Argentina’s Evolving Energy Outlook

Argentina’s Evolving Energy Outlook

BUENOS AIRES – Mauricio Macri’s election in late 2015 sent shockwaves across the hemisphere and unleashed a torrent of optimism. Indeed, there was a period of euphoria as he announced his cabinet, economic team and desire to pursue unity and reset Argentina’s regional and global standing. President Macri embraced the expectations for his administration when, during remarks to open this year’s legislative session in Argentina, he said that his government will change the country’s history.

Quickly focusing on the nation’s nearly bankrupt energy sector makes good sense for the Macri administration. Not quite 100 days into his term optimism abounded, as did the necessity to focus on the enormity of the needs for the nation’s energy sector that has ushered in an increasingly workmanlike atmosphere. That was the clear consensus across two days of intense discussions at the Argentina Energy Roundtable convened by the Institute of the Americas on March 9 and 10 in Buenos Aires.

Throughout the election, the Macri campaign made clear their intentions with regards to revitalizing the country’s economic outlook, investment climate and particularly the energy sector. Since assuming power in December, the government has moved swiftly on a variety of fronts from navigating a path to a solution for the long-standing impasse between Argentina and international creditors and confronting onerous capital controls, the country’s currency, export duties and jury-rigged inflation statistics.

The Macri government also brought a technical seriousness to the nation’s energy bureaucracy, as well as a strong push to move beyond the “disorder” and “poor management” they inherited. There have been clear marching orders from the top as the administration works to “normalize” the many government institutions that had languished for years.  In addition, little time was wasted to confront strongly entrenched market distortions and massively costly inefficiencies in the country’s energy system.

Over the last few years, energy contributed around 5 percent of the nation’s GDP, 6 percent of its export revenue and 17 percent of imports. Indeed, the interconnection between the nation’s fiscal imbalance and the cost of energy subsidies and imports was clear and demanded immediate attention. Energy subsidies cost on the order of 12% of all government spending in 2014 while energy imports that same year totaled $6 billion.

President Macri assumed power with a clear understanding that these statistics must be met head on if the country is to revitalize the energy sector and use it as a motor to jumpstart economic growth and be a significant driver of reform.

Only days after taking office in December a state of emergency was declared for the nation’s electric system to avoid what the energy minister called the possible collapse of the system. The presidential decree granted powers through the end of 2017 in an effort to stave off outages, deal with the challenges of the market distortions, and begin medium and long term planning for the system.

As part of the emergency decree, the government also moved swiftly to complete a campaign promise to liberalize prices in the electric sector and deal with the long-standing problem of distortive subsidies.  New prices for the national wholesale power market were introduced in January covering the three months between February and March. Further cuts to electric subsidies are likely later this year in an effort to move electric prices toward more market based rates. The goal in confronting these distortions and fiscal issues is to foster a more attractive investment climate and one that overturns years of confrontation between the government and private investors.

Another early move that was applauded by markets and the investment community, was the government’s creation of a ministry of energy and mining. The new ministry brought into government a wide range of experienced practitioners and energy sector veterans. The ministry replaced a Secretariat of Energy that had ceased to provide policy direction or vision.

As part of the new ministry, several new secretariats and undersecretariats were created including a renewable energy undersecrariat that will work to comply with the national goal of 8% renewables by 2017, a secretariat of energy scenarios to manage energy planning in the medium and long term (15-40 years) and an undersecretariat for energy savings and energy efficiency, which seeks to reduce consumption by 5% by 2020.

Though still early days, the Macri government has clearly been busy in an earnest effort to construct a vision for the energy sector. The first draft, along with several first steps, is in place with the formal energy outlook for the government set to be finalized and published later this year in September.

A key tenet was set forth in opening remarks at the Roundtable by Secretary of Strategic Energy Planning Daniel Redondo: Energy planning and projects must balance supply and demand in Argentina at the same time as reducing imports and supporting modest GDP growth.

IOA Mourns the Death of Don Fernando Solana and Dr. Edgar Rangel

IOA Mourns the Death of Don Fernando Solana and Dr. Edgar Rangel

The Institute of the Americas is deeply saddened by the loss of two dear friends and colleagues in Mexico: Don Fernando Solana and Dr. Edgar Rangel.

Don Fernando Solana was a long-time Board Member of the Institute of the Americas and an eminent Mexican diplomat and former foreign minister.

Dr. Edgar Rangel was a founding commissioner at the National Hydrocarbons Commission (CNH) and one of Mexico’s leading oil and gas experts. We were honored to count Edgar as a frequent speaker and participant in IOA energy programs and the annual La Jolla Conference.

Our sincerest condolences go out to their families and friends. Mexico has lost two distinguished public servants and we have lost two good friends.

Reinvigorating Regional Energy Integration

Reinvigorating Regional Energy Integration

Washington, DC – Energy integration is back in vogue in the Western Hemisphere. That was the clear consensus of a panel of government and industry experts convened by the Institute of the Americas on December 3 in Washington, DC.

After a period when economic and political factors conspired to set back the gains of regional integration efforts from the 1990’s and early 2000’s, a booming US natural gas market, myriad initiatives of the US government, and November’s change election in Argentina has reinvigorated the appetite for integration.

The well-known story of booming US oil and gas production from shale played a starring role in reviving the importance of regional energy integration. Natural gas trade between the United States and Mexico has more than doubled since 2005 and will double again by the end of the decade. At the same time, natural gas via LNG from the US Gulf Coast is imminent and will surely plug into the import markets of Chile, Central America and the Caribbean.

The United States government, oft-maligned for “not doing enough” in Latin America and particularly the energy sector, has embarked on a long list of energy diplomacy efforts aimed at the hemisphere’s energy market and integration.

 

Led largely by the US State Department’s Energy Bureau, programs such as Connecting the Americas 2022, the Caribbean Energy Security Initiative and the Energy Task Force all seek to redouble efforts at regional energy integration as well as energy transition, and boosting diversification of Central America and the Caribbean’s energy matrices. Most importantly, significant financial resources are being made available for the programs, including a $20 million clean energy fund being managed by the Overseas Private Investment Corporation, or OPIC.

The State Department representative on the panel, Chris Davy from the Energy Bureau, spoke enthusiastically and optimistically about the programs and the United States’ embrace of energy diplomacy, as well as the upside these initiatives will bring to the Caribbean, Central America and the entire hemisphere.

In addition to the important push from the United States government, there has been a shift in what may be best termed geopolitical forces in Latin America, forces that long caused countries to focus on security of supply and allow domestic concerns to supersede those of the region or regional integration.

An example is the advance and utilization in Central America of the SIEPAC electric interconnection infrastructure to realize regional electric transactions and trade. But also, countries across the Southern Cone have signaled their desire to recapture their pioneering integration efforts. These trends have been greatly buoyed by the change election in Argentina of Mauricio Macri and his pre-inauguration rhetoric on integration writ large, and the role of the energy sector.

Panelist Ricardo Iglesias of Engie pointed to what can be called a wide range of low-hanging regional integration fruit – the under-utilized energy infrastructure that is in place that with minimal investment can be restarted to usher in the next chapter of regional energy integration in the Southern Cone.

Panelists also agreed on the importance to consider the ongoing COP21 meeting in Paris and the global emphasis on confronting the challenges of emissions. Indeed, as the State Department’s Chris Davy put it: energy policy is climate policy and climate policy is energy policy.

The concept that companies are grappling with both internally and as they manage their investments in Latin America and across the globe is that of what can be summarized as an “energy transition” suggested Engie’s Ricardo Iglesias.

The role of renewables and offgrid solutions such as microgrids work hand in glove with the rational for regional integration, Mark Nelson of Sempra Energy noted. In responding to a question on the role of migrogrids across the region, Mark highlighted the lessons Sempra has garnered from their microgrid project in Borrego Springs, California and how it has informed his companies’ international portfolio as well.

Speed and Consistency: Taking Stocking of Oil & Gas Reform in Mexico

Speed and Consistency: Taking Stocking of Oil & Gas Reform in Mexico

It is often difficult to stop and take stock of a major initiative while it is underway. But that is what is occurring in Mexico as the year draws to a close and the nation charges forward with its historic energy reform efforts. Lessons learned from the public bidding process of Round One, as well as measures to rewrite the regulatory and investment framework continue to be organic, that is living and evolving. And the government has displayed an earnest desire to adapt and rethink its vision as milestones are reached and challenges emerge. Particularly with regard to upstream tenders, global insights from industry and stakeholders have been well-received.

On November 18, over 75 representatives from the Mexican government, industry, academia, and civil society convened in Mexico City for the Institute of the Americas’ Mexico Oil & Gas Roundtable. The Roundtable offered a robust half-day discussion of key issues and focused on the question of: What is the vision?

 

As the country moves along the process of tendering oil and gas blocks, as well as throwing open its midstream and downstream sectors of the hydrocarbons chain, there have been immediate lessons learned. Of the myriad practices being absorbed in Mexico, government officials noted that three stand out: 1) Oil and gas is first and foremost a geology business; 2) Striking the right balance between risk and return for oil and gas investment demands never-ending consideration and evaluation; 3) The oil and gas business is a global one and thus competition for investment and capital occurs not on a regional but rather a global scale and stage.

Throughout the Roundtable, plaudits from industry participants were underscored by the government for the speed that energy reform is being implemented. But at the same time, there were voices that noted caution is required in order to insure that the current pace provides for a consistent and sustainable path.

Panelist at the Mexico Oil and Gas Institute of the Americas RoundtablePanelists urged the government to take care and be careful not to overreach and create an environment where it is more of a running-in-place mentality as opposed to forward progress as the increasingly complicated layers of energy reform unfold. Clearly, there are concerns of overburdening the government bureaucracy and overextending nascent agencies. How much additional bandwidth exists and can legitimately be tapped in the coming weeks and months must be considered.

In the opinion of several participants, the next 12 months will determine not just the success of energy reform, but also go a long way to defining the next 12 years for Mexico’s oil and gas sector. Indeed, when it comes to the most appropriate contract model for the upcoming tender of deepwater blocks the focus should be on creating the environment for a “good contract.” This means less concern over the contract model itself and more focus on the elements that will make bidding attractive, competitive and balanced with returns for the nation. Clearly, the government has a greater appreciation for the nature of global competition than it did earlier this year. The development and publication of the Plan Quinquenal or Five Year Oil and Gas Exploration and Production Plan marked an important step as to the vision for industry and the nation alike.

Beyond the issue of competition and drawing up balanced investment opportunities, the issue of social impact and role of local communities has also been thrust to the fore as a key challenge for the implementation of energy reform.

The reform legislation created important legal instruments and regulations to manage social and environmental impacts, but government officials admitted that staff levels, attention to and understanding of the topic may not be commensurate with the sheer magnitude of the challenge. The opening of the energy sector has created a new horizon for investment, and increased the number of sector participants, projects and infrastructure in communities with little to no understanding of or exposure to the basics of interaction with private firms or even federal energy authorities. It is a concern that government and industry alike share and agree requires increased attention.

Collaboration across all facets of industry, government and civil society is necessary, with all parties sharing responsibility. The concept of a social license to operate and what that entails merits further awareness. Indeed, as with the bidding and investment elements, there are a host of international examples to draw from with regards to best practices for community relations and avoiding costly and undesired unrest across the country.

Journalists Create Periodismo de las Americas Network

Journalists Create Periodismo de las Americas Network

LA JOLLA – Investigative journalists from eight countries in Latin America and the Caribbean who attended a Nov. 10-14 professional workshop at the Institute of the Americas have formed a network to encourage and strengthen in-depth reporting on political, economic and environmental issues confronting the region.

The network, which the journalists named Periodismo de las Americas in recognition of the IOA workshop which was the impetus for forming the journalist organization, is open to reporters and editors through

out the region, said Marjuli Matheus, who serves on the board of directors of the National Association of Journalists in Caracas, Venezuela.

“We are very excited to apply everything that we learned and to be able to put into effect something tangible as a result of the workshop,” Matheus wrote in an email to IOA Vice President and Journalism Program Director Lynne Walker. “The name that we chose for the network is to honor the Institute, which gave us this opportunity.”

Matheus was one of 22 journalists who attended the five-day workshop, which focused on reporting and interview techniques, the use of data bases to conduct investigative reporting, social media tools and techniques for reporting breaking news stories, the dangers of covering organized crime in the U.S-Mexico border region and techniques to report such stories without putting journalists lives at risk; environmental and health investigative coverage; and journalism ethics.

The journalists attended from countries throughout the Americas – from Mexico, Guatemala, Costa Rica, Panama, Colombia, Venezuela, Peru and Cuba.

Journalists who attended the November workshop at the Institute of the Americas have formed a network to encourage and strengthen in-depth reporting.

Jessica Osorio, a journalist with Siglo 21 in Guatemala, said, “Given the situation in Latin America,  providing journalists access to a workshop that equips them with the necessary tools for the exercise of their profession is essential to strengthening the processes of transparency and accountability. The media and access to information are essential tools to create public awareness and empowerment of society. If journalists continue training themselves through these activities, and even more through one of the most important organizations such as the Institute of the Americas, they will contribute to the development of their countries.”

During the week, the journalists met with expert speakers such as Andrew Becker, national security and border issues correspondent with California-based Center for Investigative Journalism; Pedro Enrique Armendares, executive director of Mexico City-based Center for Investigative Journalism; Robert Hernandez, visual journalist and professor at USC’s Annenberg School for Communication and Journalism.

They also discussed investigative journalism techniques with Alfredo Corchado, Mexico City Bureau Chief for the Dallas Morning News and author of the recently published book, Midnight in Mexico; Susan White, executive editor of InsideClimateNews.org; Lynne Friedmann, editor of ScienceWriters magazine; Victor Clark Alfaro, director of the Bi-national Center for Human Rights in Tijuana; Adela Navarro, co-publisher of the Tijuana weekly newspaper Zeta; and Vicente Calderon, founder of TijuanaPress.com.

Pedro Enrique Armendares, executive director of the Mexico City-based Center for Investigative Reporting, spoke about the use of data bases as Costa Rican journalist Arnold Zamora, far left, looked on.

Journalists attending the workshop said the veteran editors and reporters who met with them during the workshop presented  a wide range of information and professional advice that will help them as they work on in-depth stories in the future.

“Activities such as the Investigative Journalism workshop organized by the Institute of the Americas  give us the opportunity to learn from excellent journalists and professors,” said journalist Mercedes Agüero, with La Nacion in Costa Rica.  “And, perhaps more important, they allow us to create networks with colleagues from other countries with whom we can collaborate, publish our work, share experiences and spread our knowledge.”

The journalists established the Periodismo de las Americas network immediately after returning to their newsrooms from the Institute’s Investigative Journalism workshop.  They now have a blog, which can be viewed at http://periodismodelasamericas.blogspot.com/

They also established a Twitter account, which is @periodismodla

And they have a FaceBook page at https://www.facebook.com/PeriodismoDLA and a page on Google Plus at http://goo.gl/DS2igS

Matheus encouraged journalists in Latin America and the Caribbean to publish their work on the blog.  The only requirement, she said, is that journalists send a brief bio about themselves and their media organization.  Journalists can send the information to periodismodelasamericas@gmail.com

The founding members of Periodismo de las Americas hope that their efforts will expand from a regional network to training programs for journalists in the Americas.

“Our idea for the future is to be able to offer training in countries in Latin America so that we can reach more journalists,” Matheus said.

IOA Workshop Focuses on Youth Gangs as a Transnational Problem that Requires Regional Solutions

IOA Workshop Focuses on Youth Gangs as a Transnational Problem that Requires Regional Solutions

LA JOLLA – Over the past three decades, Central America has experienced an increase in violence and crime, which has largely been attributed to the emergence and proliferation of youth gangs.  Policy makers throughout the region are struggling to find the right mix of suppressive and preventative policies to confront the gang problem.

To respond to these concerns, the Institute of the Americas convened high-ranking law enforcement officials, state prosecutors, anti-narcotics agency representatives and leaders of community-based organizations working with at-risk youths in several Latin American countries  for a five-day professional workshop at its La Jolla, Ca., campus.  The workshop, organized and directed by the Institute of the Americas and titled “Gangs, Youths and Demand Reduction,” focused on five thematic areas related to this regional public security issue.

The areas of discussion included community policing strategies and the role that the education system can play; the prevalence of substance abuse as it relates to gang activity and public health responses to the problem; and alternatives for at-risk youths such as employment, arts and culture programs, religion and sports.

 

U.S. expert speakers working on both suppression and prevention policies, as well as specialists in substance abuse, met with workshop participants to discuss alternatives and approaches to the spread of gang activity.  Participants and speakers agreed that a comprehensive, regional approach to gangs is necessary to prevent further escalation of the problem.

Steven Vigil, a conflict mitigation specialist who served as the co-chair of the Transnational Advisory Group in Support of the Peace Process in El Salvador, told participants that efforts to address the gang problem are failing because “this is a transnational problem that is being dealt with on a local level. You have local law enforcement that are trying to deal with a problem that is bigger than them. Law enforcement needs to be done in conjunction with other programs. Suppression puts too much pressure on law enforcement to solve the problem.”

Panama National Police officials (l-r) Luis Ortiz, Raymundo Barroso and Samuel Nieto outside Panama’s presidential palace after a meeting on gang suppression with President Juan Carlos Varela. Photo courtesy of Raymundo Barroso

Four top-ranking Panamanian police officials who attended the workshop met with Panama’s President Juan Carlos Varela  immediately after returning to discuss implementing anti-gang measures based on models they studied during seminars  at the Institute of the Americas and during field visits to programs such as Homeboy Industries in Los Angeles.

Raymundo Barroso, deputy police commissioner of a Community Crime Prevention Unit of the National Police of Panama, attended the workshop and subsequently met with President Varela along with Panama National Police Major Samuel Nieto; Luis Ortiz, also deputy police commissioner of a Community Crime Prevention Unit; and Ayda Villarreal, Chief of Police of the Children and Adolescents Division.

“During the meeting with President Varela, I was commenting about the experiences we had in San Diego and Los Angeles,” Barroso said in an interview from Panama. “ I spoke to him specifically about Homeboy Industries. There is a program that we have here  in Panama that is similar but it seems to me that Homeboy is much better and that is the part that we need to study more closely.”

During the workshop, the participants heard in-depth presentations about alcohol and drug abuse and the role that substance abuse plays in encouraging and supporting gang activity.

Dr. George Koob, director of the National Institute on Alcohol Abuse and Alcoholism in Washington D.C., detailed the irreversible damage caused by alcoholism and drug abuse.  Dr. Carmen Pulido, adjunct professor in the University of California, San Diego, Department of Psychology, spoke about best practices to respond to substance abuse in children.

The program incorporated field visits with in-depth sessions with specialists in the areas of gang prevention and programs to assist youths who seek to abandon gang life.

At Homeboy Industries, participants met with former gang members who spoke about their reasons for joining gangs, as well as learning about the organization’s jobs program for former gang members. The participants also met with the founders of Southern California Crossroads, an organization that works with gang members in the violence-plagued city of Compton, south of Los Angeles, as well as the neighborhoods of Watts and South Central Los Angeles.

“People are getting killed every day in Los Angeles. The homicide rate has gone up,” said Paul Anthony Carrillo, director of Southern California Crossroads, who has trained more than 500 gang intervention workers over the past six years.

Dr. Michael Jiménez, a surgeon at St. Francis Medical Center, said the hospital handles an average of 2,200 trauma cases a year.  The hospital treats more penetrating wounds – bullet wounds or knife wounds – than any other hospital in Los Angeles.  Some 38 percent of the trauma cases at St. Francis are penetrating wounds. Dr. Jiménez works with Carrillo and Southern California Crossroads to persuade injured gang members to leave gang life. “When they’re in the hospital, it’s a teachable moment because they are vulnerable,” he said.

San Diego, participants made a half-day field visit to the Kearny Mesa Juvenile Detention Facility where officials explained the protocols for responding to potential gang activity in the facility. And at the San Diego County Office of Education, Student Support Coordinator Anthony Ceja engaged participants in mentoring exercises to more fully understand why youths join gangs, the signs of gang involvement and steps that parents can take to guide their children away from gang activity.

“If you have children, listen to them but don’t judge,” said Shanell Rodriguez, a former gang member who now works with Ceja’s Project AWARE program. “If they have one person in their corner who sees something good in them, then they are going to make it.”

Arcela Nuñez-Álvarez, right, founded Homie Up, a San Diego-based non-profit organization, and established a Popular University to educate Latino youths and their family members about their roots and their culture. Photo by S. Lynne Walkern

Arcela Nuñez-Álvarez founded Homie UP, a San Diego-based non-profit organization, and established a Popular University to educate Latino youths and their family members – not only in the basic academic courses but also about their roots and their culture. “We give them a positive sense of who they are,” she said.

At Writerz Blok in southeast San Diego, co-founder Sergio González talked about a program to encourage graffiti as a modern art form – on T shirts and the walls of the organization’s property instead of on the streets where taggers can be arrested. Writerz Blok offers modern art classes and a free summer camp to channel criminal tagging into marketable art.

“We are never going to end the gangs,´ said González, whose non-profit organization has received numerous awards and recognitions from the City of San Diego. “But what we can do is help those who might go into gangs change their path in life.”

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