On August 12, more than eight months after the Mexican government launched a far-reaching reform agreement, President Enrique Peña Nieto presented what is arguably the most highly anticipated and polemical areas of that package: energy reform. The president outlined 10 areas of change for state oil firm Pemex and the Federal Electricity Commission (CFE). But perhaps most notable is the president’s proposal to change language in Article 27 of the Constitution and allow private firms to gain access to profit-sharing (but not production-sharing) energy contracts. Given the contentious nature of private-sector involvement in the national energy sector, will Peña Nieto succeed in passing a reform where his predecessors failed? While the reform faces opposition from the left-leaning Democratic Revolution Party (PRD), Peña Nieto’s Institutional Revolutionary Party (PRI) could have the congressional votes it needs with the aid of an alliance with the right-leaning National Action Party (PAN).
Buenos Aires brought its concerns about the Falkland Islands to the United Nations this week as a dispute with the United Kingdom heated up over the archipelago’s sovereignty. While Argentine President Cristina Fernández de Kirchner drew support for her country’s territorial claims from fellow Latin American leaders during the Rio Summit, a British company began drilling operations in the Falkland basin. A Spanish-Argentine partnership announced intentions to explore for oil as well, but in Argentine territory. The prospect of large oil reserves has brought a new twist on a decades-old disagreement over the Falklands—or Malvinas.
AS/COA Online: Brazil plans to follow a Norwegian model for auctioning concessions in its offshore pre-salt oil fields, including creation of a 100 percent state-owned company. Can you talk about this and Petrobras’ involvement?
In an AS/COA interview, Patrick Esteruelas, a specialist in the Andean region with Eurasia Group’s Latin America practice, about the effects of the dropping price of oil on Venezuela’s economy. “Venezuela can count on a sizeable cushion of reserves and foreign exchange liquid assets to help it ride the current economic down cycle,” he tells AS/COA Online's Managing Editor Carin Zissis. “But not for very long.” Esteruelas also talks about the reasons behind President Hugo Chávez's decision to hold a referendum on the elimination of presidential term limits in February.
AS/COA Online: Speculation has mounted that, with the sharp drop in the price of oil, Venezuela’s economy could be under serious threat. Yet some argue that country’s economy stands well-girded because of the high oil prices in recent years. What do you make of this debate and what are the economic outcomes Venezuela faces as a result of the oil price drop?
Esteruelas: I would say that Venezuela can count on a sizeable cushion of reserves and foreign exchange liquid assets to help it ride the current economic down cycle. But not for very long. By all accounts, Venezuela is destroying assets much more quickly than it’s been building them, given today’s oil prices. The country has somewhere around $60 billion in foreign exchange liquid assets, which include just shy of $30 billion in foreign exchange reserves, just shy of $20 billion in the foreign exchange development fund, and then the rest equitably split along the discretionary government funds and cash dollars held by PDVSA [Petróleos de Venezuela].
India’s gross domestic product (GDP) growth hit 9.2 percent for the period from July through September of this year—an increase over the already robust rate of 8.4 percent during the same period last year. But along with an ascendant economy comes a mounting hunger for energy, and New Delhi fears it cannot sustain growth in the long term without continually boosting the country’s energy supply. India’s per capita energy consumption rates remain low in comparison to those of countries like the United States and China. But India, the world’s fifth biggest energy consumer, is projected to surpass Japan and Russia to take third place by 2030. Doing so will test India’s ability to create a domestic policy for its semi-privatized energy sector, as well as its capacity to develop relationships with foreign energy exporters.
Peculiarities marked the career of Saparmurat Niyazov, the hard-line dictator who ruled Turkmenistan for twenty-one years until his unexpected death on December 21 (AP). Even as nearly 60 percent of this gas-rich, largely Muslim Central Asian country lived in poverty, Niyazov funded lavish projects (Guardian), including an ice palace outside the capital, Ashgabat, and a manmade lake in the middle of a desert. But the self-obsessed Niyazov, architect of one of the world’s most bizarre personality cults, failed to name a successor. This raises questions about the prospects of a reprieve for the country’s beleaguered citizens, and leaves in doubt Europe’s energy security (FT).
The U.S. Congress has reached agreement on a bill approving a landmark deal allowing the United States to provide New Delhi with fuel and technology to expand its civilian nuclear energy program (AP). In July, President Bush and Prime Minister Manmohan Singh announced a framework for the pact, which lifts a three-decade U.S. moratorium on nuclear trade with India in exchange for its acceptance on safeguards on its civilian nuclear facilities. While both houses of Congress negotiated a compromise bill, Undersecretary of State Nicholas R. Burns headed to New Delhi to reassure India’s government (Times of India) about the U.S. version of the agreement. The deal still requires approval by India’s parliament. More difficult to secure is the necessary support of the Nuclear Suppliers Group, which oversees guidelines for sale of the nuclear materials (Asia Times).
On his hundredth day in office, Bolivian President Evo Morales moved to nationalize his nation's oil and gas reserves, ordering the military to occupy Bolivia's gas fields and giving foreign investors a six-month deadline to comply with demands or leave. The May 1 directive set off tensions in the region and beyond, particularly for foreign investors in Brazil, Spain, and Argentina. Morales' nationalization agenda has been described as another chapter in Latin America's turn to the left, and fears are rising that the Bolivian leader has fallen into the fold of Venezuela's Hugo Chávez and Cuba's Fidel Castro. But some experts emphasize there may be more infighting than cohesion overall in the region.
On his hundredth day in office, Bolivian President Evo Morales moved to nationalize his nation’s oil and gas reserves, ordering the military to occupy Bolivia’s gas fields and giving foreign investors a six-month deadline to comply with demands or leave. The May 1 directive set off tensions in the region and beyond, particularly for foreign investors in Brazil, Spain, and Argentina. Morales’ nationalization agenda has been described as another chapter in Latin America’s turn to the left, and fears are rising that the Bolivian leader has fallen into the fold of Venezuela’s Hugo Chávez and Cuba’s Fidel Castro. But some experts emphasize there may be more infighting than cohesion overall in the region.
The oil pipeline agreement involving the World Bank, a U.S.-led oil consortium, and the government of Chad was hailed as a model to help developing nations dig their way out of poverty and avoid corruption. Under the deal, spurred by World Bank funding, most of Chad's revenues would go toward development projects. But in December, Chad's parliament voted to modify the agreement, canceling a "future generations" fund for Chad's post-oil future, and diverting funds away from poverty alleviation and toward the purchasing of arms. The World Bank responded by suspending its loans and freezing Chad's assets. A temporary agreement was reached April 27, but experts say potential civil war, cross-border troubles with Sudan, and the weakening of President Idriss Déby's regime may threaten the pipeline deal, casting further doubt on the prospects for transparency in future development projects in the region.