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46 | SERGIO C. TRINDADE DIVERSIFYING THE ENERGY MATRIX | 47 structed to transport Bolivian gas to Brazil, and it became operational while Petrobrás, the Brazilian state-owned oil company, managed the Bolivian gas fields. Upon assuming power, President Evo Morales of Bolivia decided to change the government’s relationship with Brazil and change the framework for energy investment, with the aim of regaining national ownership of oil and gas assets. Petrobrás had been operating most of the refining capacity of Bolivia, in accordance with a contract that Bolivia revoked. The decision to change the existing policy, and the contracts derived from it, in order to maintain nation- al ownership of energy assets will certainly discourage future foreign invest- ment in energy in Bolivia. In another effort to foster cooperation, the Latin American Energy Organization (OLADE) hired me in 1992, at the behest of the Group of Three,4 to help Colombia and Venezuela negotiate a gas interconnection between the two countries, at that time governed by Presidents César Gaviria and Carlos Andrés Pérez, respectively. Originally, gas was to flow from Venezuela to Colombia, with the flow to be reversed at some point in the future. A method- ological framework was offered for the two countries to engage into negotia- tions. The deal ultimately fell through because President Pérez was forced from office in Venezuela in 1993 and President Gaviria became too preoccupied with the guerrillas in Colombia. The pipeline was eventually built—work was com- pleted by 2007—but given the current state of relations between President Hugo Chávez of Venezuela and President Álvaro Uribe of Colombia, it may be some time before gas flows in either direction. Brazil’s prominence in biofuels, especially ethanol, and the policies of its for- eign ministry have led to a number of bilateral agreements between Brazil and its neighbors as well as between Brazil and countries in Africa and Asia, to sup- port the development of domestic ethanol markets. Brazil has also attempted to negotiate a plan with Venezuela to develop ethanol production, to promote agri- cultural growth and job creation in rural areas of Venezuela and to begin intro- ducing ethanol-gasoline blends into the Venezuela domestic market. However, the deal eventually fell through due to a change of heart on the part of the Venezuelan government. It was influenced by Fidel Castro’s position on biofu- els, which condemns the notion of competing with food crops by converting agricultural commodities to fuel. The Brazilian foreign ministry (Itamaraty) has promoted ethanol coopera- tion agreements with other countries in the Western hemisphere, especially in Central America and the Caribbean, most notably with Haiti and the Dominican Republic. However, the most interesting initiative stems from the author’s July 26, 2001, recommendation to President Fernando Henrique Cardoso that Brazil and the United States promote domestic biofuel develop- ment, especially ethanol, in third markets throughout the world. This Memorandum of Understanding was signed in March 2007 by Presidents Lula and Bush and is being implemented gradually, beginning with four countries: the Dominican Republic, Haiti, El Salvador and St. Kitts and Nevis. The U.S. sugar quota can be a barrier to promoting sugar cane-based ethanol production cane in countries that benefit from the quota. As an instrument of U.S. foreign policy, the sugar quota allows select countries to sell sugar in the U.S. market at the U.S. domestic price, which can be two or three times the price of sugar on international markets. Those groups that have access to the U.S. market and control scarce land and other inputs for sugar cane production may feel little inclination to switch to ethanol. Ethanol, after all, has to compete with gasoline in price. If sugar producers can continue to enjoy the high profit margins offered by the U.S. quota, even producers with high costs have little incentive to shift to ethanol. CONCLUSION Wars over sovereignty are ultimately wars over natural resources, including energy resources, as well as political and economic power. Brazil shares borders with all but two countries in South America–Chile and Ecuador. Brazil settled its 16 thousand kilometers (ten thousand miles) of shared borders through diplomatic negotiations. Throughout its history as an independent country, the only real war between Brazil and a neighboring country was the Paraguayan War of the nineteenth century (1864–1870). Reacting to a Brazilian incursion into Uruguay, Paraguayan leader Francisco Solano López attacked Brazil in 1864 and Argentina in 1865. Brazil was joined by Argentina and Uruguay in defeating Paraguay.5 The Brazilian experience is one of transforming conflict into cooperation via diplomatic action. The development of hydropower from shared river basins such as the basins of the Uruguay, Paraguay, and Paraná rivers in Argentina, Uruguay, and Paraguay is a concrete example of the Brazilian approach. Conflicts with Bolivia over the commercial deals between Petrobrás and the Bolivian government concerning oil and natural gas resources did not result in warfare. Rather, the disputes were handled with patience and diplomacy. The Paraguayan desire to extract more rent from Itaipu will be addressed through diplomatic channels. The zigzagging relationship with Chávez’s Venezuela onPDF Image | Energy and Development in South America
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