Transcript Conference on Energy in South America Luis Enrique Berrizbeitia Executive Vice President The Center for Latin American Issues George Washington University March 2002

Conference on Energy in
South America
Luis Enrique Berrizbeitia
Executive Vice President
The Center for Latin American Issues
George Washington University
March 2002
1
Contents
 Economic development in Latin America:a brief
comment
 why growth and development have not been sustainable
 updating the development model
 the importance of integration for competitiveness.
 Prospects for energy market integration in
Latin America
 potential benefits
 relevant issues
 progress toward energy market integration
2
Why growth and development have not
been sustainable in Latin America

Reforms have been mainly focused on macroeconomics,
not enough on microeconomics

Continued dependence on natural resources and
external savings

excessive vulnerability to external shocks

Growth has not been sustained nor sufficient, and
income distribution remains very inequitable

Not enough attention has been paid to social and
environmental issues

Weak institutions
3
The evolving development model
 Necessary to preserve and improve on the progress
achieved though macroeconomic and structural reforms,
but also to focus increasingly on the microeconomic
aspects of development

achieve a better balance between the economic basis
of development, and its social, environmental and
institutional dimensions

attain higher levels of sustained growth and
development

improve income distribution

reduce poverty
4
Focusing on the micro-dimensions of
development

Greater productivity and competitiveness
infrastructure
 ICTs
 SMEs


Increase investment in human capital
education
 pension reform


physical & economic integration
 domestic savings
 globalization

public health services
 unemployment coverage

Protection, promotion and development
of environmental resources

mitigation of environmental risks
 development of sustainable “green markets”

Institutional development
improve the quality and efficiency of response to social needs
 strengthen the mechanisms of democratic governance
 improve economic and social management

5
The importance of integration for
competitiveness
 Economies of scale derived from large integrated markets
reduce costs and promote competition
 Generates new business and investment opportunities and
strengthens regional economic players
 Helps protect the region from the volatility of globalization
 Facilitates competitive insertion into global markets
 Increases trade and promotes intra-regional development
of technology and service sectors
Integration improves the region’s competitiveness
6
Leadership role in promoting integration
in South America
Infrastructure
Energy markets
Financial markets
Environmental markets
Logistics for competitiveness
Commercial integration
Benefits of energy market integration
 Contributes
to optimize the use of existing
hydro/thermal capacity
compensates
for variations in hydrological and climatic cycles
takes advantage of differing demand patterns across time zones
 Contributes
to compensate for large differences
in energy resource endowment
promotes
 Improves
increased intra-regional trade in energy
the region’s overall competitiveness

lowers costs and promotes competition in energy generation
 improves the quality and reliability of electric power services
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Benefits of energy market integration
 Creates
new opportunities for intra-regional
technological development and trade in energy
services
 Helps
drive the integration of natural gas
markets
 Generates
measurable environmental
benefits
 can improve r.o.i. through “Kyoto” mechanisms (cdm)
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Relevant issue for energy market
integration in Latin America

Greater homogeneity of energy policies
across countries
 regional vs. national policy orientation
 market driven vs. planning orientation
 private vs. public sector roles
 adequate investment climate
 regulatory compatibility

Harmonization of regulatory criteria
 separation of generation/transmission/distribution
 transparent pricing mechanisms based on LTMC,
including transmission costs and pricing
 transparent and direct subsidies where needed
 joint or harmonized power and gas market regulation
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Progress toward energy market
integration in Latin America

Use existing fora to intensify exchanges among
key players, including the private sector:
potential and benefits of market-based integration
 harmonization of policies and regulations
 fora include: OLADE/CIER/CAF/CAN/MERCOSUR/
IIRSA/FTAA


Build upon existing infrastructure to evolve from
opportunity exchanges to market integration
 more
intensive use of existing interconnections
 binational hydroelectric dams (Itaipú, Yaciretá,
Salto Grande)

Aim toward firm policy commitments and specific but
realistic objectives
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Existing interconnections in South
America
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Progress toward energy market
integration in Latin America
 Power integration
projects with highest
short-term economic potential

Colombia- Ecuador (220KV)
 Ecuador-Peru
(220KV)
 Argentina-Brasil
(several at 500KV)
 strengthening Venezuela-Colombia (two at 230KV)
 Natural gas integration projects
 Colombia –Venezuela (under analysis)
 Greater potential for gas market integration in MERCOSUR
 Andean
agreement on regional interconnection
of power systems and energy interchanges

Colombia-Ecuador-Perú-Venezuela (observer status)
 Bilateral agreement: MEM (Ven.) - Termotasajero (Col.)
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CAF and the energy sector
(at Dec. 31, 2001)
•
•
•
•
•
•
Total portfolio:
Infrastructure portfolio:
Energy portfolio:
Electricity portfolio:
Approvals, electricity projects:
Number of electricity projects:
$ 6.5 billion
$ 4.3 billion
$ 1.2 billion
$ 1.0 billion
$ 1,4 billion
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CAF is currently well positioned to play a catalytic role
in promoting energy market integration in South America,
on account of its mandate, its strong regional position, its
leadership role in IIRSA, its partnership with CIER and
OLADE and its close relations with regional authorities.
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A summary overview of CAF
SHAREHOLDER COUNTRIES:
PRODUCTS AND SERVICES:
 Loans and co-financing
 Investment banking services
 Non-Financial services
YEAR: 2002
16 countries
5 Andean
CLIENTS:
Public and Private Sector

CAF’s MISSION
CAF´S INDICATORS
2001
3.127
2.548
6.527
6.805
5.573
4.862
2.563
1.826
113
Var.% 01-00
Approvals
34,6
Disbursements
40,1
Total Portfolio
27,5
Assets
16,5
Direct Loan Portfolio
14,7
Liabilities
15,4
Bonds
9,5
Net Worth
12,4
Net Income
5,0
ROE
6,6%
ROA
1,9%
BIS Ratio
30,8%
Liq. Assets/Financial Liabilities
25,4%
Non-accruals / Loan portfolio
0,6%
Allowance / Loan portfolio
3,2%
SUSTAINABLE DEVELOPMENT
REGIONAL INTEGRATION
WB -21%
MAIN SOURCE OF MULTILATERAL FINANCING FOR
ANDEAN CONTRIES
Total Approvals 2001:
US$ MM 5.637
IAFB -25%
CAF 54%
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Corporación Andina de Fomento
www.caf.com
/marzo2002
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