By Beatrice E. Rangel
Latin America is a region endowed with magnificent and trade-usable rives, waterfalls, windy plains, natural gas and sunshine.
The region's energy matrix however is centered on fossil fuels. Oil products represent more than 60% of the region's total energy consumption. The share is higher in Central America, the Caribbean, and Andean countries.
This has negatively impacted competitiveness and growth given that fossil fuels prices tend to follow a rollercoaster pattern that siphons off resources to cover imports when prices rise while having to confront debt payments and to continue to cover subsidies when they take a dive.
Under such circumstances it has been virtually impossible to create favorable conditions for other sources of energy to develop. This is particularly the case of hydroelectric, wind and solar power.
With Latin America's economy expected to grow 3% annually over the next decade, the region will need to nearly double its installed power capacity to about 600 gigawatts by 2030 -- which represents an investment of about $430 billion.
Governments lack these resources.
Further, just 3% of Latin America's power comes from so-called "nonconventional renewables" such as solar and wind power, although that is projected to rise to 7% by 2030.
But overall energy consumption in the region is expected to rise by 70% due to a growing middle-class and a rise in energy-intensive industries.
The tag thus needs to pass to the business community. The question then arises. Will corporate America seize this opportunity? And the answer seems to be a resounding no.
American power companies have created in their country a contention wall to prevent renewables from gaining too much ground while the country continues to exploit its oil and natural gas wells. And these policies have percolated to Latin America where a regulatory cum public policies wall has created a virtual fossil fuels monopoly that hinders competition from renewables in a very effective way.
Beneficiaries of these policies of course are ExxonMobil, Chevron, Conoco Phillips, EOG Resources, Phillips, Continental and Valero. In exchange for the policy-created-monopolies, these companies agree to mix their gasoline and diesel with biofuels extracted from sugar cane or recycled waste such as used cooking oil. Disruptors then would most likely come from China. India and Eastern Europe.
Policies protecting fossil fuels from competition are complemented with the state ownership over natural resources to guarantee the exclusion of renewable energies in the Latin American energy matrix.
This later principle facilitates the pairing of the interests of the oil companies with those of the Latin countries elites to freeze change in the energy territory.
Mercifully for the region energy grids have all passed their prime and are ready for a revamp and nowadays this means the entrance of multiple energy sources as the rest of the world is moving towards multi-source grids.
Also, given that most capital is now in the hands of private concerns known as hedge funds, the revamp of the Latin American energy grid will most probably be affected through public-private partnerships. And these will not only introduce new and cleaner sources but will blow up the public policy created fossil fuel monopoly. And then change will come back to region. This has not happened since 1492.Beatrice Rangel is President & CEO of the AMLA Consulting Group, which provides growth and partnership opportunities in US and Hispanic markets. AMLA identifies the best potential partner for businesses which are eager to exploit the growing buying power of the US Hispanic market and for US Corporations seeking to find investment partners in Latin America. Previously, she was Chief of Staff for Venezuela President Carlos Andres Perez as well as Chief Strategist for the Cisneros Group of Companies.
For her work throughout Latin America, Rangel has been honored with the Order of Merit of May from Argentina, the Condor of the Andes Order from Bolivia, the Bernardo O'Higgins Order by Chile, the Order of Boyaca from Colombia, and the National Order of Jose Matías Delgado from El Salvador.
You can follow her on twitter @BEPA2009 or contact her directly at BRangel@amlaconsulting.com.