May 27, 2010
Vol 1, Issue 4

Central America Approach to Energy Challenges...


Central America produces very little of its own energy, which necessitates having to strike deals with other energy producers in the region like Mexico and Venezuela.  For years, Central American and Caribbean nations relied on those two oil-producing countries to supply oil under the Pacto de San Josť at concessional prices.

While Mexico and Venezuela continued to provide the region with oil into the start of the 21st century, the dynamics began to change, as Mexican President Vicente Fox's conservative administration became involved in a tug of war with Venezuelan President Hugo Chavez's leftist government over influence in the region. Mexico offered Plan Puebla-Panama (PPP) both as a way to promote economic development and provide oil to the region. One of Fox's promises to the Central American countries was that Mexico's state-run oil company PEMEX would build a refinery somewhere on the isthmus. That refinery has yet to be built as of mid-2010.

Chavez also made his own deals in the region, creating the Petrocaribe program to offer oil to Central American and Caribbean nations at subsidized prices. The Venezuelan model promised much quicker energy relief than the long-term approach advocated by Fox. Guatemala, El Salvador, Nicaragua, and Honduras entered into agreements with Petroleos de Venezuela (PDVSA) to receive oil at concessional prices. 


Other countries are also seeking to become suppliers to the region, including Colombia and Brazil. The latter, which has vast oil reserves and a strong oil company (Petrobras), could be the next major player on the isthmus. 


In addition to its oil needs, Central Americans are also wrestling with finding an adequate supply of electrical power. The power shortage and relatively high costs of oil and other fuels to run equipment have forced some private utilities to raise electricity prices. This has prompted residents in countries like Guatemala to refuse to pay their bills. In some cases a handful of communities have set up their own municipal companies. One way to increase supply is by promoting dam construction. But this option is also controversial in Central America as well as South America and Mexico (more on that in the next issue of NotiEn). 

Carlos Navarro - Editor