It wasn’t too long ago when energy companies from Europe, United States and Canada came in droves to invest in countries like Argentina, Chile, Bolivia, Brazil and others.
Some of these countries were at the time opening up their economies to outside investment through schemes like deregulation and privatization. The reasoning was pretty simple: In order for Latin America to fuel economic growth, and thus raise living standards, such countries had to attract foreign investment to build and modernize infrastructure, especially in the energy sector.
There was so much optimism back in the 1990s that the pace of foreign investments blinded some companies that invested in the region. I’ll never forget one Repsol YPF director who said: “Matters look so rosy [in Latin America] that it’s difficult to make out what could go wrong.”
Many matters went wrong: the Asian crisis; devaluations of currencies like the reais of Brazil in 1999; Argentina’s economic meltdown in 2001; and the worrisome rise of nationalism and regulatory uncertainty in countries like Bolivia, Venezuela and Argentina.
Even if foreign energy companies helped modernize the energy sector of some South American countries, their investment policy was short-sighted and in making a quick buck without grasping too well the social, economic and historic realities of the region.
The regulatory mess of some countries like Argentina and the rise of nationalism in Bolivia, Venezuela and the growth of large state-owned majors like Petrobras of Brazil, prove that very little has changed in the region.
High poverty levels continue to be one of the region’s greatest challenges. Governments and companies are still a long way off from alleviating this onerous social ill.