Latin America faces energy crunch
LA PAZ, Bolivia -- Facing blackouts and a looming South American winter, energy-gobbling Brazil and Argentina have an urgent message for their longtime natural gas supplier Bolivia: Step up production, and quick.
The two countries depend on their poorer neighbor for gas to power homes, businesses and cars. But Bolivia's gas industry, stagnating after a decade of falling foreign investment, can no longer keep up with demand from the continent's two largest economies.
Last year a frigid winter burned up Argentina's tight gas supply, causing a shortfall that idled factories and gas-powered taxis. And as the southern hemisphere heads for winter again, experts predict the situation could be worse.
Home to South America's second-largest natural gas reserves, Bolivia produces some 1.4 billion cubic feet of it a day -- enough to feed domestic demand and a long-standing contract with Brazil, but not an ambitious 2006 export deal with Argentina.
Bolivia had gambled the tight energy market would draw foreign investment needed to fulfill the new contract. But international companies have been wary of the nation's gas fields after President Evo Morales placed them under state control in 2006. Pledged support from Venezuela and Iran also has yet to materialize.
As investment finally begins to pick up, Bolivia expects to boost production by 5 percent this year, and another 11 percent in 2009, Vice President Alvaro Garcia said in February.
Landlocked Bolivia is cut off from most international markets. It pipes gas only to its neighbors -- except for Chile, which Bolivians still resent for seizing their coastline in an 1879 war. Chile instead imports what little gas Argentina can spare.
That isolation has fostered a joint dependency with Brazil, which all but built Bolivia's hydrocarbons industry while using the cheap gas to fuel its own rapid economic growth.
But Bolivia's poor grew weary of watching their underground treasure feed a neighbor's wealth, and elected Morales in 2005 on a pledge to reclaim state control of the energy industry.
His takeover of the sector the next year at first spooked the few foreign investors who hadn't already fled the political instability that saw five Bolivian presidents in five years. Natural gas production has since flat lined, while Bolivia's government tripled its share of revenues and pumped the funds toward popular social programs.