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FALL 2015

HARVARD REVIEW OF LATIN AMERICA

ENERGY OIL, GAS AND BEYOND

ENERGY EDITOR’S LETTER BY JUNE CAROLYN ERLICK

Zocalo Hed 26 pt

Zocalo deck 14 point one line BY HARVARD REVIEW OF LATIN AMERICA

FALL 2015 VOLUME XV NO. 1

Oil, Gas and Beyond Published by the David Rockefeller Center for Latin American Studies I was waiting for the ship to come in. In fact, so was everyone else in Nicaragua. Gas lines VOLUME XV NO. 1 Harvard University stretched around the block. The supermarket shelves were nearly bare. Lights went out again David Rockefeller Center for Latin American Studies and again, plunging the country into frequent darkness. Telex machines couldn’t work, and we reporters had to depend on the few places with generators to file our stories (for younger Director Brian Farrell readers, this was pre-computer and smart phones). U.S. President Ronald Reagan had imposed a trade blockade on Nicaragua in May 1985. The Soviets were sending oil, dodging Executive Director ENERGY Ned Strong the blockade. ReVista OIL, GAS AND BEYOND We reporters did what we always do: we reported on the ship’s arrival. But we also Editor-in-Chief breathed a collective sigh of relief. The arrival of the Soviet ship meant hot showers and light June Carolyn Erlick to read by. Copy Editor Energy is intensely political. It shapes nations and trade and fuels wars and blockades. FIRST TAKE Anita Safran Energy, I discovered then, is also intensely personal. It shapes our lives on a daily basis. It’s not Latin America’s Oil and Gas by Francisco J. Monaldi 2 Publication Interns only a matter of how we get around or whether we have enough food to eat; energy produc- Isabel Espinosa tion affects the communities that receive it and those that produce it. It shapes attitudes Gabriela Farrell THE POLITICS OF OIL IN EVERY ISSUE toward gender and race and nationalism and identity. It pollutes the air and the rivers. It offers Diego Lasarte Brazil’s Oil Scandal by Simon Romero 8 immense economic opportunities. Or it does both. Design Energy and Politics in Brazil by Lisa Viscidi 13 You might not think of Latin America and the Caribbean right away as a big energy Jane Simon Design Mexico’s Energy Reform by Myrna Santiago 16 BOOK TALK producer or consumer. But Venezuela stands ninth in global oil production with gas reserves Printer China in Latin America by Rebecca Ray 20 Transforming U.S.-Latin American Relations almost triple those of Canada. Three countries—Venezuela, Brazil, and Mexico—account for P+R Publications by Michael Shifter 78 about 90 percent of the region’s oil production. And Latin America and the Caribbean also Contact Us THE ECONOMICS OF ENERGY Human Rights, Human Woes have the capability to provide abundant alternative and sources: wind, solar, 1730 Cambridge Street What Powers Latin America by Ramón Espinasa and Carlos G. Sucre 24 by Daniel Gonzalez 80 geothermal and biomass, among others. Cambridge, MA 02138 The Impact of Falling Gas Prices by Luisa Palacios 28 Musical Creation and Hardship Perhaps because of my experience in Nicaragua, I started to conceive this issue in terms of Telephone: 617-495-5428 Peruvian Oil Production by Eleodoro Mayorga Alba 32 by Pedro Reina-Pérez 82 meta-politics. And there is certainly a lot of politics related to energy in the region: the politi- Subscriptions, Back Copies and Comments cal upheaval of Brazil as a result of corruption scandals in the national oil company; the turmoil [email protected] ALTERNATIVE ENERGY BUILDING BRIDGES in oil-rich Venezuela; the impact of the semi-privatization of Mexico’s oil industry; the targeting Website Wind Energy in Latin America by Carlos Rufín 36 Building Bridges with Cuban Libraries of Colombia’s energy installations by guerrilla forces in a show of strength in the context of the revista.drclas.harvard.edu The Power of the Brazilian Wind by Mauricio B. C. Salles 38 by Lynn M. Shirey 84 ongoing peace process. Facebook in by Claudio A. Agostini ReVista, the Harvard Review of Latin America 40 But then I thought back on how the arrival of oil had been experienced on a very local and Carlos Silva and Shahriyar Nasirov personal level. I began to hear stories about the production of energy: what it felt like to grow Copyright © 2015 by the President and Geothermal Energy in Central America by Jacques E. C. Hymans 42 ONLINE up in an oil camp, how energy production affects indigenous women in one particular region, Fellows of Harvard College. Look for more content online at ISSN 1541—1443 how local communities involve themselves in deciding what is done with oil. LIVING WITH OIL revista.drclas.harvard.edu ReVista is printed on recycled stock. And just recently Alvaro Jiménez, Nieman Affiliate at Harvard ‘09, happened to mention to Life in a Venezuelan Oil Camp by Miguel Tinker Salas 46 me that he was starting a website “Crudo Transparente,” a site that monitors the Colombian Behind the Corporate Veil by Kody Jackson 50 oil industry. Out of curiosity—and as a quick break from proofreading this issue—I took a peek. Añelo and Vaca Muerta by Mariana Barrera 52 The site focuses on five areas: local economy, contracts and royalties, environment, security This issue of ReVista is made possible and human rights and ethnic conflicts. I was pleased to see how much overlap there was with through generous support of FOCUS ON THE AMAZONS ON THE COVER the themes I had chosen for this issue of ReVista. Santander Universities Global Division. Beyond Dinosaurs and Oil Spills by Theodore Macdonald 56 Petrobras Oil Platform

Although the website deals with only one country—Colombia—it felt like an affirmation Forests for Energy? by Juan Luis Dammert B. 62 Photo By Ricardo Stuckert/PR of the focus I had chosen for this wide-ranging topic. Energy is political. Energy is personal. Oil and Indigenous Communities by Barbara Fraser 66 (Agência Brasil [1]) [CC BY 3.0 Energy matters. In the Shadows of the Extractive Industry by Nelly Luna Amancio 70 br (http://creativecommons. org/licenses/by/3.0/br/deed. PREVIOUS REVISTA ARTICLES ON ENERGY 7 7 en)], via Wikimedia Commons

2 ReVista FALL 2015 REVISTA.DRCLAS.HARVARD.EDU ReVista 1 ENERGY ATLERNATIVE ENERGY

Beyond Brazil, the integration of renewable energy capacity that should be renewable energy into the electric grid Solar Energy in Chile added to the current energy matrix in the is facing many challenges. Germany sets next 10 years to reach the target is much a good example of high penetration of Development and Challenges higher than the average annual renew- renewable energy. In order to cope with able capacity that entered the matrix the pre-defined levels of reliability, other BY CLAUDIO A. AGOSTINI, CARLOS SILVA AND SHAHRIYAR NASIROV during the last five years. Additionally, to sources of energy must be connected to reach the renewable energy target of 20% the grid, ready to begin generating elec- by 2025, electricity grids will have to be tricity in case of a sudden lack of wind. In upgraded and expanded. the case of Germany, the backup source FOR SEVERAL DECADES, CHILE HAS STRUGGLED compensate for these changes and have Investors in renewable energies in of energy is gas or . One of the best to have a stable and reliable mix of en- another alternative to Argentine gas. Chile also face significant challenges. alternatives to increase the penetration ergy sources to satisfy its growing needs. The successive energy crises have Although the Chilean government has of renewable is probably energy storage In the 1980s, the country relied heavily taught us a valuable lesson. The coun- shown interest in promoting the devel- systems, but those are still very expensive on , considered almost try is now more concerned with ener- opment of RES, a number of obstacles and the most promising technologies are the sole solution to its growing energy gy diversification, understanding its remain, resulting in a moratorium on only in the infancy stage of development requirements. As a result, every time important role for the security of the several projects. Most of these projects for large amounts of energy. My research the country faced a drought, there were system. The country has learned that are wind and solar technologies, with as a visiting scholar at Harvard Universi- even periods of blackouts and rationing short-term gains come at a high long- only around 10% in terms of capacity ty is about advanced energy storage sys- because not enough energy was being term cost. In addition, the economy’s realized thus far, despite having environ- tems that might allow more renewable produced. dynamism over the last decades, includ- mental approval. energies in power systems. In the mid-1990s, a combination ing the significant improvement in the The most important barriers that What is going to be unique in Brazil of continued rapid growth in energy welfare of the population (poverty, for renewable energy projects face in Chile and will be even more interesting than demand, increasing environmental con- example, has decreased from 40% to are the high cost of the initial investment, the seasonal complementarity (between cerns regarding large hydro projects, 13% in two decades), has doubled elec- The Chilean group met with NREL researchers in Denver, Sandia in Albuquerque and the Uni- limited access to financing, opposition hydro and wind) is the fact that we could and the unreliability of hydropower tricity demand. Chile is now the country versity of Arizona in Tucson and explored the latest technological developments. from local communities, the practical and use the flexibility of existing hydropow- prompted the Chilean government to with the highest energy consumption regulatory difficulties to connect to the er plants to back up the fast changes diversify energy sources by encourag- per capita in Latin America, well ahead step forward by requiring energy-gener- grid, and lack of interest from large con- in wind speeds (because sometimes ing the use of low-price of larger countries like Argentina, Brazil ating companies to include at least 5% of With almost 356 days sumers to sign long-term contracts with the wind can stop blowing in an entire from Argentina. The low-cost energy and Colombia. their electricity from non-conventional intermittent sources (solar energy is pro- region). The large hydropower plants from the imported natural gas made it Chile is also considered one of the renewable energy sources by 2010, with- of clear skies, high duced only during the day and wind ener- reservoirs in Brazil can be considered more attractive to build combined-cycle most attractive countries for the devel- out including large hydro (only up to 20 solar radiation and low gy is produced only when there is enough great storage systems. This combination power plants instead of relying on large opment and deployment of renewable MW). This quota of renewable energy wind blowing; solar and wind have plant would enable high levels of wind energy hydro plants and coal. Thus the energy energy technologies (RET), mostly set a 5% target from 2010 until 2014 as humidity, the Atacama factors of 30% or 40% at most). Remov- penetration and would turn the Brazilian sector invested heavily in this source, because its geographic location and the transition period, with 0.5% incre- Desert in northern ing or at least mitigating these barriers electric power generation into one of the building four pipelines from Argentina, diversity provide abundant renewable ments from 2015 through 2024, when and creating further incentives remains a most successful sustainable electricity setting up new gas distribution net- energy resources (RES). Significant generators are expected to produce 10% Chile offers excellent key challenge for the development of the matrices in the world. That will happen works and constructing a half a dozen potential exists in the use of biomass, of power generated through renewable conditions for generating Chilean renewable energy sector. if the wind does not stop blowing, the new combined-cycle power plants. In hydropower, geothermal, solar, wave sources. If companies do not comply with The evidence increasingly supports rain keeps falling on the right places and 2004, natural gas accounted for 26% and wind energy. In particular, Chile the quota, they have to pay a fine, which solar energy. that solar energy has great potential to the rivers continue to flow (not consider- of Chile’s total energy consumption, of has one of the largest solar potentials doubles if the incompliance occurs again. become a major source of clean and secure ing the negative impact of big reservoirs, which 80-90% came from gas supplied in the world. With almost 356 days of Although the fines are in some cases years, other renewable technologies, energy in Chile. In addition to overcom- which is another long and interesting from Argentina. As a result, in 2004 the clear skies, high solar radiation and low cheaper than the cost of compliance, including solar and wind, have started to ing the hurdles facing many renewable discussion). Argentine government restricted the humidity, the Atacama Desert in north- the policy has been quite successful, and play a more significant role. energy projects, both misconceptions volume of gas exports to Chile in order ern Chile offers excellent conditions for energy generation from RES has met or In 2013, the Chilean government about solar energy and some of its unex- Mauricio Salles is a Visiting Scholar to relieve its own domestic gas short- generating solar energy. Therefore, add- even surpassed the defined quota of 5%. increased the quota by doubling its pected benefits must be explained. at Harvard and Assistant Professor of ages. In just a few years, the gas supply ing solar energy to the energy mix can be Renewable energy generation reached renewable-energy target from the pre- Even as the costs of solar power con- the Department of Electric Energy and to Chile stopped. This brought about an important opportunity to contribute 7% of the country’s total energy gen- vious goal of 10% by 2024 to 20% by tinue to decline, the public and many Automation Engineering (PEA) at the another energy crisis in which gen- to the country’s energy diversification eration in 2012. Until early 2012, small 2025. Even though this new target pro- policymakers perceive solar energy as Polytechnic School of the University of erators were forced to replace gas-fired strategy. hydro and biomass were the leading vides attractive incentives to invest in “too expensive”—thinking that solar São Paulo. electricity with expensive and more pol- To attract renewable energy invest- renewable technologies used for the com- the development of renewable energy energy would lead to increased energy Ana Maria Peres, a Brazilian journal- luting diesel generation, and the gov- ment, several new regulatory incentives pliance of the legal quota, accounting for projects, the amount of investment in prices. However, solar panel prices per ist and former resident of Cambridge ernment promoted the construction of have been introduced. In 2008, the Chil- almost 90% of total renewable genera- new capacity required to reach the 20/25 watt generated have decreased 86% (MA), collaborated with this article. liquefied natural gas (LNG) terminals to ean government took a significant first tion. However, during the last couple of target is quite significant. In fact, the new between 1996 and 2013 because of sig-

40 ReVista FALL 2015 PHOTO: COURTESY OF SERC/CLAUDIO AGOSTINI REVISTA.DRCLAS.HARVARD.EDU ReVista 41 ENERGY ALTERNATIVE ENERGY

to roads and infrastructure to maintain Although solar power’s the flow of fossil fuels. Geothermal Solar energy has now started to play most obvious benefit a greater role in the energy matrix of Energy in is the environmental the country. There are still some prob- lems that need to be overcome to allow advantage from the full deployment of its large poten- Central producing less CO2 tial, but a future with cleaner energy and sustainable development is becom- America emissions than ing increasingly feasible. Under the Volcano fossil-fuel-burning Achieving the ambitious renewable energy goals and overcoming existing BY JACQUES E. C. HYMANS technologies, the use barriers require strong, consistent and of solar energy has a balanced policy support by the govern- ment. Unless the Chilean government potentially large social takes a leadership role establishing WHEN WE THINK ABOUT GLOBAL TECHNOLOGY value that is missed by prioritized areas of policy interven- leaders, Central America does not typi- tions to address challenges rapidly cally come to mind. But Central American traditional cost-benefit and properly, it could miss a chance to countries have indeed been in the van- analysis. materialize large-scale solar develop- guard in their use of geothermal energy: ment and to recoup the benefits of solar an abundant, constant, efficient, renew- energy investments for the develop- able and low-carbon source of electric nificant technological advances. The ment of its communities and regions’ power. costs, therefore, are becoming increas- economic growth. Establishing a policy Twenty-four percent of El Salvador’s ingly competitive with respect to other framework to accelerate market com- electricity comes from geothermal. That technologies. If pollution caused by the petitiveness, supporting the needed figure places it second out of all countries use of fossil fuels such as coal and die- confidence for investments in local in the world in its level of reliance on this sel were figured into the costs through technology advancement and manufac- power source. (Iceland is tops.) Mean- the implementation of corrective taxes, turing capacity, facilitating large-scale while, fifteen percent of Costa Rica’s elec- solar energy cost would become even solar grid integration, implementing tricity comes from geothermal, as does ten more competitive. new financing and business models, percent of Nicaragua’s and five percent Although solar power’s most obvious expanding international collabora- of Guatemala’s. Compare those numbers benefit is the environmental advantage tion to provide accelerated learning with the worldwide figure of 0.3 percent. from producing less CO2 emissions and knowledge transfer to Chile, and The basic reason for Central America’s than fossil-fuel-burning technologies, improving training, education and geothermal energy riches can be summed the use of solar energy has a potentially awareness for solar energy technologies up in one word: volcanoes. large social value that is missed by tra- are among the priority policy actions to Even more impressive is the amount ditional cost-benefit analysis. Solar be taken shortly. of geothermal energy that Central Ameri- energy can strengthen the economy in cans have under foot, but so far failed to rural areas because network extension Claudio A. Agostini is a professor at exploit. World Bank reports indicate that of traditional energy systems is typically the School of Government, Univer- the countries of the region may have up not a viable economic option for these sidad Adolfo Ibáñez, Santiago, Chile. to 25 times more geothermal energy than communities. In isolated rural areas Carlos Silva is a professor at the School they are currently using, and that geother- with lack of access to electricity, grid of Engineering and Sciences, Univer- mal power alone could cost-effectively sat- extensions are often not cost effective. sidad Adolfo Ibáñez, Santiago, Chile. isfy their entire electricity demand. Therefore, isolated, or off-grid, small Shahriyar Nasirov is a professor at Yet the Central Americans have added solar energy systems can provide a sus- the School of Engineering and Sciences, only a relatively small amount of addi- tainable and cost-effective alternative Universidad Adolfo Ibáñez, Santiago, tional geothermal plant capacity since to the diesel based solutions that are Chile. returning to peace and democratic gov- typically deployed in such areas. Chile The article is based on previous ernance after the end of the Cold War. has more than 3,500 isolated rural research by the authors, who are grate- The region’s geothermal production did communities with no access to energy ful for the financial support of the proj- increase approximately fivefold between networks, many of them lacking access ect CONICYT/FONDAP 15110019. 1990 and 2012—from 747 to 3,542 giga-

42 ReVista FALL 2015 NICARAGUA: MASAYA VOLCANO IN NICARAGUA. PHOTO BY JOSÉ GABRIEL MARTÍNEZ FONSECA/SVALDWARD INK 2012 (FLIKR) REVISTA.DRCLAS.HARVARD.EDU ReVista 43