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Energy and Development in South America

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Energy and Development in South America ( energy-and-development-south-america )

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The Crisis in the Argentine Energy Sector and Its Regional Impact Thomas Andrew O’Keefe INTRODUCTION Argentina’s current energy crisis is primarily the result of internal political dynamics. In response to the fury of the Argentine people towards their entire political class following the implosion of the economy in 2001 and 2002, the transition governments that followed adopted populist measures and put the burden of “paying” for the collapse of the Convertibility Plan—which had tied the Argentine peso in a one-to-one parity with the U.S. dollar for a decade—on foreign investors. In May 2003, Néstor Kirchner assumed the presidency by default with only 22 percent of the vote after Carlos Menem, who knew he would be defeated by a landslide, pulled out of the second round. Kirchner’s ini- tially weak position provided him with little maneuvering space to dismantle the anti-market policies in the energy sector that he had inherited from his prede- cessors. Although the eventual recovery of the Argentine economy gave Kirchner the opportunity to dismantle these measures, which by 2004 were pro- ducing bottlenecks in the entire energy sector, he chose not to. Instead, he pri- oritized his personal ambitions and consolidated his political base so as to facil- itate the election of his wife to the presidency in October 2007. NATURAL GAS The state-owned Gas del Estado was established in 1946 to transport and distribute natural gas to end-users. Natural gas production, however, was the monopoly of the state petroleum company Yacimentos Petrolíferos del Estado or YPF. In 1993 Gas del Estado was replaced by two private sector transport firms (i.e., Transportadores de Gas del Norte or TGN and Transportadores de Gas del Sur or TGS) and eight private sector regional distributors. YPF was also privatized in 1993 and concessions to explore and extract natural gas were opened up to private sector competition.

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