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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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28 | OSCAR LANDERRETCHE CHILE’S CHOICES | 29 Table I. CHILE: DEPENDENCE ON PRIMARY ENERGY IMPORTS IMPORTS / TOTAL SUPPLY ENERGY AND DEVELOPMENT Some environmentalists argue that the efficient use and production of energy could curb the demand for energy products. Some also argue that economic growth can be reduced without affecting economic and social development. However, history and cross section analyses show that economic growth is a nec- essary, but not sufficient condition to attain economic and social development. In addition, a high level of per capita energy consumption is also a necessary but not sufficient condition for economic and social development. Energy consumption (primary) and Gross Domestic Product (GDP), both in per capita terms, are positively and significantly correlated (Figure 1): Figure I. 2005: RELATIVE PRIMARY ENERGY CONSUMPTION 1991 2006 2006: TOTAL SUPPLY STRUCTURE CRUDE OIL 87.6% 98.7% 38.9% NATURAL GAS 0.0% 72.3% 24.8% COAL 40.3% 92.0% 11.5% HYDROELECTRICITY 0.0% 0.0% 9.0% FIREWOOD AND OTHER 0.0% 0.0% 15.8% TOTAL 45.1% 66.9% 100.0% (PER CAPITA) and GDP (PER CAPITA) WORLD AVERAGES (175 COUNTRIES) = 100 GDP PPP (IMF OCT 2007) MILLION BTU (US EIA OCT 2007) RELATIVE GDP PER CAPITA PPP R2 = 0,5549 SOURCE: NATIONAL ENERGY COMMISSION - CHILE (CNE) (LNG) import facilities and new hydroelectric power plants. To generate power, the country has also substituted coal and fuel for natural gas. Also worth noting are the lost investment and lost development opportuni- ties, both in Chile and Bolivia, due to short-sighted and ultimately counterpro- ductive policies towards foreign investors and potential joint ventures with Chile, implemented by President Evo Morales’s government. In the long run, Chile and Bolivia will not be the only countries to lose out. Recent trends in energy issues in the region show a revival of obsolete policies and bring old cleavages once again to the fore. It seems absurd to try to unite Latin America around “dirigiste”4 or statist policies which lead to inefficiency and stagna- tion. Even if surpluses provided by high energy prices could allow some govern- ments to believe that foreign capital from outside the region is no longer necessary, it is doubtful that regional integration could take place based on recycling local extraordinary profits within the region, an outcome that Venezuelan President Chávez seems to think possible. As history shows, these surpluses will likely be short-lived. It is unlikely that populism and exacerbated nationalism will help us achieve the levels of development that are within our potential. However, it is important to recognize that some of these ill-advised policies spring from the flawed implementation of policies of liberalization and privati- zation. The reaction against such policies has provided the socio-political basis for the resurgence of resource nationalism. Instead of improving and integrating their regulatory frameworks and trying to strengthen regional regulatory inte- gration,5 some governments have returned to interventionist policies; these are causing, as in the past, numerous kinds of inefficiencies and imbalances. Efficiency can reduce the energy requirements, but history shows that energy inten- sity6 falls only after significant levels of growth and development have been achieved. Energy intensity increases during the first decades of a countries econom- ic take off and starts falling (increasing energy efficiency) only after an economic development threshold of some sort has been reached, as seems to have been the case of the United Kingdom around 1880, the United States and Germany around 1920, France in the 1930’s and Japan in the 1950’s, while developing countries were not reducing their energy intensity by the end of the 20th century. RELATIVE PRIMARY CONSUMPTION PER CAPITA

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