Politically, relations between the Chávez regime and the Chilean ruling coalition have not been easy. The overwhelming majority of the Concertación claims to be a center-left that, although careful to proclaim it openly, despises the policies and style promoted by the Bolivarian revolution. Chávez, in turn, did not hesitate to place the Lagos government in front of his enemies. In his speech at Fort Tiuna he says: “two opposing axes have been defined … one is Caracas, Brasilia, Buenos Aires … the empire is going to try to weaken it … there is the other axis, Bogotá (Uribe ), Quito (Lucio Gutiérrez), Lima (Toledo), La Paz (Mesa), Santiago de Chile (Lagos), that axis is dominated by the Pentagon … ”.

Of the governments of the Southern Cone, it is Chile with whom the Chavista regime has the greatest distance, which could increase if President Bachelet, in October of this year, decided not to vote for Venezuela in her attempt to occupy a non-permanent seat on the Council of UN Security.

Paraguay and Uruguay

Regarding gas pipelines, an initiative launched in April this year by the presidents of Bolivia, Uruguay and Paraguay, with the presence of Venezuela, to build a 6,000 km long pipeline, which would leave Tarija in Bolivia, has gone unnoticed. Paraguay would cross through Puerto Casado, to culminate in Montevideo. The announced cost of $ 450 million seems at first glance underestimated. Venezuela declared itself available to contribute to its financing.

In mid-2005, it was announced that Venezuela had started sending 9,000 bpd to Paraguay.

With regard to Uruguay, PDVSA and the Uruguayan state company, ANCAP, have announced a joint venture to extract heavy and ultra-heavy crude from the Orinoco Belt, in order to ensure supply to the Eastern Republic for the next 25 years. The foregoing implies expanding and modernizing the Uruguayan “La Teja” refinery, so that it can process this type of oil, with an investment of 200 million dollars, the financing of which has been offered by Venezuela. Uruguay would pay up to 67% with export products and the rest in term and preferential interest rates.


During the 1990s, Argentina applied a policy in the energy sector based on three pillars. The first, an aggressive privatization, perhaps the most drastic that has taken place in the region. Second, strong deregulation that practically excluded the State from controlling energy resources. Third, the concession contracts to private companies contained rates established in pesos, convertible to dollars at a parity of one dollar one peso. The initial impact of these policies caused the sector to develop at rates of 4.5% and 5.5% for oil and gas, respectively. However, these successes hid serious weaknesses as they were based on the overexploitation of known reserves without regulatory frameworks establishing exploration investment obligations, production and transportation, which strongly damaged the future supplies of the country. When the 2002 crisis occurred, convertibility ended and gas prices were partially frozen at the wellhead, creating no less conflict between the companies and the government, which they accuse of a unilateral breaking of the rules of the game.

The non-resolution of this dispute between the companies and the government has left Argentina without an energy policy, although everything suggests that it has large oil and gas reserves. The country is, until today, a net exporter of gas, although the rapid growth of its domestic demand, the failure to discover new significant reserves and the absence of investments in exploration and production, will sooner or later transform it into an importer of gas. natural gas. The issue is of crucial importance for Chile, which for a decade has had Argentina as its sole supplier of natural gas.

Among the countries of the Southern Cone, Argentina is the one with the closest relationship with Venezuela.

In August 2005 Chávez and Kirchner signed an agreement by which Venezuela sold four million barrels of fuel oil, at a total cost of 340 million dollars that would be paid partially in money and, also, in exchange for Argentine products and services, These included ships, agricultural machinery, a hydraulic laboratory, and elevators. Partly due to these negotiations, “Vessels and Shipyards of Venezuela” and “Astilleros Río Santiago” reached an agreement, for a value of 112 million dollars for the construction of two oil tankers – which could eventually be four – with which Chávez would start a new oil line called Petroamericana. In addition, PDVSA and the state-owned Energía de Argentina (ENARSA) joined forces to enter the retail business, which would lead to the purchase or installation of more than a hundred gasoline pumps.

In July of this year, Venezuela would have acquired 245 million dollars in Argentine sovereign bonds, with which it totals purchases for almost 3,000 million dollars of these papers, most of them maturing in 2012, constituting a form of credit line between both governments favorable to Argentina.

These agreements have been the object of criticism and suspicion in both Buenos Aires and Caracas. It is argued that Argentina has paid for Venezuelan fuel oil at a price that is 20% higher than the international market. In turn, Argentine bond purchases would have generated a complex and lucrative speculation where the debt securities purchased by the Bolivarian Ministry of Finance are sold to Venezuelan banks that trade them on the New York Stock Exchange and their product re-entered the country for be settled in the parallel foreign exchange market of Caracas (Buenos Aires, Noticias magazine , 7/29/2006).

But beyond these collaborations under scrutiny, Argentina is concerned about facing a difficult energy situation. In recent months, the Kirchner government has expressed interest in the development of its hydrocarbon maritime basins, for which it has requested the collaboration of both PDVSA and Petrobras. It is likely that, given Brazil’s superiority in this field, the agreement will be achieved with Petrobras.

The most interesting thing, however, was the announcement made, in the final days of August, by Minister Julio De Vido, of a vast nuclear energy program that would mean an investment of 3,500 million dollars to build a new plant based on of enriched uranium, complete the Atucha II plant, whose construction had been paralyzed since 1994, and extend the useful life of the current Embalse plant. If this materializes, Argentina would have four nuclear power plants, being the leading Latin American country in this field.

Tensions over gas pricing

On another level, the issue of natural gas prices has strained relations between the countries of the area. Bolivia had been for Brazil and Argentina a supplier of gas at a fairly cheap price. However, in July this year, Bolivia and Argentina agreed to a price increase from $ 3.2 to $ 5 per million BTU, a value set at the border, which constitutes an increase of 56%.

Negotiations between Bolivia and Brazil have started and threaten to be tough and protracted. The first, because Brazil enters them with the weight of the grievances that nationalization meant; the second, because they are held in the final months of the Brazilian presidential race and Lula will not risk appearing in an attitude of condescension before the government of Evo Morales.

Chile, which despite the breach of the committed shipments, had been benefiting from the pricing in Argentina, paying for its imports between 2.8 and 3.4 dollars per million BTU, will have to suffer price increases for the purchase of Argentine gas, which will rise to the order of $ 5 per million BTU.

These price increases, which are at the border and to which, therefore, an additional cost must be added until it is transferred to the places of consumption, place Bolivian gas at levels that, without being exaggerated, are high and, therefore, begin to become attractive projects tending to replace it with alternative fuels. In the case of Argentina, considering the additional transportation costs, the price of Bolivian gas is in the order of 6 dollars.

Investments of the Southern Cone in the Orinoco Belt

Light crude reserves are currently at their lowest historical levels. On the contrary, there is an abundance of heavy and sulfur-rich crude oils, but refineries do not appreciate them because they are difficult to treat and their transformation into light products is expensive. There are few refineries with the capacity to treat this type of hydrocarbon. Venezuela is, in the world, the country with the greatest wealth in terms of heavy crude. Its exploitation should be the main objective of its energy policy, which means improving its refineries in quantity and quality and, at the same time, association contracts for the exploitation, refining and commercialization of these crude oil through agreements with companies or countries that have, build or finance plants with technology capable of processing low API grade crude oils.

If the purpose of Venezuela is to achieve greater autonomy of its exports from the United States, it must assume that its current dependence has a name: the North American refining capacity of Venezuelan heavy crudes that, if not treated in those facilities, might not have markets.

But the refining of heavy crude oil supposes large investments that PDVSA, with its current budgets and with the diversion of its resources, in a wide range of initiatives – from “missions” to aid to Cuba or Bolivia, to financing large gas pipelines. – you are not in a position to board. In turn, the royalty and tax increases decreed by the Chávez government and the provisions for PDVSA to take control of 60% of the share ownership of the companies and their management, is discouraging some of the main private investments in the area. . This would be, according to Fitch Rating, the case of four projects for the exploitation of heavy crude, which approved in the past decade –Cerro Negro, Hamaca, Petrozuata and Zincor– today should be considered high risk.

Under these conditions, it is not surprising that PDVSA and the Venezuelan government are seeking partnerships with state oil companies in the Southern Cone – Petrobras, Uruguay’s ANCAP, Argentina’s Enarsa, or Chile’s ENAP – to explore, exploit and refine heavy crude. The idea of ​​an association that includes both exploration and exploitation in the Orinoco Belt and refining in the destination country (Pernambuco, Montevideo or Santiago) can be a type of joint venture with greater stability in the rules of the game, since It would try to participate in all phases of the production process (vertical integration) but with facilities of similar relevance in the nations part of the agreement.

Projects of this type already announced are likely to mature and new ones to emerge, creating a form of symmetrical relationship between Venezuela and its partners in other countries.

The “Southern Gas Pipeline” and the gas integration of Venezuela and the Southern Cone

In the last year the president of Venezuela has developed a great activity around the so-called “Gasoducto del Sur”, which would start from Puerto Ordaz, in the Caribbean nation, would cross Brazil in two directions, until it ended in Uruguay and Argentina, eventually the north. Chile, and interconnecting with Bolivia and Peru. With its more than 9,000 km of extension, it would be a world-class infrastructure work. The longest oil pipeline in Europe, which connects the Caspian Sea with the Mediterranean, starting from Azerbaijan and crossing Georgia and Turkey, does not exceed 1,700 km in length and its construction took ten years.

If carried out, the “Gasoducto del Sur” would be the great work of energy integration in America and, in this sense, not only in its promoter, Hugo Chávez, but in various sectors, it arouses the enthusiasm that surrounds the pharaonic constructions. However, against it there are technical, economic and environmental objections that are worth mentioning.

It is a common statement in the gas industry that in the case of pipelines of more than 3,000 km in length, LNG is more convenient; at a greater distance, a liquefaction plant at the origin and a regasification plant at the final destination are more profitable. It is argued that the costs of transportation through 9,000 km are so high that they would require that the supplier, in this case Venezuela, should sell the gas at a border value of no more than $ 2 per million BTU, and even less, such as a way that the price at its final destination (Argentina, southern Brazil or Chile) could be competitive, of course with Bolivian natural gas, but also with liquefied natural gas.

Neither would the energy demands of the Southern Cone justify a project of this cost. The current natural gas deficit in the two countries in the region that are the largest net importers (Brazil and Chile) do not exceed 55 million cubic meters per day. Meeting a demand of 55 or 70 million cubic meters through an investment of at least 23,000 million dollars, which is the budgeted cost of the gas pipeline, is not economically profitable. But even more serious for the viability of the project, Brazil, as seen above, ensures that it will achieve self-sufficiency in gas matters in the coming years and Argentina has launched a nuclear energy program that could strongly reduce its demand for natural gas, without prejudice to the fact that it has a high probability of finding new gas fields. Bolivia, for its part, Sooner rather than later, you will have to consider that if you have enough gas to meet the current demands of Argentina, Brazil and Chile, a gas pipeline that brings Venezuelan hydrocarbon to the region is almost an economic aggression. Does it make sense to fetch oil from Puerto Ordaz if it is 7,000 km closer to Santa Cruz de la Sierra, whose gas pipeline, which connects that city with San Pablo, is 2,200 km long?

There are also strong doubts that Venezuela can face the financing of a work of this magnitude on its own. The Venezuelan industry, as we have seen in this work, has a worryingly low investment, without considering the enormous demands that the offers of all kinds made by Hugo Chávez to very different countries have created on it.

Finally, it is certain that environmental groups will strongly oppose the layout of a pipeline that intervenes in the Amazon jungle, one of the most unexplored territories in the world and, in this way, opens it up to the penetration of other human groups in search of exploitation. of its forests and riches.


Under the name of oil policy, two types of situations are usually covered. One, that it is effectively the result of the application of force and hegemony given by the management of that resource. Another, the exercise, sometimes naked and arbitrary, of the wealth that oil originates to intervene, either directly or through covert operations, in the politics of other states. These activities are also considered part of the so-called “oil policy”; but it would be more appropriate to say that we are dealing with the application of the power that wealth gives without it having any great significance if its source is oil, diamonds or a powerful manufacturing industry. They are different realities, but both must be analyzed because although easy to distinguish intellectually, in concrete political life they go together,

However, in Latin America the possibilities of oil influence are somewhat limited due to the fact that it is an area rich in energy. In effect, Venezuela, Mexico, Colombia, Ecuador and Trinidad and Tobago are oil exporters. Argentina and Bolivia produce enough to satisfy their domestic market. While Peru, Brazil, Chile, Paraguay, Uruguay and all the Central American and Caribbean nations are net importers of crude oil, with the aforementioned exception of Trinidad and Tobago.

With regard to Venezuela, its “oil diplomacy” takes place in a framework under many adverse concepts, as indicated by an analysis of its oil industry that shows the stagnation of production levels, underinvestment, the inability to attract significant levels of private investment, the politicization and mismanagement of PDVSA and the presence of ultra-heavy crude. Under these conditions, its diplomatic action based on oil depends on the current high oil prices and is possible as long as that situation continues.

Central America and the Caribbean is the region where the importance of oil and gas as a policy instrument may be greatest, since it is an area in which large oil producers and twenty-two nations that are net importers of crude oil and gas concur. There are two world-class producers that are Venezuela and Mexico and another two –Trinidad and Tobago and Colombia– which, without reaching the production levels of the previous ones, are large at the regional level. Only two of the net importing nations, Guatemala and Cuba, produce oil but in quantities that cannot satisfy their domestic consumption. In this framework and around energy an interesting play of influences develops. On the one hand, Venezuela appears as a fundamental actor, through PetroCaribe and above all in a strategic alliance with Cuba.

At first glance, the Andean region appears as the area of ​​America where “oil diplomacy” should have a lesser impact, since the countries that comprise it are net exporters of energy to the world: they have enormous reserves of oil, gas, coal and hydroelectricity. But, on the other hand, the seriousness of its political, social and ethnic crisis opens the door to the influence of powers, large or medium, that want to gain power within other States on the basis of intervening in them by financing political actions, open or covert, tending to destabilize their governments or that seek to support parties or candidates that are related to their interests and projects. Actions of this type have been carried out by Chávez in each of the nations in that area,

The situation in the Southern Cone is more diverse since Brazil and Chile meet there, demanding more than half of the hydrocarbon imports from Latin America. However, the possibilities of an “oil diplomacy” on the part of Venezuela seem unlikely if the political, economic and international importance is taken into account, especially of Brazil and Argentina, which make them nations within whose interior it can hardly establish leadership. or to establish a certain hegemony in a country of lesser relative importance such as Venezuela. In the case of Chile, its economic dimension is similar to that of the Caribbean nation – higher or lower depending on the variations in the price of crude oil – but its macroeconomic stability and diversification of its productive structure, its greater political development and its international and market prestige make it, like Argentina or Brazil, relatively invulnerable to operations from Caracas. Something similar can be said of Uruguay, which, although economically smaller, is one of the most advanced political systems on the continent. Consideration of energy problems in the area is not possible without reference to Bolivia. The highland nation – the poorest in South America – has an overabundance of natural gas that could allow it to meet the needs of Brazil, Argentina, Uruguay and Chile. Bolivia is, in this sense, the gas lung of the Southern Cone and this is creating it and will create strong tensions with its neighbors, especially Brazil and Chile. relatively invulnerable to operations from Caracas. Something similar can be said of Uruguay, which, although economically smaller, is one of the most advanced political systems on the continent. Consideration of energy problems in the area is not possible without reference to Bolivia. The highland nation – the poorest in South America – has an overabundance of natural gas that could allow it to meet the needs of Brazil, Argentina, Uruguay and Chile. Bolivia is, in this sense, the gas lung of the Southern Cone and this is creating it and will create strong tensions with its neighbors, especially Brazil and Chile. relatively invulnerable to operations from Caracas. Something similar can be said of Uruguay, which, although economically smaller, is one of the most advanced political systems on the continent. Consideration of energy problems in the area is not possible without reference to Bolivia. The highland nation – the poorest in South America – has an overabundance of natural gas that could allow it to meet the needs of Brazil, Argentina, Uruguay and Chile. Bolivia is, in this sense, the gas lung of the Southern Cone and this is creating it and will create strong tensions with its neighbors, especially Brazil and Chile. Consideration of energy problems in the area is not possible without reference to Bolivia. The highland nation – the poorest in South America – has an overabundance of natural gas that could allow it to meet the needs of Brazil, Argentina, Uruguay and Chile. Bolivia is, in this sense, the gas lung of the Southern Cone and this is creating it and will create strong tensions with its neighbors, especially Brazil and Chile. Consideration of energy problems in the area is not possible without reference to Bolivia. The highland nation – the poorest in South America – has an overabundance of natural gas that could allow it to meet the needs of Brazil, Argentina, Uruguay and Chile. Bolivia is, in this sense, the gas lung of the Southern Cone and this is creating it and will create strong tensions with its neighbors, especially Brazil and Chile.


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Note : Part of the conjunctural information has been gathered from newspapers, magazines, news agencies and sites web of these media, comprising speeches, statements, press releases from authorities and companies the energy sector of the various countries .