Brazil, Economy, Energy, Environmental Conservation, Inter-American Relations, Mexico, Venezuela

State of Petro: National oil in the Americas

Energy is ever more becoming the piston driving Latin America to the contemporary world stage.

This reality arrives in lieu of major Chinese and Russian investments in Venezuela’s petroleum belt, Mexico’s intense debate over how to diversify foreign investment in its state-run energy powerhouse, and Brazil’s ever-expanding oil coffers that continue to propel its economy upward in the face of a global economic recession.

These three states lead energy production in Latin America and will increasingly become a lifeline for the world’s swelling consumer demand, and key to its sustainable growth. Petroleum and natural gas have for a time been assets sought heavily by the US and Europe, but now draw clientele from the surging populace of China, India, and wider Eurasia.

Amid this equation, guaranteed global supplies remain variable, tending to degrade in both refining ease and reserve accessibility. This, coupled with security concerns in the Middle East, marks a unique opportunity for the region to fund much needed domestic reform and present viable energy initiatives to the international community, beyond the distant third tier.

A fundamental challenge in scaling these energy companies to meet such global demand will be the state’s ability to balance its investment and revenue model. All three of these Latin American countries highlighted here have state-run energy sectors, though all are not created equal. For a more informative look, see the comparative breakdown below:

Country México Brazil Venezuela
Founded 1938 1953 1975
Petro Profile Heavy Crude (2/3, Maya), Light Crude (1/3, Isthmus & Olmeca) Predominantly Heavy Crude (Marlim), although newly discovered, subsalt fields are of Light grade and Sweet substance Almost entirely Extra-Heavy Crude, of Sour substance (high sulfur)
Proven Reserve Capacity 10-13.68 billion 12.35 billion 99 billion
Largest Reserve Cantarell Sugar Loaf Orinoco Belt
Onshore / Offshore % 20/80 40/60 Predominately onshore reserves, spread across 4 principal fields. Shallow water reserves in the Maracaibo Basin
Production Output 2.8 million bbl/d 2.72 million bbl/d 1.5 million bbl/d
Refining Capabilities 1.5 million bbl/d (6 refineries) 2.223 million bbl/d (16 refineries) 1.28 million bbl/d (Domestic & foreign refineries- Citgo USA)
Annual Revenue US $98 Billion (2008) US $118.3 billion (2008) US $120 billion (2008), est. US $50 billion  (2009)
Foreign Investors Sparse due to tight regulation by state apparatus, although the Calderón adminstration has opened doors for foreign investment on the deep sea exploration front Private sector energy (Shell, Cheveron), BP (biofuels), China Previous investors included major intl. petroleum giants, but after state reappropriation, Russia, Iran, China, & Brazil have agreed to looser terms under the Bolivarian regime
Principal Export Recipient(s) United States Largely utilized for growing domestic consumption, biofuels (ethanol) make up bulk of energy export United States & Europe, China fastest growing consumer

SOURCES: US Energy Information Administration, Oil & Gas Journal, Business Week, CIA World Factbook

These numbers are enlightening in the sense that they present a snapshot of current carrying capacity and orientation of each state’s petroleum sector. However, a deeper study of energy futures can prove to be a bit speculative.

In the case of México, PEMEX has long been the case study on state investment of natural resource and economic autonomy. It relies heavily on taxes from its rich output to fund an array of federal initiatives and deliver energy to the Mexican consumer at a subsidized price. But, wrought with declining output on its principal oil field, Cantarell, the company has a need to exploit deeper off-shore deposits that require sophisticated equipment and a niche expertise– tasks honed upon by transnational powerhouses such as ExxonMobil, BP, and other state companies such as PETROBRAS. Due to this shifting source dynamic, the Calderón administration has worked diligently to promote external investment. This however remains a major political hot button due to historic precedent, as the industry’s sovereignty is seen as a sacred right to the Mexican populace. PEMEX has more than the necessary resources to carry onward, but significant institutional reform will remain fundamental.

PETROBRAS has gained measurable authority in the international energy sector both for the diversification of its investments, and the expertise of its workforce. President Luiz Inácio Lula da Silva has worked diligently to build a state model that profit shares with private enterprise, while promoting a solid domestic refining infrastructure. Recent offshore discoveries in sub-salt reserves via the Tupi fields continue to grow the Brazilian lot, while Brazilian officials are aiming to funnel revenue to direct state initiatives and maintain energy independence. For the time being, Brazil appears to be playing its cards right to promote sizable production in means to maximize internal growth. It will be interesting to see when it goes net positive in its production, to which countries it will direct its resources.

Turning to the more volatile petroleum sector, Venezuela has seen its share of production ebbs and waves in the past decade. President Hugo Chávez has too tapped into the ‘petro vein’ to fund large swaths of state initiatives, however often with a playbook at odds with much of its professional workforce. Lack of international investment (due to restrictive reappropriation efforts) and flight of expertise have reduced export capacity and bogged down exploratory projects in the Llanos sector and Orinoco Basin. The state energy company, PDVSA, however sits upon perhaps the world’s largest crude reserves in the Orinoco Belt, rivaling fields in Saudi Arabia. Due to its heavy tar-like viscosity though, special refining capabilities are needed to extract petroleum from sand and sludge– a role the United States currently fulfills. This is where large investment by China and Russia will float PDVSA initiatives in the near future despite waste from within. This, while the Venezuelan state maintains institutional direction and pads its GDP.

Overall, with the exception of Brazilian offshore reserves, it appears that most new petroleum pools are of heavier grade crude. This will require a more expensive refining process and specialized facilities, promoting favorable conditions for foreign direct investment (FDI) and transnational partnerships.

The manner in which each of these companies respond to its new role in the world energy sector will be developments watched closely by all, but seems to present favorable prospects to a long-forgotten region.

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Argentina, Colombia, Ecuador, Inter-American Relations, U.S. Foreign Policy, Venezuela, War on Drugs

UNASUR: Amid bickering, García calls BS on Chávez Rant


Felipe Ariza, Presidencia – SP

Not surprisingly, the bilateral defense agreement to extend terms of US presence in Colombia has ruffled the feathers of a few Latin American leaders at the Unasur conference in the mountain oasis of Bariloche, Argentina this week.

In reality, most everyone who follows this agreement, and the two countries’ historic defense cooperation, realizes this is merely a formalization of affairs. It’s no secret the US had a definitive role assisting Colombian officials in the hostage dupe against the FARC (Operation Jaque) last year, nor that they continue to provide intelligence, logistics, and training to its officials in means to undermine insurgent opposition and disrupt narco factions.

However, by no means have we seen a surge of in US troop/contractor levels, ceding of Colombian sovereignty, nor direct engagement that even remotely presents a bellicose shift toward neighboring American states. Any quips of this nature are fabrications of pure ‘Pixar’ scale. Now, whether or not this extended agreement is truly an effective defense measure for either country, alongside Plan Colombia, is another debate entirely.

Nonetheless, verbal crossfire ensued between the ALBA-aligned nations and president Álvaro Uribe of Colombia surrounding the sealed agreement. While Uribe outlined the case of mutual responsibility in such partnership and preached its concrete results that extend beyond verbal apathy, Venezuelan president Hugo Chávez and Ecuadorian president Rafael Correa emphasized the ulterior motives of US force projection and the destabilizing nature of such a move.

This is rather ironic considering that it was Correa’s mandate to scrub the lower-profile U.S. base in Manta that spurred this broadened initiative. And, in literal terms of regional destabilization, Chávez has a wrap sheet of saber rattling, ‘covert’ support for illicit factions, and arms acquisition from Russia and elsewhere that clearly trump any augmentative facet of this development.

Perhaps the most amusing exchange in this reunion came from Peruvian president Alan García, in lieu of Chávez’s insinuation that the US was preparing to invade Venezuela for its vast energy resources:

“Man, why are they going to dominate the petroleum if you already sell it all to the United States?” Mr. García said. The remark drew laughter, though not from Mr. Chávez.”

For a solid video recap of the summit, check out BBC Mundo (in Spanish), or its article review (in English).

Also, for more on the Chávez front, check out the polarizing profile by former U.S. Ambassador to Venezuela, Otto Reich, at ForeignPolicy.com.

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Elections, Venezuela

Electoral waves sway Caracas


Photo by Andres via Flickr

No tanks grind along the washed-out streets of Caracas, nor have battalions stormed breakaway sectors of Venezuela this Monday. No revolutions were to be televised. Rest assured Ms. O’Grady, the Andean state lives to see another day.

Record numbers of Venezuelans hit the streets yesterday, enduring long lines to partake in the country’s regional and municipal elections.

After months of lofty expectations for a political showdown between Chavistas and opposition to the current regime, results dictated in the early hours this morning permit neither side to boast of fervent victory.

Charged for many months by an aura of executive scale, the vote would gauge popular sentiment for President Hugo Chávez’s Bolivarian mandate and the fate of candidates who positioned themselves to such. Given his widespread grip upon the allied majority of Venezuela’s 22 states, it would test support for his ‘por ahora‘ stance, an onward pursuit toward expanding his grandiose socialist agenda.

Upon the announced results from the national election board (CNE), Chávez publicly declared:

We have a map almost completely dressed in of red, just a bit of red […] It’s a great victory for our people, for the PSUV (United Socialist Party of Venezuela). The road toward the construction of socialism has ratified itself– the new historic project of Venezuela; and now, we will move to deepen and extend it.

Although pro-Chávez candidates claimed victory in major swaths of the country, the most populous sectors with significant political sway, including the greater mayor of the nation’s capital Caracas, ceded to opposition. These decisive blows included wins in oil-heavy Zulia, north central Miranda, Tachira, and the industrial powerhouse, Carabobo. It appears grassroot frustrations with public security, inflation, high cost of food commodities, and lack of alternative chopped a leg from under the president on his country’s throne.

Chávez, however, contines to hold solid river cards at the governing table, brandishing broad insitutional control and consolidating party loyalists at nearly every level. Yet, his absolute goal of rehashing the failed 2007 constitutional referendum (allowing among other items, unlimited reelection) continues to sink, further washed over by the political riptide of yesterday’s ballot draw.

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Elections, Venezuela

The Hugo Chavez Show

Looks as though PBS Frontline will offer us a delectable Thanksgiving-week special this upcoming November 25. Before Americans’ traditional overeating, and the turkey’s dose of L-tryptophan set in, the documentary series aims to “[chronicle] Hugo Chavez’s ascent to power and his efforts to use the powers of the presidency to stay there.”

Considering this documentary will have a timely release amid upcoming Venezuelan regional elections (Nov. 23), it shall be intriguing to see what analytical conclusions the film draws in the wake of this critical political juncture for Venezuela. Although Chavez has been able to eliminate a swath of his key rivals, this race threatens his projection in pivotal sectors of the country— a prospect that would not settle well with the ire of ‘Chavistas’.

The program written, produced, and directed by filmmaker, Ofra Bikel, will pre-release on Frontline’s web site beginning Nov. 19.

Check out a preview below, and give us your take on the film upon its release— Chavez undoubtedly will.

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Colombia, Economy, Inter-American Relations, Mexico, U.S. Foreign Policy, War on Drugs

10 lessons the ‘Drug War’ should have taught us


Photo via Andy Zeigert, Flickr.
Medellín boss Pablo Escobar moments after being gunned down in Dec. 1993, after a joint Colombian-U.S. manhunt operation.

A telling article featured this past Wednesday in the Washington Post underlines a flux of coca cultivation in the Andean region over the past five years– not that this should come as some inherent revelation to us all. With the United States Government spending nearly $4 billion on drug eradication and interdiction programs during this period and the crop yield flowing rather unabated, the aims of U.S. security initiatives in Latin America can be labeled a bit, shall we dare say, out of touch?

The irony of course is that these five years stretch back to another three decades of almost stagnant policy, littered with short-lived tactical successes and exhausted rhetoric. Indeed, the nature of narcotics trafficking and its actors have morphed over time, however the bottom line for U.S. drug policy has not. It continues to emphasize the destroying of the product rather than addressing the conditions under which its trade flourishes.

Recently, I debated the merits of the multifaceted Plan Colombia, detailing how American efforts in counternarcotics have challenged traditional political paradigms and have been blurred by the lofty aims of several administrations. As I note, there has been a fair measure of success in Colombia via a restoring of state legitimacy and relative sovereignty over major territory. This, however, remains a secondary objective to U.S. eradication efforts in the region.

With drug related violence spilling across greater Mexico and the United States moving to counteract its influence in much the same manner via its Plan Merida, history can offer us some choice wisdom. Here follow ten lessons Uncle Sam can hash from his fabled ‘War on Drugs’:

1.
Understand the changing nature of the beast: Narcotics trafficking in Latin America has continually evolved in both organizational structure and operational orientation in recent decades, moving away from hierarchical vulnerabilities toward flexible, “snap-in” nodes. These operate among a viral network of transnational organized crime and fringe political groups now utilizing established routes to North America via Mexico and through western Africa onward to the European theatre.

2. Counternarcotics and counterinsurgency are not mutually exclusive:
Illicit actors capitalize on bureaucratic rules of engagement. Seen early on in Plan Colombia, U.S. policy under the Clinton administration held the prerequisite that action taken with its material support, active or implicit, should strictly target narcotics strongholds. This essentially fractured a unified strategy toward combating armed actors that threatened state legitimacy before the Colombian populace. U.S. counternarcotics operations must be conducted within the lens of bolstering domestic state security and fortifying of judicial apparatuses against corruption.

3. The prevalence of narco affairs in Latin America, in part, results from U.S. neglect to engage the region on larger issues: Let’s face it, Latin America has until very recently been the forgotten theatre in U.S. foreign policy endeavors and its national security agenda. Sure, the usually banter of Hugo Chávez and his Bolivarian revolution stir the Washington pot every now and then, but the more illusive reality remains that the tide of illicit commerce and migration found in the region, be it human smuggling, gun-running, or narcotics trafficking, is testament to sparse economic opportunity and rabid corruption of state institutions by powerful mafia actors. Measures by the U.S. to promote transparent governance, state responsibility, and economic incentives for fulfilling such have been sorely lacking to bear much resemblance of Good Neighbor policy.

4. While narcotics trade may not always be politically oriented, fighting it is: Ardent diplomacy and political negotiation among American states remains crucial in combating the transnational threat posed by cartels and sub-state insurgents. Unless a level of cooperation and a unified initiative are adopted to promote inter-state security, subversive organizations will aim to exploit these state quarrels, whether they are politically oriented in orientation or not– it’s in their own self interest to pit the region’s regimes against themselves and the lever of U.S. strategy.

5. Targeting narcos draws strange bedfellows: Aka. “blowback”. As one can readily see in the unfolding parapolitcal scandal on the contemporary Colombian stage, and through much of U.S. cold war policy in the region, crushing insurgencies forges some ugly alliances with vigil ante groups. Remember Los Pepes stalking drug kingpin Pablo Escobar amid U.S. support?…those same leaders subsequently led paramilitary death squads in record disappearances of Colombian campesinos.

6. This is a domestic battle as much as a transnational plague: There is a fundamental reason the narcotics industry draws billions of dollars annually from its sales and arms itself with military grade weapons– yep you guessed it, U.S. supply and demand. Until this issue is addressed from both sides of the aisle, its going to take a lot of Hail Mary‘s and super-duper border walls to combat American demand for blow and ganja.

7. It is a campaign that can never be won, but can be properly managed: No way to kill all the cannabis and coca plants south of the border, even with the magic touch of Round-up. No way to blockade every one of those superfluous routes to the U.S. or Europe, or even to hunt down the industry’s school of big flounders. This is not a war that can be won by numbers or decisive blows, it is a campaign that should aim to manage state authority, exercise territorial control, and provide attractive alternatives to the struggling populace.

8. States should be rewarded for complicity, not shunned and isolated for alternative agendas: U.S. policy of disengagement has not proven to be very fruitful in terms of national security or furthering of inter-American cooperation. Shunning Venezuela, Bolivia, and Ecuador as pariahs for their “alternative” approach to collective nationalism has only worked against efforts at diminishing supply and financing of fringe opposition. While these states work to build opposition to American influence, they dangle carrots to smaller nations prone to sway by incentive (petroleum, mining, natural gas, medical aid, etc.). U.S. apathy imparts a political vacuum in the region.

9. Foreign aid should be distributed based on fulfilled benchmarks: Instead of penalizing and sanctioning American states for not complying directly with U.S. strategy, reward their demonstrated efforts to achieve compromised objectives. Demonizing regimes such as that of Morales, Chávez, and Correa only plays into their domestic cards. Hasn’t the United States had a fair measure of success in other regions of the world following this very same premise?

10. The United States Government is more than capable of leading a regional security initiative and promoting a level of stability to the Americas: The United States with its regional partners has had more than its fair share of known tactical successes against cartels and insurgent groups in Latin America. Look to the training of Colombian special forces in recent years to curtail the FARC, the capture and extradition of major mafiosos, the fall of the Medellín and Cali cartels in the 1990s, the disruption of international cells operating in the southern cone, among thousands of major seizures and raids from actionable intelligence. The problem has never been one of capability or even sheer logistics when cooperation is forged…it has been a matter of political vision and overarching strategy. That shift needs to be made to the larger picture, foregoing the eternal quest to burn the mother of all drug caches, toward the understanding that security interests are served by promoting strong governance of the American states.

Among these few, I’m quite sure there are many more valuable lessons that can be gleaned from the counternarcotic campaigns of Latin America, amid other international bouts of transnational crime. Feel free to weigh in and let us know, what do you see as cornerstone to pan-American security?

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Elections, Inter-American Relations, Venezuela

How to rig Venezuelan elections for dummies

Venezuela is not a particularly popular topic in Washington these days. To most, the bombastic rhetoric that President Hugo Chávez throws to the airwaves on an almost weekly basis has instilled an innate ‘mute’ response from those in the American foreign policy sector. Indeed, at times the elaborate feuds of the Venezuelan regime play out more as a flailing telenovela than international diplomacy.

Behind the scenes however, political rip tides are stirring Caracas in the midst of upcoming federal and municipal elections at the year’s end. On such accord, a rising young politician, Mayor Leopoldo López of Chacao, made it a point to visit the United States this past week to convey a sense of both the elections’ significance and shine light on its already fraudulent bearing.

Featured in Monday’s Washington Post op-ed , López is among hundreds of opposition candidates that have been blacklisted by the government well before the ballots are to be cast by the greater public. Jack Diehl of the Times explains:

“Two weeks ago, Venezuela’s national electoral council, dominated by Chávez followers, moved to ban López and 371 other candidates from the Novemeber state and local elections, which are shaping up as the most important since Chávez was first elected nine years ago. This broad exclusion was based entirely on the finding of another Chávez appointee, who ruled that each of the candidates was guilty of an administrative or legal offense, though none has been judged in court.”

To this end, López spoke before a forum organized by the Inter-American Dialogue, in which he outlined the progress made in the Cachao municipality of Caracas, the growing necessities of the Venezuelan populace, and the fallacies contrived by the regime to undermine ‘alternative’ governance (Audio here).

According to López, the current regime holds a grip on a near 90 percent of the political system, making it difficult to maneuver on strategic and tactical levels before the monopoly. He himself has been a victim of three assassination attempts and a kidnapping in 2006, both events he attributes with certainty to the government for his discrepancies in policy.

In step with this rhetoric, López attributed the following paraphrase to Chávez himself earlier this year:

“We are confronting a possible war if we lose the regional elections in November […] If we lose regions like Caracas, like Miranda, like Táchira, we will be in a state of war.”

Framing this motive, López cites clear breach of the Venezuelan Constitution in Articles 65, 42, and 289, which declare a citizen eligible to run unless convicted by a judicial body of a criminal offense, and in the latter article describes the limited role of the board itself to exercise nullifying powers. In an ironic twist, Chávez had been brought before the Supreme Court on such criminal charges after his manufactured coup in 1992. Even so, the decision had not been one strong enough to dispel him from the ballot box in 1998.

Despite the hostilities and a regime hell-bent to derail any potentially successful candidate, the mayor maintains that these elections must be seen in context of the 2007 mandate that aimed to indefinitely renew his executive role. It marked Chávez’s first rebuff since his election in 1998. From there, he argues a fundamental campaign for change must be fortified by a few pillars:

  • A united, ‘alternative’ platform to bid for political office
  • Subsequent need for such platforms to reach and conduct “good governance” on a regional and local level

And if López and other ‘alternative’ candidates were able to show some success at the polls in November?

Amid his discussion before the forum, the mayor underlined a handful of issues not handled adequately in the mind of the Venezuelan public :

  • Public safety (He cites Caracas as the most dangerous city in the hemisphere with 70 murders per 10,000 inhabitants)
  • Food shortages
  • Housing
  • Corruption
  • On the international front, the state’s alleged relationship with the FARC and its diplomatic stance with regional players, including a “fundamental reshaping of relations between North and South America”

Although López carries many ambitions and insights, unless significant pressure is leveraged on Chávez in the coming months from fellow American states or domestic fervor, its seems unlikely he, nor the rest of the near 400 blacklisted candidates, will have the opportunity to lay their hand to the table. Nonetheless, the mayor’s visit has seemingly stirred the pot in Caracas, as the regime ponders the prospects of an microscope of the eroding democratic trends of the Venezuelan state.

Update: Upon his return to Caracas this past week, the mayor was subsequently detained at the airport for two hours and purportedly roughed up physically by unidentified officials. He described his treatment on Venezuelan television as unacceptable. His claims were later to be satirized across several programs.

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Colombia, Inter-American Relations, U.S. Foreign Policy, Venezuela

The lights stay on at Miraflores


Beatrice Murch via Flickr

One can imagine the blustery state of Venezuelan President Hugo Chávez upon discovering a U.S. naval plane had entered the country’s restricted airspace off the Carribean coast this past Saturday. At this point though, he probably plays to the tune of vindication among his naysayers— those who find his prophecy of imperial gringos sweeping the Bolivarian homeland a bit, hmm, off kilter.

U.S. officials acknowledged yesterday that the incursion did indeed occur, albeit by pilot error in a counternarcotics mission. The flight reportedly veered into Venezuelan airspace near a Presidential estate and military compound, restricted to both civilian and official aircraft.

Whether this was purely a case of a disoriented crew or true probing by the administration officials is at this point rather irrelevant, as Chávez doesn’t take much to spook these days. After the coup plot launched in 2002 on his own presidency, purportedly by CIA-sponsored dissidents, Chávez is all but convinced the United States continues to mark him. In the past few months his rhetoric has elevated with the Colombian intrusion upon Ecuadorian territory in its operation against the FARC camp, March 1 of this year.

In a much publicized response, Chávez then mobilized 10 battalions to the border to showcase his opposition to external meddling (ironic given the favoritism he’s played toward Colombian insurgent operations). This event comes amid his voiced conspiracies that either American and/or Colombian troops, under U.S. command, will commence subversive operations in Venezuelan territory.

In any case, Chávez fails or chooses to ignore, that while he remains a nuisance to the Bush administration, commercial ties are strong with the region’s economic partners and to the U.S. itself. Also, in addition to the Latin American agenda remaining on Washington’s backburner much of Bush’s tenure, any attention/resources diverted from the Middle East will likely land on the doorstep of the southern neighbor, Mexico, who is toe to toe with narco factions on its northern border front.

In any case, Chávez is likely to continue this posture with the upcoming U.S. adminstration and its allies, out of sheer political benefit and a degree of wariness. When the characteristic red flannel is traded for a plush robe, his security detail will still sweep the closet for unbeknown spooks or disgruntled venture capitalists. After contemplating the latest grudge to air in the next round of Aló Presidente, he might reach under his pillow to grasp a close guarded trinket— perhaps the Liberator’s long lost sword. We can bet though, the lights shall stay on through the night at Miraflores.

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