Under the Import Substitution-Industrialization ISI model, the fundamental function of integration was to expand the markets in order to enable a more efficient industrialization process. Bouzas, Accordingly, new industries were protected and integration had to reduce high efficiency costs in small economies that were unable to reach a higher scale. The golden age of integration was the sixties.
Due to the framework of Latin-American Associations in favor of greater integration, the sixties turned out to be very dynamic. That year, the Treatise of Montevideo was renegotiated and the LAIA Latin American Integration Association was created, based on a more flexible approach and on bilateral agreements, hence breaking the wide ranged vision of integration.
The political as well as the military context of conflicts in the region, in conjunction with the international crisis of the sixties debt crisis and exhaustion of ISI, resulted in policies of greater protectionism by some countries which lead to a decrease in trade flow. The original projects of regional integration were relegated. Towards the end of the eighties, the approach of integration in Latin America took a substantial turn away from the previous focus. This new approach was known as the "New Regionalism". From then on, the role of integration was aligned with a new paradigm of economic policies called "The Washington Consensus".
In this sense, integration had the role of promulgating a more complete trade liberalization of the region for the worldwide economy, strengthening the North-South bilateral agreement between countries in the south and countries in the north or northern blocs. On a regional level, a loss of dynamism existed in the commercial blocs. There were serious problems of economic and social convergence in the blocs, no progress towards a greater integration and the political divergence was increasingly marked CAN, Colombia-Venezuela which prevented important agreements from being reached, to a certain extent.
The North-South free trade treaties had taken preference over South-South agreements, without taking into account that both mechanisms strengthen the region and the countries since they are not substitutes, but complementary mechanisms 3. With the approach of a greater worldwide insertion, countries had taken their decisions individually on participation in the external market. Economy and politics in the integration initiative. The notion of integration and its motivation in South-America are visualized and internalized by its inhabitants in a different way to those in developed countries.
In the European case, at the time of creating the European Coal and Steel Community , there was already a level of industrialization.
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The main objective was "to contribute, through the common market for coal and steel, to economic expansion, growth of employment and a rising standard of living" 4. However, the Latin-American longing for integration was to reach higher levels of industrialization, to solve structural problems that had prevented a greater development and to manage a better position in the global market.
The structural problems pertaining to Latin America such as insufficient and heterogeneous production, scant institutional and financial development, lack of endogenous technological foundation and extreme inequality and poverty, are very big challenges that only could be overcome through a regional consolidation, in view of a better political and economic insertion of the region in the worldwide context.
Tavares, Gomes, For this reason, a political and economic-historical analysis is required in order to comprehend the processes of integration in the region. Bela Balassa , in his eagerness to give purely economic connotations, defined the commercial integration as "a process", or as a "state of things". In this way, the economic integration defined as "a process" includes several measures to abolish discrimination among economic units belonging to different national states.
On the other hand, as a "state of things", integration represents a lack of various forms of discrimination among national economies. However, from a "wider" point of view, integration could be considered as a process of growing solidarity and structural interpenetration of which mechanisms, instruments and objectives are defined in the Constituent Treaty from which integration originates.
Torres, Some criticize such purely economic visions by classifying them as commercialist Torres, ; others classify them as populist views with ideological tendencies. Nevertheless, in order to achieve integration of "state", the political will and economic interests will have to be combined in the "process", reaching an equitable optimization among its participants. Integration involves losing a certain extent of national sovereignty, but it also entails gaining benefits of the above-mentioned integration.
During the sixties, integration played a strategic and indispensable role to accelerate growth, expand and diversify exports and to make progress towards industrialization, with a better use of economies of scale, advantages of specialization and industrial complementation. However, problems arose at the time of advancing from this first stage of industrialization towards a more dynamic model of growth.
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The constant and continuous loss of economic and political weight is a problem that can hold back joint regional development. The impact of the financial crisis on the economic and social situation, and together with new environmental measures for traditional exports from Latin America, led us to rethink about the need of a greater cooperation among the countries in order to work on an international level. Although it is clear that there are quite strong ideological tendencies in the region, it is necessary to coordinate policies of state with the goal of reaching joint regional measures.
Economic integration cannot exist without a greater flow of commerce, reduction of customs tariffs and other difficulties related to foreign business, in the same way, neither a new form of regional economic organization can be established without political will and the conformation of consolidated transnational institutions with a regional long-term objective.
The growth of worldwide energy demand and the proximity of the peak price of petroleum, open horizons of uncertainty, on the one hand due to the supply of this resource, and on the other hand because of the imbalance in the producing economies caused by vulnerability gained when facing a constantly changing situation.
It is not by chance that the topic of energy has been present at meetings and summits for heads of states in the region. In April of the First South American Energy Summit took place, in which the South American Energy Council was created; in that same year, Bush visited Brazil during his "tour for ethanol" in order to make agreements on biofuel.
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Hence, during the Fifth Summit of the Americas that took place in Trinidad and Tobago in April of , the importance of energy in the region was pointed out, and has been compiled in the "Energy Security" section of the Declaration of Commitment of the Port of Spain. The ideas and "proposals" of integration in Latin America contain substantial data, but it is worth to analyze the main role that energy plays in regional and international contexts by price fluctuations of crude oil. Following the mid eighties and the implementation of economic reforms, the private sector took on an important role in the energy sector, due to the privatization of several state owned Enterprises of Energy and Hydrocarbons.
Accordingly, and with an external market of certain price stability, important interconnections took place for the transmission of energy between the countries. Could this be called progress of integration? The transnational energy interconnections through greater infrastructural construction for energy commercialization were guided by market interests and profit optimization. In this sense, there was no intergovernmental agenda that defined projects of integration based, not only, on continuing the development of energy interconnection, but instead based on much deeper and longer-term objectives of cooperation and energy security.
The current outline is different. In the extreme context of the food crisis, price rises of petroleum as well as the financial crisis and political changes in the region, these have all served to instill a new situation in which energy, and the roles of Brazil and Venezuela, are important in the process of integration. During the Energy Summit of , it was stated that "energy integration must be utilized as an important tool to promote social and economic development and the eradication of poverty".
However, these great dreams contain large amounts of data. By viewing the role that energy plays in integration there are two proposals, the first brought about implicitly by Brazil, by means of its oil company PETROBRAS, and the other explicit proposal brought about by Venezuelan projects, through mixed agreements articulated between the PDVSA company and national enterprises of other countries on subjects of energy cooperation and the financing of access to energy. The first position tried to expand its hegemony in the traditional style of integration; the second one tried to give "alternative" ways by putting emphasis on cooperation before maximization of economic utilities, but emphasizing the role that energy plays in order to gain political hegemony.
Another difference lies in the causes of expansion of these enterprises.
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However, the Venezuelan government uses it to expand its ideology among the nations. It is true that we are far from reaching energy integration, and the progress that has been made towards a greater interconnection, is at a standstill. The role that it is being given to energy exceeds its own limits, forgetting about the most basic objectives: to secure the regional supply and allow a greater access from the population, through the progress of energy network interconnections.
It is necessary to combine long term integration projects, under a transnational framework of commitment and cooperation among the countries, with short term projects that are able to carry out the objectives proposed at important meetings on energy and presidential summits. In order to begin with our analysis it is important to locate Latin America and the Caribbean LAC in the worldwide context, to know what is its importance in the framework of global energy policies, as well as to identify the main players in the region.
The largest producers are Venezuela and Mexico representing Both countries have different reserve perspectives: 66 years for Venezuela and 8 years for Mexico. It is the second most important type of energy in the region and one of the energy resources that has grown very rapidly in its consumption and the discovery of new reserves over the last few years.
Mexico is the biggest regional producer, and consumes almost the totality of its own production in its internal market. Part of the accelerated growth of natural gas demand has to do with its use in electricity power generation as a substitute for other previously used energies petroleum, hydroelectric power. The largest proven reserves of natural gas are owned by Venezuela.
Brazil counts with Chart 2. The global trade of natural gas has increased substantially starting in the year , from approximately billion cubic meters BCM to BCM in This tendency has been noticeable in the region due to different factors: an increase on the side of supply, greater discoveries, higher investments which were accompanied by reforms that attracted foreign capital, as well as on the side of consumption, both in the residential area and the use of this energy resource for electric power generation.
Chart 3. The consumption and production growth of natural gas. According to EIA, the consumption of natural gas will increase by 2.
As it was pointed out previously, many countries are incorporating more and more natural gas in electricity power generation, with the aim of diversifying their sources of energy, which are based fundamentally on hydroelectricity, and at the same time reduce the utilization of expensive fossil fuel petroleum. Chart 4. According to EIA, natural gas is estimated to be the second most utilized energy in electricity generation with the highest growth rate.
However, hydroelectric power will maintain its first place. For this reason, it is very important to raise a sustainability analysis under social and environmental approaches for this source of energy. The dynamics of the natural gas trade, including LNG, seem to create a future scenario of price rises due to high demands driven by the supply capacity of the producing countries. This new panorama raises certain warnings for those countries which lack this resource and are looking for alternative energy.
South America: current situation of energy integration. The process of regional energy integration up until the nineties was scant and focused on bilateral electricity interconnections and on a gas structure developed mainly by Argentina, Bolivia and Chile. The construction boom of international gas interconnections occurred during the mid nineties. The deregulation reforms in the energy sector and the privatization of state owned petroleum enterprises motivated an increased level of investments.
The "South American Energy Ring" AES project was comprised of an infrastructural connection by private initiatives, and encouraged by some governments, in order to ensure sufficient gas supply in the region. At first, the cooperation by Argentina, Chile, Brazil, Peru and Uruguay was considered, and later the possibility arose to include Bolivia and Paraguay.
Table 1. One of the motivations of AES was to create an institutional framework in order to bring investments into the energy sector that at the time were scant. Therefore it was indispensable to create a suitable legal arrangement and a predictable industrial regimen. Specifically, the project did not make much progress in real terms although it had plenty of publicity support. The seven governments never got to negotiate together. One of the technical obstacles regarding the viabilities of this project was the lack of proven reserves of the first supplying country, Peru, which implied that the project would have to be carried out with the involvement of Bolivia.