Lloyds List: Optimistic hopes tempered by politics and bureaucracy: “…Venezuela is still looking to unlock its energy reserves after PDVSA ended an agreement with Shell to develop a $2.7bn project in Mariscal Sucre.”: Thursday December 29, 2005
IT was a year of great hope for Latin America. In Panama, there was strong hope for a decision on the expansion of the Panama Canal, one of the most exciting projects for the global shipping industry.
In Brazil, hopes were high that Transpetro would place the first orders for tankers in the country for more than 10 years, breathing new life into its shipbuilding industry.
In Venezuela there was expectation that the country would be able to capitalise on its gas reserves, the largest in the western hemisphere with $7bn of investment. However, with remarkable predictability, politics and bureaucracy have contrived to leave these hopes on hold for 2006.
A referendum on the expansion of the canal has been pencilled in for the end of next year, Transpetro is to decide on its $2bn tanker order in the first quarter of 2006 and Venezuela is still looking to unlock its energy reserves after PDVSA ended an agreement with Shell to develop a $2.7bn project in Mariscal Sucre.
These frustrations have been more than compensated by the continued rise in commodity prices contributing to record exports in Brazil, Chile, Colombia and Argentina and Venezuela. The high oil price in particular has helped Venezuelan president Hugo Chavez to flex his political muscles in pushing for greater integration through offering cheap oil to his neighbours.
Mr Chavez created Petrocaribe this year, an innovative alliance designed to strengthen his influence with the Caribbean by offering soft financing on Venezuelan crude.
Petrosur, a similar initiative that would see Brazil, Argentina and Uruguay benefit from similar terms was also offered, helping Venezuela secure a place in Mercosur, the region's strongest trading block.
It is all part of the geopolitical battle for the heart of Latin America and control of the region's trade, which has been played out on the highest stage this year.
The US, with its plans for a free trade area of the Americas stretching from Alaska to Tierra del Fuego, received a bloody nose at the summit of the Americas in November with the plan being shelved.
The US has been left to pursue bilateral agreements with the Central American countries, the Dominican Republic (Cafta-DR), Chile, Colombia and Peru, all of which have made progress. The Cafta-DR deal was finally forced through Congress this year. Chile has been up and running since 2004 and has seen its trade with the US rise accordingly.
Brazil, Argentina, Venezuela have all made clear their opposition to similar deals until there are resolutions of the protection offered to US farmers and steelmakers by the current administration.
While the US remains the principal trading partner for all the countries in Latin America, the free trade stand-off has left the region's leading economies to look to China as another source for its raw materials and likewise for inward investment.
However, once again the great hope of US$34bn of Chinese investment in Brazilian and Argentine infrastructure promised in 2004 has still failed to take concrete form.
A serious reduction in agricultural subsidies in the US and Europe at this month's World Trade Organisation meeting might be the region's last great hope to turn 2005 from a year of great hope into one of substance.
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