Mexican President Andrés Manuel López Obrador wants to raise oil output by nearly half, and is positioned to build Dos Bocas
: an $8 billion refinery that will be the largest in the country. The Mexican President has defended this approach, positioning it as a move aimed at boosting the country’s energy security and sovereignty.
Meanwhile In Brazil, Jair Bolsonaro, the country’s far-right president, has made claims that environmentalism is a “left-wing plot”.
The Latin American left’s enthusiasm for oil refineries suggests otherwise, however. In Brazil, Luiz Inácio Lula da Silva (president from 2003 to 2011) ordered the state-controlled oil company Petrobras to build four refineries. In Ecuador, former President Rafael Correa oversaw a $2.2 billion upgrade to a refinery. Peru’s former President Ollanta Humala began a similar $3.5 billion upgrade during his time in office.
AMLO has good reason to want to exploit his nation’s natural resources to the full. As reported by The Economist
, oil can help power growth and fill the treasury. In May, the government announced that no private bidders had met the terms for Dos Bocas’s construction, so the project will now be handled by the state. The President is throwing public money at Pemex, without requiring its reform.
“Mexico has no trouble importing gasoline from refineries on the United States’ Gulf coast,” says David Shields, an energy consultant in Mexico City.
This money would be better spent on repairing inefficient existing refineries, or on expanding distribution grids for electricity and natural gas (though private investment could do those jobs).
“Ideology in part explains the enthusiasm for such projects among leftists. Fossil-fuel nationalism is a throwback to the concerns of the Latin American left of the mid 20th century. amlo’s adviser for the project is José Alberto Celestinos, aged 90, who was in charge of building refineries for Pemex in the 1970s.”
Big state projects provide an opportunity for many to make money. Very few people expect Dos Bocas to hit its budget. The only one of Lula’s refineries to be completed cost $20 billion, nine times its original estimate. Half of the $5 billion that Mr. Correa’s government spent on oil projects was stolen, according to his successor.
In terms of energy, Latin America cannot be accused of being a “dirty region”. The region has the world’s cleanest energy matrix, largely because of its large hydroelectric dams, and most of Latin America’s carbon emissions come from land-use changes and transport, as growing middle classes jump into cars.
“Some Latin American countries have encouraged non-conventional renewable technologies, such as wind and solar, whose price has fallen steeply. Rather than copy European subsidies, they have done so by fixing targets and by using auctions in which the market determines the supply price” (The Economist
According to Lisa Viscidi, an energy specialist at the Inter-American Dialogue, over 40% of Uruguay’s electricity comes from wind, while solar plants provide 8% of Chile’s. Both countries have had left-wing governments—but have no significant oil. Costa Rica, has set (and appears to be on track to meet) a target of producing all of its electricity from renewable sources by 2021.