South American Natural Gas Crisis a Tragedy of Politics

BUENOS AIRES, Argentina — Few things better illustrate the tragedy of Latin American populist and nationalist politics than the crisis related to natural gas in South America. A region endowed with vast reserves and governments that describe themselves as close partners is mired in crippling power shortages and cross-border disputes over cutbacks in the supply of natural gas. People cannot count on consistent service.

The problem began in 2002 when Argentine politicians decided to control the price of natural gas, large amounts of which had been discovered in the country during the previous two decades. In the context of an economic rebound, demand boomed. Natural gas became a crucial part of Argentina’s energy mix — the automobile industry here largely converted to it as a fuel source.


But because the controlled prices provided little incentive to foreign companies at a time when the government was leading an aggressive campaign against private capital, investment dried up. When supply was unable to meet demand, shortages followed. Argentina was forced to reduce contracted exports to Chile from 20 million cubic meters a day in 2003 to one-tenth of that today.

Chileans, whose solid economy depends heavily on energy imports, felt betrayed by their next-door neighbor even though both left- wing governments called themselves allies. The cutback in exports to Chile was not enough to solve the problem in Argentina, which ended up importing other fuels that were more expensive and less clean than natural gas.

Red Orbit