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32 | OSCAR LANDERRETCHE CHILE’S CHOICES | 33 Chile and MERCOSUR were making progress towards achieving a higher degree of integration in the field of natural gas, even though the institutional framework is weak and national markets have not been integrated,7 until Argentina unilaterally reduced its natural gas supplies to Chile. One of the key weaknesses is the lack of mechanisms to mediate conflict. Another weakness concerns the lack of rules to cope with crises affecting the availability of specific resources, such as the one affecting Argentina supplies to Chile. It is unlikely that the increasing politicization of energy integration initiatives, witnessed in recent years, would render regional improvements in this field. I see more conflict than cooperation as a result of the resurgence of populism and exacer- bated nationalism in our region. That is why I am not optimistic about the prospects coming from the Energy Summit held in Venezuela on Isla Margarita in April 2007 and promoted by Venezuela, Ecuador, Bolivia, and Argentina. For example, the Great South American Natural Gas Pipeline seems too large, too uneconomical and too controversial to be built, and some of the early supporters are having second thoughts about it. Controversies over the promotion of ethanol, a biofuel that can be blended with gasoline to reduce countries’ dependence on foreign oil, has become not only a new source of conflict between the United States and the Venezuelan govern- ment, but also a source of disagreement among South American countries, because some oil exporters look at it as a potential threat to their international oil- based policies. Meanwhile, bilateral relations between Bolivia and Brazil deterio- rated severely after the nationalization of hydrocarbons decreed in May 2006, affecting Petrobrás’ investment. President Néstor Kirchner’s statist policies affected investment in the energy sec- tor so severely that domestic shortages have become a major problem, affecting sup- plies to Argentine consumers and neighboring Chile. Argentina’s new president, Cristina Fernández de Kirchner, put former Minister for Federal Planning Julio de Vido in charge, among other areas, of energy matters. Not surprisingly, policies towards neighboring Chile have remained much the same. Under these circumstances, Chile has no other viable alternative than to 1) substitute coal and fuel oil for natural gas in order to generate power; 2) pro- mote Liquefied Natural Gas projects (LNG) for the northern and central regions; 3) develop hydroelectric capacity and non-traditional sources of renewable energy, including biofuels; and 4) move forward in the consideration of nuclear energy. This latter issue is very controversial, but the idea has gained greater acceptance in light of the generalized perception that the country is vul- nerable from the standpoint of energy. Sound economic policies and political stability have created the environment for Chile’s sound economic performance; such performance, in turn, provides the country with the resources it needs to pay for energy in international mar- kets. No regional integration in the foreseeable future will provide energy at prices below international levels. Thus, Chile has turned to globalized commod- ity markets as a more secure source of energy products. The country still has a long way to go in reducing its vulnerability, but it certainly will not opt for dependency on specific countries. Chileans, in short, are not optimistic about future developments in the area of regional integration, but we remain optimistic about the long-term perform- ance of the region. We expect common sense to prevail in the sphere of econom- ic policy, provided that extreme nationalism and populism are neither promot- ed nor provoked by misguided foreign policies on the part of major world pow- ers. In the meantime, we continue to prepare the institutional and technical foundations for regional energy integration, making the most of the regional organizations and institutions we have built over the years.8 CONCLUSION In the Chilean case, it is unrealistic to expect a very significant reduction in ener- gy intensity, in part because the country has not yet reached a high level of devel- opment and in part because mining remains very important to the economy as a whole. Chile is dependent on energy imports and must diversify its sources—both in terms of products and countries of origin—including the use of domestic non- traditional sources. It seems overly optimistic to assume that increasing energy effi- ciency would alone be sufficient to meet Chile’s energy needs. In Latin America, integration requires market-oriented policies. “Open region- alism” constitutes a non-protectionist approach which promotes integration. In the case of energy, non-protectionist policies not only promote integration but also increase competition in the markets. Development needs energy and both require appropriate government policies, information, and confidence in order to foster and coordinate long-term investment. Current manifestations of populism and exaggerated nationalism, in some cases a reaction to misguided or ill-con- ceived liberalization and privatization measures, will not help integration at all. NOTES 1. Genaro Arriagada, “Petróleo y gas en América Latina. Un análisis político de relaciones internacionales a partir de la política venezolana,” DT No 20/2006, September 19, 2006, Real Instituto Elcano, http://www.realinstitutoelcano.org/PDF Image | Energy and Development in South America
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