SAO PAULO: As Latin American countries have been moving to enhance their energy infrastructure and meet the needs brought by economic development, investors worldwide have been demonstrating their desire to explore the region’s new opportunities.
Gulf nations, especially Saudi Arabia and the UAE, have been among the most promising partners in the region’s upcoming energy endeavors.
The most recent announcement regarding Latin American-Middle Eastern energy partnerships was made last week, when Paraguayan authorities met with their Emirati counterparts and discussed the terms of a memorandum on economic cooperation. Partnerships in renewable energy projects were part of the deal.
With three hydroelectric power plants, Paraguay produces much more electricity than it needs, and exports the excess — more than 60 percent — to Brazil and Argentina.
“But in eight or 10 years, our situation will be much less comfortable. We’ll need to invest in electricity production, something that we’ve never thought about over the past 40 years,” Victorio Oxilia, an energy expert and professor at the National University of Asuncion, told Arab News.
Not only will demand from the population grow, but new industries will implement projects in Paraguay and require more energy, he added.
“At the same time, we need to diversify our sources. All our hydroelectric plants depend on the River Parana. Severe droughts can easily impact power generation,” he said.
Investing in solar energy plants is the natural response to those challenges. A government strategic plan for 2040 established it as a priority, Oxilia said, adding: “It’s a resource that abounds in the whole territory, so it’s a great candidate to be developed not only by Paraguay’s public energy company, but also by private agents.”
The projects currently being discussed will probably be followed by many more in the coming years, and will encompass wind power, hydrogen and synthetic biofuels.
A recent law, promulgated in January, determined a series of incentives for renewable energy production.
“There’s great potential when it comes to substituting the fossil fuels we now use in transportation and which we have to import,” Oxilia said.
Paraguay’s economy has been growing over the past few years thanks to agriculture — the nation is a major grain producer and exporter.
That is opening new opportunities in different areas, and may also include green energy in the future, Oxilia said.
“The Chaco region is near the big lithium reserves in Chile and Argentina. It’s a region that … can concentrate a cluster of lithium battery manufacturers,” he added.
In January, during Abu Dhabi Sustainability Week, Paraguayan officials met with directors of the Abu Dhabi Fund for Development, who promised to fund — or at least lend money for — renewable energy projects in the South American country.
On the same occasion, Costa Rican authorities discussed with Emirati officials potential partnerships in electricity production.
In an interview with local news website La Republica, Environment and Energy Minister Franz Tattenbach said the Central American nation needs to transform its transportation sector and adopt electric buses, for instance.
Mario Alvarado Mora, who directs the Costa Rican Association of Energy Producers, told Arab News that 99 percent of the electricity produced in the country is environmentally clean, “but two-thirds of the nation’s energy come from nonrenewable sources and are used mostly in transportation.”
He added: “Costa Rica has a great challenge, and also a great opportunity, to decarbonize its energy mix and use renewable resources.”
The energy sector is pushing the government for legislative changes in order to increase legal safety and attract more foreign investors, he said. A bill containing some of these changes is being analyzed in Congress.
In Argentina, where both Saudi Arabia and the UAE are planning to invest in energy endeavors, the most pressing needs concern not so much energy production but its distribution infrastructure, said Juan Jose Carbajales, a professor at Jose Clemente Paz National University in Buenos Aires.
“We lack pipelines to take crude and natural gas from Vaca Muerta deposits to regional markets. We also need to expand our high-voltage grid,” he told Arab News, referring to the giant geological formation in Neuquen, Rio Negro, La Pampa and Mendoza provinces that contains major reserves of oil and gas.
Carbajales lamented that there are many projects for wind and hydroelectric power plants currently suspended due to the lack of distribution infrastructure.
“That situation also limits the expansion of hydrogen fuel because electricity is needed in its production,” he added.
In April, Argentina signed a $500 million deal with the Saudi Fund for Development for food and energy projects, including the gas pipeline Nestor Kirchner.
Scheduled to be completed in June, the pipeline will connect Vaca Muerta to Buenos Aires province. The SFD loan will also fund transmission lines.
In 2022, the sovereign funds of Saudi Arabia, Qatar, Abu Dhabi and Kuwait announced that they would invest $1 billion in Argentina until the end of 2023. Some of the partnerships include energy generation and infrastructure.
Such investments are fundamental for Argentina given that it is facing serious macroeconomic challenges, including high inflation.
“Those problems make it harder for the country to have access to the international capital markets,” Carbajales said.
Another Latin American country with great plans involving energy — especially renewable energy — is Mexico, which in February disclosed its project for that sector and invited nations worldwide to invest in it during the inauguration of a solar plant in the state of Sonora.
Also in February, Saudi Minister of Economy and Planning Faisal Al-Ibrahim told Mexican magazine Expansion that investments in energy were part of the potential partnerships between the two countries.
Lawyer and energy expert Marcial Diaz told Arab News: “Mexico doesn’t have the means to make the necessary investments in projects connected to wind power, solar power and the market of fuels.”
He added that Mexico imports almost 70 percent of its fuel, so a transformation in that area is fundamental, with private investors directly collaborating in new endeavors.
Skeptical about the current administration’s ability to draw foreign investments for energy projects, Diaz said such plans usually take a long time, “so endeavors being conceived now will only be carried out during the next administration.”
He added: “No Latin American country is self-sufficient in energy terms, so it’s important for all of us to count on long-term investments.”