August was no vacation for Latin America, especially in the energy sector.
BY JEREMY MARTIN
August, it is said, is a sleepy, uneventful month. Beaches overflow, hotels are overbooked and the call again after September 1 signs are plentiful. Indeed, send a few emails and see how many out of office replies you receive. Well, apparently, the memo did not make it to the powers that be in Latin America this year (or for that matter, Washington, DC).
As this year’s calendar inexorably moved to September, the region’s second earthquake of the month rippled across the Southern Cone. Fortunately, unlike the tragic earthquake that hit Peru on August 15, this was merely a tremor in the region’s geopolitics. Speaking tentatively at a hastily arranged press conference on August 31, Bolivia’s Minister of Hydrocarbons announced that Bolivia would have to reduce its gas exports, primarily those destined for Argentina.
POPULIST TRIUMVIRATE CRACKS
At first blush, this appeared to be no more than an indication of Bolivia’s continued inability to devise a long-term vision for its energy sector. Closer examination reveals a more interesting development: the Hugo, Evo, Nestor energy populist triumvirate had been cracked.
With the important demarcation of the March visit of President Bush to Brazil, there has been a virtual tug of war between Brazil’s President Lula and President Hugo Chávez of Venezuela. The clash has centered on energy, or to be more specific, the pros and cons of ethanol for our hemisphere’s energy matrix.
For months, Evo and Nestor – and fourth leg of the stool, Rafael Correa of Ecuador - had played right along with Chávez. Whether it was implicitly undercutting Lula or directly supporting Chávez by subscribing to the Gran Gasoducto del Sur project; an estimated 10,000 kilometer natural gas pipeline that upon completion would allow gas molecules to pass between Caracas and Buenos Aires. A project that calls to mind a version of the string and tin cans kids use to try and talk to each other - a lot of fun, but ultimately not too practical. Ironically, the dissolution of the Gran Gasoducto del Sur was another of the significant stories this not-so-quiet August. During one of his tours, Chávez let slip that the project was unlikely to come fruition, not surprising after Brazil and Petrobras had made it quite clear they were less than enthralled with the proposal.
IRONY FOR ARGENTINA
Meanwhile, President Evo Morales and his government in Bolivia continued dancing on the head of a pin since their tempestuous energy nationalization plan was unveiled over a year ago. And when a decision had to be made as to who would get pinched in terms of natural gas exports, Evo assured Lula and Brazil’s national oil company Petrobras that they would receive all of their contracted natural gas, and so it fell to Argentina to bear the brunt of the shortfall. This decision dripped with irony as it has been Argentina and the Kirchner Government who have re-written the playbook on breaking bi-national natural gas supply contracts with their trans-Andean neighbor Chile.
The splinter in the Evo, Nestor, Hugo triangle overtook the August headlines previously emanating from Buenos Aires that two of the world’s largest oil companies – Shell and ExxonMobil – were contemplating selling their assets and getting out of Dodge. A sure sign that August marked a new chapter in that government’s truculence.
ExxonMobil also figured in a meaningful story from Nicaragua last month. With little warning or apparent justification, Daniel Ortega’s government seized an Esso fuel storage terminal on the Pacific Coast. The seizure occurred despite his myriad pronouncements since squeaking back into the presidency that he was a wiser Daniel Ortega. Indeed, Ortega went as far as to state his belief in the importance of the private sector and that he would actually court private investment.
CHILE - AND CHAVEZ
Also vying for top billing in the unannounced competition for attention during August, was Chile where workers took to the streets to protest their government’s lack of spending despite a worldwide copper boom, a commodity that Chile leads the world in producing. Notwithstanding the Socialist bona fides of Chile’s President Michelle Bachelet, the largest workers union in the country did not hesitate to call for the rally and protest to denounce the government’s continued adherence to “neo-liberal” policies.
Yet no discussion of the humble month of August would be complete without even more of a star turn from Hugo Chávez than already mentioned. Indeed, in invoking metabolic effects he simultaneously sought to alter Venezuelan’s internal clocks and chronometers. In what must rank as one his proudest editions of his version of must-see TV, “Alo Presidente,” the Venezuelan leader took care of his re-election prospects, solar patterns and just about everything else during his 7 hour speech on August 19th. Throw in the aforementioned crash and burn of the Gran Gasoducto del Sur and the hundreds of cans of tuna emblazoned with his photo (and that of less than successful protégé Ollanta Humala) that showed up for earthquake victims in Peru, and President Chávez is the unofficial champion newsmaker of the supposed sluggish month.
While many of us unplugged last month to spend time at the beach, to try to hook the big one, or to take the kids on limitless theme park rides, Latin America was anything but dull.
Welcome to September, paved this year with events from an August of consequence across the region.
Jeremy Martin is director of the energy program at the Institute of the Americas, a non-profit institution based at the University of California San Diego. He wrote this column for Latin Business Chronicle.
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