Categories: Articles, Latin American Law & Business Report
As Posted on American University's Center for Latin American and Latino Studies Blog, March 24, 2016
The sharp drop in global oil prices – caused by a combination of a slowing Chinese economy hurting commodities sales and efforts by Saudi Arabia to retain market share – has both downsides and advantages for Latin America and the Caribbean. By keeping production levels steady, despite decreased demand, so that a barrel of crude remains below US$40, the Saudis’ hope is to put U.S. shale oil producers and Canadian tar sands producers out of business. The drop in oil prices has had a varied impact elsewhere in the Americas:
As posted on American University's Center for Latin American and Latino Studies Blog, February 11, 2016
Pundits who dismiss MERCOSUR and the Union of South American Nations (UNASUR) as failed attempts at Latin American economic integration should look again. MERCOSUR has presided over an explosion in intra-regional trade among its four original member states (Argentina, Brazil, Paraguay, and Uruguay) from just over US$ 5 billion at its launch in 1991 to US$ 43 billion by 2014. UNASUR, for its part, is credited with thwarting a coup attempt against Evo Morales in 2008 and putting a damper on continental arms races.
As Posted on American University's Center for Latin American and Latino Studies Blog, October 19, 2015
The September 30 awarding of three contracts on five oil production blocks that the Mexican government opened for bidding has raised hopes that the Peña Nieto administration’s efforts to reform the country’s energy sector are back on track, but many challenges remain. In contrast, an auction of leases on 14 blocks in July was a huge disappointment as contracts could only be issued for two of them. The auctions are part of Mexico’s effort to reverse years of declining petroleum output by permitting private sector and foreign participation in an industry monopolized for decades by the state oil company, PEMEX. Foreign and private sector firms are now allowed to enter into both profit- as well as production-sharing agreements with PEMEX and thereby retain a percentage of the gains on the oil they extract. In some cases, outright concessions – termed “licenses” so as not to run afoul of the Mexican Constitution – are permitted.
As posted on American University's Center for Latin American and Latino Studies Blog, January 13, 2015
The sharp drop in the benchmark Brent crude price of oil from just under US$115 per barrel in June 2014 to its current perch around US$50 has important ramifications for the Western Hemisphere. For Venezuela, which earns some 95 percent of its foreign exchange from petroleum exports, it is a potential disaster. Underlying political tensions will be exacerbated if there is no money to continue funding social welfare programs or heavily subsidizing gasoline. It probably also spells the end of PetroCaribe’s generous repayment holidays and what are in essence below-market interest loans for Caribbean and Central American nations. Sharply lower oil prices also put at risk major energy projects such as the development of Brazil’s pre-salt reserves, which require a minimum price of $50 to $55 to be economically viable. Equally tenuous are Argentine efforts to regain energy self-sufficiency by exploiting its vast shale oil and gas reserves and Mexican plans to attract foreign investors to participate in deep-water oil exploration and drilling. The minimum price for a barrel of oil below which new investment projects in Canada’s oil sands are no longer attractive is around $65. Shale oil producers in the United States are also being squeezed by low petroleum prices.
As posted on American University's Center for Latin American and Latino Studies Blog, September 9, 2014
The English-speaking Caribbean nations – whose heavy dependence on imported diesel and fuel oil to generate electricity has placed them among the most heavily indebted countries in the world (on a per capita basis) – will face massive headaches if PetroCaribe collapses. They eagerly signed up for the Venezuelan initiative, which sells them petroleum with one- or two-year grace periods and long repayment schedules ranging from 15 to 25 years at 1 or 2 percent interest. Participating countries can even pay with products or services in lieu of hard currency. In the case of Guyana, Haiti, Jamaica, and the Eastern Caribbean mini-states, PetroCaribe’s financing scheme represents an estimated 4 to 7 percent of their annual GDP. The worsening economic turmoil in Venezuela, however, raises serious concerns about PetroCaribe’s future. According to recent media reports, PdVSA, the Venezuelan national petroleum company, is shortening repayment periods and increasing interest rates.