This week's likely top stories: Intelligence chiefs to be replaced in Peru; Citigroup is permitted to process Argentine debt payment; Costa Rica sets global clean energy record; former Spanish PM to defend Venezuelan opposition leaders; Ayotzinapa victims’ families visit Amnesty International.
Peruvian Intelligence Chiefs Fired amid Spying Allegations: The Peruvian Presidency of the Council of Ministers issued two resolutions that were published on Sunday, announcing the dismissal of Ivan Kamisaki, the executive director of the National Directorate of Intelligence (DINI), and accepting the resignation of Javier Briceño, the national intelligence director. Kamisaki and Briceño were accused of spying and misconduct after media outlets published information allegedly gathered by DINI on citizens, including former President Alejandro Toledo and current Defense Minister Pedro Cateriano. In February, Prime Minister Ana Jara announced that DINI would be temporarily closed for restructuring in response to complaints that it had spied on opposition politicians.
U.S. Judge Authorizes Citigroup to Process Argentine Debt Payments: Citigroup announced in a statement on Saturday that U.S. judge Thomas Griesa has authorized the bank to resume processing interest payments for Argentine bonds, with payments now scheduled for March 31 and possibly June 30, 2015. The bank had been caught in the middle of the dispute between the Argentine government and U.S. “holdout” creditors who refused to restructure their debt, leading Argentina to go into default for the second time in 13 years in August 2014. Previously, Griesa had permitted Argentina to pay restructured bond holders, but later decided that Argentina could not pay those creditors until it had paid holdouts. NML Capital, one of the holdouts, said it had reached an agreement with Citibank on Sunday to allow the interest payments to resume. The bank recently said it could lose its banking license in Argentina if it is not allowed to make interest payments.
Costa Rica Sets Renewable Energy Record: On Sunday, Costa Rica set a global record for renewable energy use, cementing its status as a world leader in clean energy. The Central American nation has experienced heavy rainfall in recent months, and on Sunday, the country set a record by going 75 days in a row using 100 percent renewable energy. Costa Rica relies on four hydroelectric dams to supply its energy needs, has not used fossil fuels since December 2014. Renewable energy expert Jake Richardson warned that the country should make sure to diversify its renewable sources, as the availability of hydro power can vary widely with the seasons, and hydroelectric dams can harm river ecosystems.
Former Spanish Prime Minister to Defend Venezuelan Opposition Leaders: Felipe González Márquez, Spain’s Socialist Prime Minister from 1982 to 1996, will join the defense team of imprisoned Venezuelan politicians Leopoldo López and Antonio Ledezma, announced his spokesperson Joaquín Tagar on Monday. González, a lawyer by profession, has expressed concern about the current political and economic crisis in Venezuela. López has been incarcerated since February 2014 and Ledezma, the mayor of Caracas, was arrested in February 2015 for an alleged plot against Venezuelan President Nicolás Maduro.
Families of Missing Mexican Students Appeal to Amnesty International: Felipe de la Cruz, the father of one of the survivors of the tragic attack on students in Ayotzinapa, Mexico in September 2014, spoke to the U.S. branch of Amnesty International on Saturday in New York City. The families of the students went to Amnesty International to present their case in hopes of receiving recommendations from the human rights organization on how to advance their cause. The families also aim to visit the United Nations, but a meeting has not yet been confirmed. Saturday’s presentation was part of “Caravana 43,” a tour of 43 cities across the U.S. to boost support for an independent investigation into the victims’ fates.
In June 2014, West Texas Intermediate, a benchmark crude oil grade, sold at $106 dollars per barrel. In early December, the price closed at $65 dollars per barrel, and is currently trading at just over $50 dollars per barrel. This precipitous decline has had an adverse effect on oil producers in Latin America—in particular, countries such as Mexico and Colombia that heavily rely on oil receipts to fund their national budgets.
On the other hand, consumers in Central America and the Caribbean are benefiting from low oil prices. Investors are looking at the region with a long-term view, and while some companies are cutting back on spending plans, the resources available in the region will continue to be attractive.
While formulating spending and investment plans for the year, energy companies will budget for a certain oil price in order to break even. For example, Venezuela’s break-even price in January 2015 was over $115 per barrel, making it extremely challenging to turn a profit. The drop in oil prices also impacts gas investment, because national and international oil companies often prospect the two at the same time—and thus must make appropriate spending decisions based on their relative prices. As such, the two markets are closely intertwined.
As investment levels are cut back, the oil price environment should be leveraged to encourage integration efforts in the region that would improve conditions for investment, even in a price-constrained environment. For example, the Pacific Alliance, which includes Chile, Colombia, Mexico, and Peru, should seek to create larger internal markets and stronger investment conditions to draw investment. Shale gas development is also priority for the Alliance, and the creation of a development bank to finance infrastructure projects is one recommendation for further development.
While renewable energy investment globally fell by 11 percent in 2012, renewable energy financing increased by 127 percent in Latin American countries, excluding Brazil. According to Bloomberg New Energy Finance, this included gains of 595 percent in Mexico, 313 percent in Chile, 285 percent in Uruguay, and 176 percent in Peru. In total, renewable energy investments in Latin America reached $9.7 billion in 2012.
When adding the important renewable energy portfolio of Brazil ($5.2 billion in 2012), the renewable energy sector in Latin America is growing and will continue to attract significant capital in the coming years. A combination of favorable government policies, receptiveness to foreign investment, and attractive regulatory regimes has drawn investors to renewable energy projects in the region. These issues were debated in Washington on July 30 during a roundtable discussion on financing renewable energy in Latin America at the Council of the Americas, held under the auspices of the Council’s Energy Action Group.
The conditions for renewable energy in Latin America are favorable. From the photovoltaic potential of the Atacama Desert in Chile to the many rivers that feed into hydroelectric dams in Brazil to the fields of African palm oil in Colombia, developers have been drawn to the region due to a unique geography that offers great potential for renewable feedstocks.
Countries are also beginning to adopt renewable energy standards. Chile is leading the way with its 20/20 renewable plan—20 percent of the country’s electrical grid powered by renewable energy by 2020. While the target may be a long shot, the initiative demonstrates that countries in the region are serious about developing their renewable energy potential.
Passage of climate change legislation in the U.S. House of Representatives last Friday was the United States’ first step in a more robust, forward-looking policy to cut greenhouse-gas emissions. But look to the other side of the Rio Grande and you’ll find a country that is showing new leadership in going green.
Yes, the outlook for Mexico may be somewhat grey these days if you're looking at the economic situation or the loss in tourism revenue. But Mexico is fast becoming one of Latin America’s best examples of how a government can address climate change and open the door for greater use of alternative energy.
Mexico’s role is quite welcome in a region that lags behind the world in terms of its investments in alternative renewable energy and in fighting climate change. In 2007, Latin America produced just 1.7 percent of global renewable energy, including wind, solar, geothermal, and small hydro energy. This correlated with the region’s ability to attract a meager 3 percent of the $87 billion globally invested in renewable projects. And while Latin America may not be a big contributor of carbon dioxide (CO2) emissions, climate change is intensifying tropical rains, tornados, hurricanes, and dry seasons across the world. Mexico and the rest of the region stand to lose out by not taking action now.