The country left the cartel in order to expand pumping, but the Covid-19 crisis has cut extraction volumes by 10.8%.

Construction of a variant of the oil pipeline that crosses the Andes, from the Ecuadorian Amazon to the Pacific [Petroecuador].

ANALYSIS / Jack Acrich and Alejandro Haro

Ecuador left the Organisation of Petroleum Exporting Countries (OPEC) on 1 January 2020 to avoid having to continue to join the production cuts imposed by group , which it agrees to in order to push up the world price of crude oil. Ecuador preferred to sell more barrels, albeit at a lower price, because by exporting more at the end of the day written request it could increase its income and thus get out of its serious financial situation status , which the coronavirus emergency has only accentuated, with a fall in GDP in 2020 currently estimated at 9.5 per cent.

However, domestic economic difficulties and the difficult international situation have not only prevented Ecuador from expanding pumping, but oil production has fallen by 10.8% in the last year. average In 2020, Ecuador extracted 472,000 barrels of oil per day, especially affected by the sharp reduction in activity in April with the beginning of the confinement, which was not compensated for the rest of the year. agreement This is a volume that is below the 500,000 line that has always been exceeded in recent years (in 2019 production was 528,000), according to figures from Petroecuador, the state hydrocarbons company. The reduction in global consumption during the Covid-19 year also correlated with a drop in the consumption of derivatives in Ecuador, especially gasoline and diesel, which fell by 18.5%.

International investment constrained by the pandemic context and reduced consumption marked a status that could hardly lead to an increase in production. In 2020, Ecuador saw a drop in the value of oil exports of 42.1% (twice as much as total exports), which, combined with a deterioration in the price of a barrel of oil, meant a 40.9% reduction in public revenue from the oil sector, according to the International Monetary Fund (IMF) data .

The figures for the first two months of 2021 indicate an accentuation of the fall in crude oil production (-4.73% compared to January and February 2020) and derivatives (-7.47%), as well as their export (-22.8%).

Cutting expense and seeking oil revenues

Exiting OPEC did not pose any particular risk for Ecuador, which had already left the organisation in a previous period. Its limited weight in OPEC and the progressive decline in the cartel's own strength meant that Ecuador's attempt to go it alone was not particularly costly. The absolute priority of Lenín Moreno's government was to rebalance the country's macroeconomic picture - battered by the high public expense of his predecessor, Rafael Correa - and for this it urgently needed to increase state revenue, a significant part of which in Ecuador normally comes from the hydrocarbons sector.

When he became president in 2017, Moreno set out to steer the country towards more market-friendly energy policies. The president was determined to break with the nationalist approach of his predecessor, whose policies discouraged foreign investment in the oil industry while significantly increasing public debt. Among the most costly programmes undertaken by Correa was to maintain high subsidies for energy consumption, with especially low fuel prices.

In order to overcome the financial status that Ecuador found itself in when he took office, Moreno approached the IMF to apply for financial aid financial, and committed to structural reforms, including the gradual dismantling of subsidies. These reforms, however, were not well received and the social unrest that spread throughout the country put further pressure on the oil industry.

In February 2019, Moreno negotiated an IMF loan to help reduce the country's large fiscal deficit and huge external debt, which by the end of 2018 had reached 46.1 per cent of GDP and twelve months later would reach 51.8 per cent. The committed 'bailout' was for $10.2 billion, of which $6.5 billion came from the IMF and the rest from other international agencies.

As part of austerity measures agreed with the IMF, Moreno was forced to end government subsidies that had kept petrol prices low for decades. In early October 2019 he announced a plan of cuts to save $2.27 billion a year, essentially withdrawing the fuel subsidy. The advertisement decree, which would later be annulled, immediately provoked massive protests, both from transporters and low-income sectors, as well as most notably from indigenous communities. The street violence forced the president to leave Quito for a few days and move to Guayaquil.

To address the need for revenue, Moreno sought to rely on the oil industry, which accounts for roughly a third of the country's total exports. He initially expressed the intention to seek a rise from the 545,000 barrels of crude oil produced at the time to almost 700,000 barrels a day.

goal One of the measures taken in this direction was to promote the development and the exploitation of the Ishpingo-Tiputini-Tambococha field, with the aim of increasing oil production by 90,000 barrels a day. This decision met with social rejection due to the environmental damage it could cause, as the Yasuní National Park, in the Ecuadorian Amazon, has been declared a protected area. The government then decided to postpone the expansion of production, first to 2021 and then to 2022. The civil service examination was especially led by indigenous communities, in a mobilisation that partly explains the success in the 2021 presidential elections of Yaku Pérez's indigenist Pachakutik movement, which almost made it to the second round.

Another measure was to reverse some of his predecessor's emblematic policies. For example, he eliminated the service contracts introduced under President Correa, thus restoring the model production-sharing contract. This reform was more favourable to international oil companies, as it allowed them to retain a share of oil reserves; it also offered them financial incentives to invest in the country. The new model was first applied in the tenders awarded during the twelfth Intracampos oil round, in the Oriente region, which is rich in oil reserves. Under this contract modality , the Moreno administration awarded seven of the eight exploration blocks on offer with a total investment of more than $1.17 billion.

Fall in production

Due to the urgency of increasing revenues, Ecuador resisted the plan of production cuts that OPEC has been imposing on its members at various times since the abrupt fall in oil prices in 2014. Initially, the organisation accepted that some of its members, with moderate or very low production volumes compared to previous figures, as was the case of Venezuela, would maintain their extraction rates. But since it could no longer be an exception, Ecuador preferred to announce at the end of 2019 that it would leave OPEC and not have to reduce its production to 508,000 barrels per day in 2020, which was the quota set for it.

What is striking is that last year production finally fell from 528,000 barrels per day in 2019 to 472,000 (a drop of 10.8%), and not because of decisions taken at OPEC headquarters in Vienna but because of the various difficulties subject caused by the Covid-19 crisis. Petroecuador's oil exports fell from 331,321 barrels per day in 2019 to 316,000, a drop of 4.6%, which in monetary terms was greater, as the price of a barrel of Ecuadorian mixed oil fell from 55.3 dollars in 2019 to 34.7 in 2020.

One element that makes it difficult for Ecuador to take better advantage of its hydrocarbon potential is that it has insufficient infrastructure for refining crude oil. The country has three refineries, but their capacity does not reach the volume of domestic consumption of oil derivatives, which means that it must import diesel, naphtha and other products. This means that in times of high oil prices, Ecuador benefits from exports, but also has to pay a higher invoice price for imports of derivatives. In 2020, Petroecuador had to import 137,300 barrels per day.

The complicated situation caused by the pandemic has continued to put pressure on Ecuador's public debt, which reached 66.4% at the end of 2020, despite all the attempts made by the Moreno government to reduce it.

The next president, due to take office at the end of May 2021, will also have little room for manoeuvre due to these debt volumes and will have to continue to rely on higher oil revenues to balance public finances. The expansionary policies of expense during Correa's presidency took place in the context of the commodity super-cycle, which benefited South America so much, but this is unlikely to be repeated in the short term deadline.

OPEC's loss of weight

With its departure from OPEC, Ecuador left an international organisation that was created in 1960 with the aim of regulating the world oil market and controlling oil prices to a certain extent. goal . The founding members were Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. Over time, other countries joined OPEC and today it is made up of thirteen members: Algeria, Angola, Republic of Congo, Equatorial Guinea, Gabon, Libya, Nigeria, United Arab Emirates and the five founding countries. When it was created, the organisation sought to establish, acting as a cartel, a kind of counterweight to a series of Western energy transnationals, mainly from the United States and the United Kingdom. OPEC members account for about 40 per cent of world oil production and contain about 80 per cent of the world's proven oil reserves. To be admitted as a member of the organisation it is necessary to have substantial oil exports and to share those of the member countries.

Ecuador joined OPEC in 1973, but suspended its membership in 1992. Subsequently, in 2007 it resumed active participation until its leave in January 2020. Considering that Ecuador was one of OPEC's smaller members, it did not really have much influence in the organisation and its exit does not represent a substantial loss for the organisation. However, it is a second departure in just one year, as Qatar, which had more weight in the cartel, left on 1 January 2019. In its case, its divorce from OPEC was due to other reasons, such as its tensions with Saudi Arabia and its desire to focus on the gas sector, of which it is one of the world's largest producers.

These moves are an example of OPEC's loss of influence. This has led it to establish alliances with producers that are not part of the organisation, such as Russia and some other countries forming OPEC+. With the decline of oil production in Venezuela and the decreasing ability of other members to control their production and exports, Saudi Arabia has been increasingly consolidating its position as the cartel's leader, accounting for around a third of the total production, with approximately 9.4 million barrels per day. In a way, Saudi Arabia and Russia remain, in a head to head battle, as the main countries seeking to cut production in an attempt to increase prices. Additionally, thanks to fracking, the United States has become the largest oil producer, representing a major influence on the international crude oil market, affecting the power that OPEC may have.

The hydrocarbon field is the centrepiece of President Alberto Fernández's 2020-2023 Gas Plan, which subsidises part of the investment.

Activity of YPF, Argentina's state-owned hydrocarbon company [YPF].

ANALYSIS / Ignacio Urbasos Arbeloa

Argentina is facing a deep economic crisis that is having a severe impact on the standard of living of its citizens. The country, which had managed to emerge with enormous sacrifices from the corralito of 2001, sees its leaders committing the same macroeconomic recklessness that led the national Economics to collapse. After a hugely disappointing mandate by Mauricio Macri and his economic "gradualism", the new administration of Alberto Fernández has inherited a very delicate status , now aggravated by the global and national crisis generated by Covid-19. Public debt is now almost 100% of GDP, the Argentine peso is worth less than 90 units to the US dollar, while the public deficit persists. The Economics is still in recession, accumulating four years of decline. The IMF, which lent nearly $44 billion to Argentina in 2018 in the largest loan in the institution's history, has begun to lose patience with the lack of structural reforms and hints of debt restructuring by the government. In this critical status , Argentines are looking to the development unconventional oil industry as a possible way out of the economic crisis. In particular, the Vaca Muerta super field has been the focus of attention of international investors, government and citizens for the last decade, being a very promising project not Exempt of environmental and technical challenges.

The energy sector in Argentina: a history of fluctuations

The oil sector in Argentina has more than 100 years of history since oil was discovered in the Patagonian desert in 1907. The geographical difficulties of area - lack of water, distance from Buenos Aires and salty winds of more than 100 km/h - meant that project advanced very slowly until the outbreak of the First World War. The European conflict interrupted coal imports from England, which until then had accounted for 95% of Argentina's energy consumption. business The emergence of oil in the inter-war period as a strategic raw subject commodity revalued the sector, which began to receive huge foreign and domestic investment in the 1920s. By 1921, YPF, the first state-owned oil company in Latin America, was created, with energy self-sufficiency as its main goal goal. The country's political upheaval during the so-called Década Infame (1930-43) and the effects of the Great Depression damaged the incipient oil sector. The years of Perón's government saw a timid take-off of the oil industry with the opening of the sector to foreign companies and the construction of the first oil pipelines. In 1958, Arturo Frondizi became President of Argentina and sanctioned the Hydrocarbons Law of 1958, achieving an impressive development of the sector in only 4 years with an immense policy of public and private investment that multiplied oil production threefold, extended the network of gas pipelines and generalised access to natural gas for industry and households. The oil regime in Argentina kept the ownership of resource in the hands of the state, but allowed the participation of private and foreign companies in the production process.

Since the successful 1960s in subject oil, the sector entered a period of relative stagnation in parallel with Argentina's chaotic politics and Economics at the time. The 1970s was a complex journey in the desert for YPF, mired in huge debt and unable to increase production and secure the longed-for self-sufficiency.

The so-called Washington Consensus and the arrival of Carlos Menem to the presidency in 1990 saw the privatisation of YPF and the fragmentation of the state monopoly over the sector. By 1998, YPF was fully privatised under the ownership of Repsol, which controlled 97.5% of its capital. It was in the period 1996-2003 that peak oil production was reached, exporting natural gas to Chile, Brazil and Uruguay, and exceeding 300,000 barrels of crude oil per day in net exports.

However, a turnaround soon began in the face of state intervention in the market. Domestic consumption with fixed sales prices for oil producers was less attractive than the export market, encouraging private companies to overproduce in order to export oil and increase revenues exponentially. With the rise in oil prices of the so-called "commodity super-cycle" during the first decade of this century, the price differential between exports and domestic sales widened, creating a real incentive to focus on production. Exploration was thus left in the background, as domestic consumption grew rapidly due to tax incentives and a near horizon was foreseen without the possibility of exports and, therefore, lower income from the increase in reserves.

The exit from the 2001 crisis took place in a context of fiscal and trade surpluses, which allowed the country to regain the confidence of international creditors and reduce the volume of public debt. It was precisely the energy sector that was the main driver of this recovery, accounting for more than half of the trade surplus in the period 2004-2006 and one of Argentina's main sources of fiscal revenue. However, as mentioned above, this production was not sustainable due to the existence of a fiscal framework that distorted oil companies' incentives in favour of immediate consumption without investing in exploration. By 2004, a new tariff was applied to crude oil exports that floated on the basis of the international price of crude, reaching 45% if the price was above 45 dollars. The excessively rentier approach of Néstor Kirchner's presidency ended up dilapidating the sector's investment incentives, although it is true that they allowed for a spectacular increase in derived fiscal revenues, boosting Argentina's generous social and debt repayment plans. sample As a good illustration of this decline in exploration, in the 1980s more than 100 exploratory wells were drilled annually, in 1990 the figure exceeded 90, and by 2010 the figure was 26 wells per year. This figure is particularly dramatic if one takes into account the dynamics that the oil and gas sector tends to follow, with large investments in exploration and infrastructure in times of high prices, as was the case between 2001-2014. 

In 2011, after a decade of debate on the oil sector in Argentina, President Cristina Fernández decided to expropriate 51 per cent of the shares of YPF held by Repsol, citing reasons of energy sovereignty and the decline of the sector. This decision followed the line taken by Hugo Chávez and Evo Morales in 2006 to increase the state's weight in the hydrocarbons sector at a time of electoral success for the Latin American left. The expropriation took place in the same year that Argentina became a net energy importer and coincided with the finding of the large shale reserves in Neuquén precisely by YPF, now known as Vaca Muerta. YPF at the time was the direct producer of approximately one third of Argentina's total volume. The expropriation took place at the same time as the imposition of the "cepo cambiario", a system of capital controls that made private foreign investment in the sector even less attractive. Not only was the country unable to recover its energy self-sufficiency, but it also entered a period of intense imports that hampered access to dollars and produced a large part of the macroeconomic imbalance of the current economic crisis.

The arrival of Mauricio Macri in 2015 heralded a new phase for the sector with policies more favourable to private initiative. One of the first measures was to establish a fixed price at the "wellhead" of the Vaca Muerta oil fields with the idea of encouraging the start-up of projects. As the economic crisis worsened, the unpopular measure of increasing electricity and fuel prices by more than 30 per cent was chosen, generating enormous discontent in the context of a constant devaluation of the Argentine peso and the rising cost of living. The energy portfolio was marked by enormous instability, with three different ministers who generated enormous legal insecurity by constantly changing the hydrocarbons regulatory framework . Renewable solar and wind energy, boosted by a new energy plan and greater liberalisation of investment, managed to double their energy contribution during Mauricio Macri's time in the Casa Rosada.

Alberto Fernández's first years have been marked by unconditional support for the hydrocarbons sector, with Vaca Muerta being the central axis of his energy policy, announcing the 2020-2023 Gas Plan that will subsidise part of the investment in the sector. On the other hand, despite the context of the health emergency, 39 renewable energy projects were installed in 2020, with an installed capacity of around 1.5 GW, an increase of almost 60% over the previous year. In any case, the continuity of this growth will depend on access to foreign currency in the country, which is essential to be able to buy panels and windmills from abroad. The boom in renewable energy in Argentina led the Danish company Vestas to install the first windmill assembly plant in the country in 2018, which already has several plants producing solar panels to supply domestic demand.

Characteristics of Vaca Muerta

Vaca Muerta is not a field from a technical point of view, it is a sedimentary training of enormous magnitude with dispersed deposits of natural gas and oil that can only be exploited with unconventional techniques: hydraulic fracturing and horizontal drilling. These characteristics make Vaca Muerta a complex activity, which requires attracting as much talent as possible, especially from international players with experience in the exploitation of unconventional hydrocarbons. Likewise, conditions in the province of Neuquén are complex given the scarcity of rainfall and the importance of the fruit and vegetable industry, in direct competition with the water resources required for the exploitation of unconventional oil.

Since finding, the potential of Vaca Muerta has been compared to that of the Eagle Ford basin in the United States, which produces more than one million barrels per day. Evidently, the Neuquén region has neither Texas' oil business ecosystem nor its fiscal facilities, making what might be geologically similar in reality two totally different stories. In December 2020, Vaca Muerte produced 124,000 barrels of oil per day, a figure that is expected to gradually increase over the course of this year to 150,000 barrels per day, about 30% of the 470,000 barrels per day Argentina produced in 2020. Natural gas follows a slower process, pending the development of infrastructure that will allow the transport of large volumes of gas to consumption and export centres. In this regard, Fernández announced in November 2020 the Plan for the Promotion of Argentine Gas Production 2020-2023, with which the Casa Rosada seeks to save dollars by substituting imports. The plan facilitates the acquisition of dollars for investors and improves the maximum selling price of natural gas by almost 50%, to 3.70 dollars per mbtu, in the hope of receiving the necessary investment, estimated at 6.5 billion dollars, to achieve gas self-sufficiency. Argentina already has the capacity to export natural gas to Chile, Uruguay and Brazil through pipelines. Unfortunately, the floating vessel exporting natural gas from Vaca Muerte left Argentina at the end of 2020 after YPF unilaterally broke the ten-year contract with the vessel's owner, Exmar, citing economic difficulties, limiting the capacity to sell natural gas outside the continent.  

One of the great advantages of Vaca Muerta is the presence of international companies with experience in the aforementioned US unconventional oil basins. The post-2014 learning curve of the US fracking sector is being applied in Vaca Muerta, which has seen drilling costs fall by 50% since 2014 while gaining in productivity. The influx of US capital may accelerate if Joe Biden's administration fiscally and environmentally restricts oil activities in the country, from agreement with its environmentalist diary . Currently the main operator in Vaca Muerta after YPF is Chevron, followed by Tecpetrol, Wintershell, Shell, Total and Pluspetrol, in an ecosystem with 18 oil companies working in different blocks.

Vaca Muerta as a national strategy

It is clear that achieving energy self-sufficiency will help Argentina's macroeconomic problems, the main headache for its citizens in recent years. No Exempt of environmental risk, Vaca Muerta could be a lifeline for a country whose international credibility is at an all-time low. Alberto Fernández's pro-hydrocarbon narrative follows the line of his Mexican counterpart Andrés guide López Obrador, with whom he intends to lead a new moderate left-wing axis in Latin America. The spectre of the nationalisation of YPF by the now vice-president Cristina Fernández, as well as the recent breach of contract with Exmar, continue to generate uncertainty among international investors. status Moreover, the poor financial performance of YPF, the main player in Vaca Muerta, with a debt of more than 8 billion dollars, is a major drag on the country's oil prospects. Similarly, Vaca Muerta is far from realising its potential, with significant but insufficient production to guarantee revenues that would bring about a radical change in Argentina's economic and social status . In order to guarantee its success, a context of favourable oil prices and the fluid arrival of foreign investors are needed. Two variables that cannot be taken for granted given Argentina's political context and the increasingly strong decarbonisation policy of traditional oil companies.

The big question now is how to reconcile the large-scale fossil fuel development with Argentina's latest commitments on climate change subject : to reduce CO2 emissions by 19% by 2030 and achieve carbon neutrality by 2050. Similarly, the promising trajectory of renewable energy development during Mauricio Macri's presidency may lose momentum if the oil and gas sector attracts public and private investment, crowding out solar and wind.

Vaca Muerta is likely to advance slowly but surely as international oil prices stabilise upwards. The possibility of generating foreign currency and boosting a Economics on the verge of collapse should not be underestimated, but expecting Vaca Muerta to solve Argentina's problems on its own can only end in a new episode of frustration in the southern country.

US LNG sales to its neighbours and exports from Latin American and Caribbean countries to Europe and Asia open up new prospects

Not relying on pipelines, but being able to buy or sell natural gas also to distant or land-locked countries improves the energy prospects of many nations. The success of fracking has generated a surplus of gas that the US has begun to sell in many parts of the world, including to its hemispheric neighbours, who in turn have more choice provider. At the same time, being able to submit gas in tankers has expanded the customer portfolio of Peru and above all Trinidad and Tobago, which until last year were the only two American countries, apart from the US, with liquefaction plants. Argentina joined them in 2019, and Mexico in 2020 has promoted investments to join this revolution.

▲ A liquefied natural gas (LNG) freighter [Pline].

article / Ann Callahan

The United States is connected by pipeline only to Canada and Mexico, but is selling gas by ship to some thirty other countries (Spain, for example, has become a major buyer). In 2019, the US exported 47.5 billion cubic metres of liquefied natural gas (LNG), of which one-fifth went to American neighbours, according to agreement with report BP 2020 on the sector.

Eight countries in Latin America and the Caribbean already have regasification plants for gas arriving by cargo ship in liquid form: there are three plants in Mexico and Brazil; two in Argentina, Chile, Jamaica and Puerto Rico, and one each in Colombia, the Dominican Republic and Panama, according to the annual summary association of LNG importing countries. In addition to the US, LNG also arrives in these countries from Norway, Russia, Angola, Nigeria and Indonesia. Two countries export LNG to various parts of the world: Trinidad and Tobago, which has three liquefaction plants, and Peru, which has one (another became operational in Argentina last year).

In an attempt to mitigate the risk of electricity shortages due to a decrease in hydropower production due to drought or other difficulties in accessing energy sources, many countries in Latin America and the Caribbean are turning to LNG. As a cleaner energy source, it is also an attractive option for countries already struggling with climate change. In addition, gas financial aid will help overcome the discontinuity of alternative sources, such as wind and solar power.

In the case of small island countries, such as those in the Caribbean, which for the most part lack energy sources, cooperation programmes for the development of LNG terminals can provide them with a certain independence from certain oil supplies, such as the influence exerted on them by Chavista Venezuela through Petrocaribe.

LNG is natural gas that has been liquefied (cooled to about -162°C) for storage and transport. The volume of natural gas in its liquid state is reduced by approximately 600 times compared to its gaseous state. The process makes it possible and efficient to transport it to places that cannot be reached by pipelines. It is also much more environmentally friendly, as the carbon intensity of natural gas is about 30% less than that of diesel or other heavy fuels.

The global natural gas market has evolved rapidly in recent years. Global LNG capacities are expected to continue to grow until 2035, led by Qatar, Australia and the US. According to BP's report on the sector, in 2019 the share of gas in primary energy reached an all-time high of 24.2%. Much of the growth in gas production in 2019, when it increased by 3.4%, was due to additional LNG exports. LNG exports last year grew by 12.7% to 485.1 billion cubic metres.

Liquefaction and regasification plants in the Americas [report GIIGNL].

Boom

While the United States lagged behind in gas production at the beginning of the first decade of this century, the shale boom since 2009 has led the US to exponentially increase gas extraction and play a key role in the global trade of the liquefied product. With the relatively easy transportation of LNG, the US has been able to export and ship it to many parts of the world, with Latin America, due to its proximity, being one of the regions that is feeling the shift the most. Of the 47.5 billion cubic metres of LNG exported by the US in 2019, 9.7 billion went to Latin America; the main destinations were Mexico (3.9 billion), Chile (2.3 billion), Brazil (1.5 billion) and Argentina (1 billion).

While the region has promising export potential, given its proven natural gas reserves, demand exceeds production and it must import. Venezuela is the country with the largest reserves in Latin America (although its gas power is smaller than its oil power), but its hydrocarbon sector is in decline and the largest production in 2019 came from Argentina, an emerging shale country, followed by Trinidad and Tobago. Brazil matched Venezuela's output, followed by Bolivia, Peru and Colombia. In total, the region produced 207.6 billion cubic metres, while its consumption was 256.1 billion.

Some countries receive gas by pipeline, as is the case of Mexico and Argentina and Brazil: the former receives gas from the US and the latter from Bolivia. But the growing option is to install regasification plants to receive liquefied gas; such projects require some investment, usually foreign. The largest exporter of LNG to the region in 2019 was the US, followed by Trinidad and Tobago, which, due to its low domestic consumption, exports practically all its production: of its 17 billion cubic metres of LNG, 6.1 billion went to Latin American countries. The third largest exporter is Peru, which sent its 5.2 billion cubic metres to Asia and Europe (it did not sell on the continent itself). Argentina joined exports in 2019 for the first time, although with a leave amount, 120 million cubic metres, almost all destined for Brazil.

The region imported a total of 19.7 billion cubic metres of LNG in 2019. The main buyers were Mexico (6.6 billion cubic metres), Chile (3.3 billion), Brazil (3.2 billion) and Argentina (1.7 billion).

Some of those that imported smaller quantities then re-exported part of the supplies, as did the Dominican Republic, Jamaica and Puerto Rico, generally with Panama as the main destination.

Tables extracted from report Statistical Review of World Energy 2020 [BP].

By country

Mexico is the largest importer of LNG in Latin America; its supplies come mainly from the US. For a long time, Mexico has relied on gas shipments from its northern neighbour via pipelines. However, the LNG development has opened up new prospects, as the country's location can help it boost both capacities: improved pipeline connections with the US may allow Mexico to have a gas surplus at Pacific terminals for re-exporting LNG to Asia, complementing the absence of liquefaction plants on the US West Coast for the time being.

The possibility of re-exporting from Mexico's Pacific coast to the large and growing Asian LNG market - without the need for tankers to pass through the Panama Canal - is a major attraction. agreement The US Energy department granted in early 2019 two authorisations to Mexico's project Energía Costa Azul to re-export US-derived natural gas in the form of LNG to those countries that do not have a free trade agreement (FTA) with Washington, as stated in the 2020 report of the group International Importers of Liquefied Natural Gas(GIIGNL).

For the past decade, Argentina has been importing LNG from the US; however, in recent years it has reduced its purchases by more than 20 per cent as domestic gas production has increased thanks to the exploitation of Vaca Muerta. These fields have also allowed it to reduce gas purchases from neighbouring Bolivia and sell more gas, also via pipeline, to its neighbours Chile and Brazil. In addition, in 2019 it will begin exporting LNG from the Bahía Blanca plant.

With Argentina pumping gas to neighbouring Chile, in 2019 Chilean LNG imports declined to their lowest Degree in three years, although it remains one of the important buyers in Latin America, having switched Trinidad and Tobago to the US as its preferred provider . It should be noted, however, that Argentina's export capacity depends on the levels of domestic flows, especially during winter seasons when widespread heating is a necessity for Argentines.

Over the past decade, Brazil' s LNG imports have varied significantly from year to year. However, it is projected to be more consistent in its reliance on LNG until at least the next decade, as renewable energy is developed. In Brazil, natural gas is largely used to back up Brazilian hydropower.

In addition to Brazil, Colombia also considers LNG as an advantageous resource to back up its hydroelectric system in low periods. On its Pacific coast, Colombia is currently planning a second regasification terminal. Ecopetrol, the state hydrocarbon business , will allocate USD 500 million to unconventional gas projects in addition to oil. Along with the government's authorisation to allow fracking, currently stagnant reserves are projected to increase.

Bolivia also has significant natural gas production potential and is the country in the region whose Economics is most dependent on this sector. It has the advantage of existing infrastructure and the size of neighbouring gas markets; however, it faces skill production from Argentina and Brazil. Also, being a landlocked country, it is limited in the commercialisation of LNG.

Although Peru is the seventh largest producer of natural gas in the region, it has become the second largest exporter of LNG. Lower domestic consumption, compared to other neighbouring markets, has led it to develop LNG exports, reinforcing its profile as a nation focused on Asia.

For its part, Trinidad and Tobago has adapted its gas production to its status as an island country, basing its hydrocarbon exports on tankers, which gives it access to distant markets. It is the leading exporter in the region and the only one with customers in all continents.

The finding of a "significant" amount of oil in offshore wells puts the former Dutch colony in the footsteps of neighbouring Guyana.

The intuition has proved to be correct, and explorations carried out under Suriname's territorial waters, together with the successful hydrocarbon reserves that are being exploited in Guyana's maritime borders, have found abundant oil. The finding could be a decisive boost for the development of what is, after Guyana, the second poorest country in South America, but it could also be an opportunity, as with its neighbour, to accentuate the economic and political corruption that has been hindering the progress of the population.

Suriname's presidential palace in the country's capital, Paramaribo [Ian Mackenzie].

article / Álvaro de Lecea

So far this year, drilling in two offshore fields in Suriname has been positive result , confirming the existence of "significant" oil in block 58, operated by France's Total, in partnership with US-based Apache. Everything indicates that the same success could be obtained in block 52, operated by the also American ExxonMobil and the Malaysian Petronas, which were pioneers in prospecting in Surinamese waters with operations since 2016.

Both blocks adjoin the fields under the waters of neighbouring Guyana, where it is currently estimated that there are some 3.2 billion barrels of extractable oil. In the case of Suriname, exploration in the first viable field, Maka Central-1, discovered in January 2020, indicates 300 million barrels, but estimates from Sapakara West-1, discovered in April, and subsequent planned exploration, have yet to be added. It is estimated that some 15 billion barrels of oil reserves may exist in the Guyana-Suriname basin.

Until this new oil era in the Guianas (the former British and Dutch Guianas; the French Guianas remains an overseas dependency of France), Suriname was considered to have reserves of 99 million barrels, which at the current rate of exploitation left two decades to deplete. In 2016, the country produced just 16,400 barrels per day.

status political, economic and social

With just under 600,000 inhabitants, Suriname is the least populated country in South America. Its Economics is heavily dependent on the export of metals and minerals, especially bauxite. The fall in commodity prices since 2014 has particularly affected the country's accounts. GDP contracted by 3.4% in 2015 and by 5.6% in 2016. Although the trend then turned positive again, the IMF forecasts a 4.9% drop in GDP for 2020, as a result of the global crisis caused by Covid-19.

Since gaining independence from the Netherlands in 1975, its weak democracy has suffered three coups d'état. Two of them were led by the same person: Desi Bouterse, the country's president until this July. Bouterse staged a coup in 1980 and remained in power indirectly until 1988. During those years, he kept Suriname under a dictatorship. In 1990 he staged another coup d'état, although this time he resigned the presidency. He was accused of the 1982 murder of 15 political opponents, in a long judicial process that finally ended in December 2019 with a twenty-year prison sentence, which is now being appealed by Bouterse. He has also been convicted of drug trafficking in the Netherlands, for which the resulting international arrest warrant prevents him from leaving Suriname. His son Dino has also been convicted of drug and arms trafficking and is in prison in the United States. Bouterse's Suriname has come to be presented as the paradigm of the mafia state.

In 2010 Desi Bouterse won the elections as candidate of the National Democratic Party (NDP); in 2015 he was re-elected for another five years. In the 25 May elections, despite some controversial measures to limit the options of the civil service examination, he lost to Chan Santokhi, leader of the Progressive Reform Party (VHP). He tried to delay the counting and validation of votes, citing the health emergency caused by the coronavirus, but the new National Assembly was finally constituted at the end of June and is due to appoint the country's new president in July.

Total's operations in Surinamese and Guyanese waters [Total].

Relationship with Venezuela

Suriname intends to use the prospect of the oil bonanza to strengthen Staatsolie, the state oil company. In January, before the Covid-19 crisis became widespread, it announced purpose to expand its presence in the bond market in 2020 and also, conditions permitting, to list its shares in London or New York. This would serve to raise up to $2 billion to finance the national oil company's exploration campaign over the next few years.

On the other hand, Venezuela's territorial claims against Guyana, which affect the Essequibo - the western half of the former British colony - and which are being studied by the International Court of Justice, include part of the maritime space in which Guyana is extracting oil, but do not affect the case of Suriname, whose delimitations are outside the scope of this long-standing dispute.

Venezuela and Suriname have maintained special relations during Chavismo and while Desi Bouterse has been in power. On occasions, a certain connection has been made between drug trafficking under the protection of the Chavista authorities and that attributed to Bouterse. The offer made by Bouterse's son to Hezbollah to have training camps in Suriname, for which he was arrested in 2015 in Panama at the request of the United States and tried in New York, can be understood in light of the relationship between Chavism and Hezbollah, to whose operatives Caracas has provided passports to facilitate their movements. Suriname has supported Venezuela in regional forums at times of international pressure against the regime of Nicolás Maduro. In addition, the country has increasingly strengthened its relations with Russia and China, from which in December 2019 it secured the commitment of a new credit .

With the political change of the last elections, Maduro's Venezuela has in principle lost a close ally, while gaining an oil competitor (at least as long as Venezuelan oil exploitation remains at a low level).

▲ proposal of a lunar base for obtaining helium, taken from ExplainingTheFuture.com [Christopher Barnatt].

GLOBAL AFFAIRS JOURNAL / Emili J. Blasco

[8-page document. downloadin PDF]

INTRODUCTION

The economic interest in space resources, or at least the reasonable expectation of the profitability of obtaining them, goes a long way to explaining the growing involvement of private investment in space travel.

Beyond the commercially strong artificial satellite industry, as well as those serving scientific and defence purposes, where the state sector continues to play a leading role, the possibility of exploiting high-value raw materials present on celestial bodies - from entrance, on the closest asteroids to the Earth and on the Moon - has awakened a kind of gold rush that is fuelling the new space degree program .

The epic of the new space barons - Elon Musk, Jeff Bezos - has captured the public narrative, but alongside them there are other New Space Players, with varied profiles. Behind them all is a growing group of equity partners and restless investors willing to risk assets in the hope of profit.

To talk of space mining fever is certainly exaggerated, as the real economic benefit to be gained from space mining - obtaining platinum, for example, or lunar helium - has yet to be demonstrated. While the technology is becoming cheaper, financially enabling new steps into outer space, bringing tons of materials back to Earth has a cost that in most cases makes the operation less financially meaningful.

It would be enough, however, that in certain situations it would be profitable to increase the number of space missions issue , and it is assumed that this traffic in itself would generate the need for an infrastructure abroad, at least with stations to refuel fuel - so expensive to lift into the sky - manufactured from subject raw materials found in space (the water at the lunar poles could be transformed into propellant). It is this expectation, with some basis in reasonableness, that is fuelling the investments being made.

In turn, increased space activity and the skill to obtain the resources sought project beyond our planet the concepts of geopolitics developed for Earth. The location of countries (there are particularly suitable locations for space launches) and the control of certain routes (the succession of the most convenient flight orbits) are part of the new astro-politics.

Gold mining and oil transport pollute Amazonian rivers

Not only are fires negatively affecting the Amazon, which is undergoing an accelerated reduction in forest mass, but increased activity, driven by deforestation itself - which in turn encourages illegal mining and more fuel transport - increases pollution of the Amazon River and other waterways in the countries that are part of the region. The use of mercury in gold mining is an additional serious problem for the communities living in the basin.

▲ Sunset on the Amazon River, Brazil [Pixabay].

article / Ramón Barba

The increase in illegal mining in the Amazon region, in countries such as Colombia and Peru, and especially in Venezuela, has increased river pollution throughout the basin. Pollution is also aggravated by the transport of oil, which generates crude oil leaks, and by the discharge of wastewater linked to increased human activity, which in turn is related to increasing deforestation.

Illegal mining has spread especially in the last two decades, linked to the increase in the price of minerals. Despite the general fall in the price of raw materials since 2014, the quotation has remained high in the case of gold, because as a safe haven value it resists the global economic slowdown. Obtaining gold requires the manipulation of mercury to extract and separate it from the rocks or stones in which it is found. It is estimated that illegal mining activity discharges an average of 24 kilos of mercury per square kilometer. As the Amazon Cooperation Treaty Organization (ACTO) points out in its report Regional Transboundary Diagnostic Analysis of the Amazon Basin of 2018, it is estimated that the Brazilian Amazon alone received 2,300 tons of mercury until 1994 and then has registered volumes around 150 tons per year.

ACTO indicates that mining is located especially in the Guiana Shield, in the Andean zones of Peru and Bolivia, and in the Colombian piedmont. Information gathered by this organization estimates that between 100,000 and 200,000 people are involved in this activity in Colombia and Peru, a figure that doubles in the case of Brazil.

For its part, the network Amazónica de Información Socioambiental Georreferenciada (RAISG), in its study La Amazonía Saqueada, of late 2018, notes that the area in which illegal mining occurs "is on the rise", especially in Venezuela, where "reports change drastically from year to year". The RAISG computes 2,312 points in the Amazon region where there is illegal mining activity, of which 1,899 correspond to Venezuela.

According to RAISG's report , mining exploitation gives a double functionality to rivers, as they are used for the introduction of machinery and for the disposal of minerals. This has serious environmental effects (soil erosion, contamination of water and hydrological resources, extinction of aquatic flora and fauna, atmospheric impacts...), as well as serious consequences for the health of indigenous peoples, as mercury contamination of rivers affects fish and other living beings that move in the river environment. Given that the main per diem expenses of indigenous peoples is fish, the ingestion of high levels of mercury ends up damaging the health of the populations (cases of loss of vision, heart disease, damage to the central nervous, cognitive or motor system, among others).

Another aspect of mining activity is that it tends to lead to land appropriation and incursion into protected natural areas in the Amazon, increasing deforestation and reducing biodiversity. The Tapajós and Xingú areas in Brazil, together with the Guiana Shield, are the areas most affected by deforestation, according to RAISG. According to programs of study , this organization indicates that deforestation due to gold mining has accelerated in the last twenty years, from 377 km2 deforestation between 2001-2007, to 1,303 km2 deforestation between 2007-2013. In Peru, it is worth noting the case of department Madre de Dios, where 1,320 hectares were deforested between 2017 and 2018.

Other causes of contamination

In addition to illegal mining, other processes also pollute rivers, such as hydrocarbon extraction activities, wastewater discharge and river transport, as warned by ACTO, an organization that groups the eight countries with territory in the Amazon region: Brazil, Colombia, Guyana, Suriname, Venezuela, Peru, Bolivia and Ecuador.

Hydrocarbon contamination. The status affects the five countries to the west of the Basin (Colombia, Ecuador, Peru, Guyana and Brazil), Bolivia being a potential candidate as it has large untapped gas reserves in the area. Contamination in this case comes from the transport of oil by river from the extraction points to the refineries. This has important environmental and socioeconomic consequences, such as soil degradation and air pollution, which also implies loss of flora and fauna, as well as hydrobiological resources, affecting biodiversity and species migration. In the socioeconomic field, these problems translate into increased operational costs, the displacement of indigenous people, an increase in diseases and the emergence of conflicts.

Pollution from domestic, commercial and industrial wastewater. Despite the large amount of water available in the countries of the Amazon basin, the level of sanitation does not exceed 60%. As a consequence, rivers become vectors of disease in many rural communities, as sanitation is lower in these communities. data , which has not been updated, speaks of urban and domestic waste of 1.7 million tons per liter and 600 liters per second in 2007. At the same time, it is important to take into account the damage caused by agroindustrial activities in river courses, since the large number of insects and microorganisms issue implies an abundant use of pesticides, herbicides and fungicides. Among the environmental and social problems caused by this activity are the emission of greenhouse gases, the deterioration of aquatic ecosystems, eutrophication and pollution by agrochemicals, and the loss of wages and increase in water treatment costs.

Pollution from river transport. The Amazon region has about 24,000 km of navigable rivers, which are the main means of communication. Some 50 million tons of cargo were transported on the Amazon at the beginning of the decade just ended. In addition to fuel leaks, the activity produces a dragging of sludge that is not dredged periodically, as well as contamination of riverbanks and beaches, which damages the Economics and tourism.

Impact on indigenous communities   

For many indigenous peoples, as is the case in Colombia, gold is a sacred mineral because it represents the sun on earth. They consider that the extraction of this mineral implies the loss of life in the territory and in order to extract it the shamans of the area must "ask permission" through a series of ceremonies; to do so without the granted permission implies negative consequences, hence the indigenous populations associate the improper extraction of gold with illness and death. An example of this is the area of the Aaporis River, also considered sacred, where Yanomami leader Davi Kopenawa speaks of the xawara wakémi (the smoke epidemic), derived from the burning of gold and which is, according to him, the cause of death of some inhabitants of the area.

However, members of indigenous communities also engage in artisanal mining, either because they reject the tradition of entrance in the face of the economic benefits of illegal extraction, or because they are forced into this occupation by the lack of opportunities. The latter occurs in the Peruvian communal reservation of Amarakaeri, which is very affected by extractive activity, where its inhabitants have been forced to practice artisanal mining, pressured by their subsistence needs and by external mining interests that end up exploiting them.

Uncontrolled mining, on the other hand, has a negative impact on the environment in which indigenous people live. In the Ecuadorian province of Zamora Chinchipie, for example, a mega project open-pit mining operation was carried out, the impact of which has involved deforestation in the area of 1,307 hectares between 2009 and 2017.

It is worth highlighting the fact that mining not only implies an attack against certain indigenous cultural aspects, but also a serious attack against their human rights in that, despite being peoples living in voluntary isolation, mining companies interfere in these reserves and force displacements and uprooting. This status is especially critical in Bolivia, Ecuador and Peru, countries in which there is a "gray zone" between legality and illegality in artisanal mining, increasing the Degree impact on indigenous areas. At the same time, it is worth mentioning the repressive activity of the states in the destruction of dredges and rafts, which leads to a violent response from those affected, as occurred in the Humaita revolt in Brazil.

Indigenous life has also been affected by the presence in these territories of guerrilla or paramilitary groups, as well as organized crime groups. In Colombia, armed groups have taken advantage of mining to finance their activities, which they develop in areas with high levels of poverty and difficult access for the Government. Between 2017 and 2018 there was a 6% increase in this activity, in places where coca can also be grown, whose production has likewise increased in recent years. The OECD 's 2016 Due Diligence in the Colombian Gold Supply Chain report indicates that the FARC, ELN and criminal gangs began their mining activity in the 1980s and increased it in the 1990s as a result of the rising price of gold and the increased difficulty of obtaining stable drug revenues. In 2012, the FARC and ELN had a presence in 40% of Colombia's 489 mining municipalities. Recently, ELN presence has been witnessed in illegal mining in Venezuela, especially in the state of Bolivar, to which FARC dissidents sheltered in Venezuelan territory could be added.

Geothermal energy already accounts for 7.5% of the Central American electricity mix, with installed capacity still far below the estimated potential.

Central America's volcanic activity and tectonic movements offer optimal conditions for the region's small countries to take advantage of an alternative energy source to imported hydrocarbons or an ever more polluting coal. At the moment, the installed capacity -largest in Costa Rica and El Salvador- is barely 15% of the most likely estimated potential.

▲ San Jacinto-Tizate geothermal plant in Nicaragua [Polaris Energy Nicaragua S. A.] [Polaris Energy Nicaragua S. A.].

article / Alexia Cosmello

Central America currently has an installed geothermal capacity of 645 megawatts (MW), far from the potential attributed to the region. This may reach, in the highest band of estimates, almost 14,000 MW, although the most likely estimates speak of around 4,000 MW, which implies a current utilization of approximately 15%, according to data of the World Bank published in 2018.

The energy obtained constitutes 7.5% of the total electricity generation in Central American countries: a not insignificant figure, but one that still needs to grow. Forecasts point to an expanding sector, although attracting the necessary foreign investment has so far been limited by the risks inherent in this industry and national legal frameworks.

Geothermal energy is a clean, renewable energy that does not depend on external factors. It consists of harnessing the heat of the earth's interior - high temperature resources in the form of hot subway fluids - for electrical and thermal generation (heating and domestic hot water). It is governed by the magmatic movement of the earth, which is why it is a scarce resource and limited to certain regions with a significant concentration of volcanic activity or tectonic movement.

Latin America

These characteristics of the American isthmus are also shared by Mexico, where the geothermal sector began to develop in the 1970s and has reached an installed capacity of 957 MW. The friction of the tectonic plates along the South American and eastern Caribbean coast also gives these subregions an energy potential, although less than that of Central America; its exploitation, in any case, is small (only Chile, with 48 MW installed, has really begun to exploit it). The total geothermal potential of Latin America could be between 22 GW and 55 GW, a particularly imprecise range given the few explorations carried out. Installed capacity is close to 1,700 MW.

The World Bank estimates that over the next decade, Latin America would need an investment of between US$2.4 billion and US$3.1 billion to develop various projects, which would add a combined generation of some 776 MW, half of which would correspond to Central America.

Attracting private capital is not easy, considering that since the 1990s the Latin American geothermal sector has had less than US$1 billion in private investment. Financing difficulties are partly related to the very nature of the activity, as it requires a high initial investment, which is high risk because exploration is laborious and it takes time to reach the energy production stage. Other aspects that have made it less attractive have been the policies and regulatory frameworks of the countries themselves and their deficiencies in the local and institutional management .

Geothermal energy, in any case, should be a priority for countries with high potential such as Central America, given that, as the International Renewable Energy Agency (IRENA) points out, it constitutes a low-cost electricity generation source and also stimulates low-carbon economic growth. For this reason this organization has order to the governments of the Central American region to adopt policies that favor the use of this valuable resource , and to develop legal and regulatory frameworks that promote them.

The World Bank and some countries with particular technological expertise are involved in international promotion and advice. Thus, Germany is carrying out since 2016 a program of development of geothermal potential under the German Climate Technology Initiative (DKTI). The project cooperates with the development Geothermal Fund (GDF), implemented by the German development bank KfW, and the Central American Geothermal Resource Identification Program, supported by the German Federal Institute for Geosciences and Natural Resources (BGR). goal The initiative is also supported by the German Agency for International Cooperation (GIZ), which has organized technical courses, together with business LaGeo, located in El Salvador, for geothermal plant operators, teachers and researchers at subject, with the aim of achieving a better management of the installations and a more efficient development of the energy projects.

By country

Although Central American countries have shown a high dependence on imported hydrocarbons as energy source , in terms of electricity generation the subregion has achieved an important development of renewable alternatives, put at the service of all members of the Central American Integration System (SICA) through the Electrical Interconnection System for Central American Countries (SIEPAC). The executive director of the administrative office General of SICA, Werner Vargas, highlighted at the beginning of 2019 that 73.9% of the electricity produced at the regional level is generated with renewable sources.

However, he indicated that in order to cope with the growing electricity demand, which between 2000 and 2013 increased by 70%, the region needs to make greater use of its geothermal capacities. Greater integration of geothermal energy would save more than 10 million tons of CO2 emissions per year.

The share of geothermal energy in the electricity mix varies from country to country. The highest share corresponds to El Salvador (26%), Nicaragua (15%) and Costa Rica (12.5%), while the share is small in Honduras (3%) and Guatemala (2.5%).

In Costa Rica, the Costa Rican Electricity Institute (ICE) delivered last July the Las Pailas II geothermal plant, in the province of Guanacaste, at a total cost of US$366 million. The plant will contribute a maximum of 55 MW to the electric network , so that when it is fully operational it will raise the total installed capacity in the country from 207 MW to 262 MW.

Costa Rica is followed by El Salvador in electricity generation from geothermal energy. The national leader in production is business LaGeo, manager of almost all of the 204 MW installed in the country. This business has two plants, one in Ahuachapá, which produces 95 MW, and the other in Usulután, with a production of 105 MW. With lower electricity consumption than Costa Rica, El Salvador is the Central American country with the highest weight of geothermal generation in its electricity mix, 26%, double that of Costa Rica.

Nicaragua has an installed capacity of 150 MW, thanks to the geothermal interest of the Pacific volcanic mountain range. However, production levels are clearly below, although they account for 15% of the country's electricity generation. Among the geothermal projects, the San Jaciento-Tizate and Momotombo projects are already being exploited. The first one, exploited by business Polaris Energy, was built in 2005 with the initial intention of producing 71 MW, to reach 200 MW by the end of this decade; however, it is currently producing 60 MW. The second, controlled by business ORMAT and the participation of ENEL, was promoted in 1989 with a capacity of 70 MW, although since 2013 it has been producing 20 MW.

Guatemala is slightly behind, with an installed capacity of 49 MW, followed by Honduras, with 35 MW. Both countries recognize the interest of geothermal exploitation, but have lagged behind in promoting it. And yet the Guatemalan government's ownprograms of study highlights the profitability of geothermal resources, whose production cost is US$1 per MW/hour, compared to US$13.8 in the case of hydroelectric power or 60.94 percent for coal.

The upcoming gas self-sufficiency of its two major buying neighbors forces the Bolivian government to look for alternative markets

▲ Yacimientos Pretrolíferos Fiscales Bolivianos (YPFB) gas plant [Corporación YPFB].

ANALYSIS / Ignacio Urbasos Arbeloa

Bolivia, under Evo Morales, is the only economic success story of all the Latin American countries that embraced left-wing populism at the beginning of this century. Together with Panama and the Dominican Republic, Bolivia has achieved the highest GDP growth in the region in the last five years, and all this in a difficult context of decline on the part of its main trading partners: Argentina and Brazil[1]. The political stability brought by Evo Morales since 2006, coupled with prudent counter-cyclical macroeconomic policies and a new hydrocarbons management are part of the formula for this success. Nevertheless, there are enormous economic and political risks for Bolivia. On the one hand, natural gas accounts for 30% of exports and its destination is exclusively Brazil and Argentina, countries that are close to gas self-sufficiency. Finding alternative routes is not an easy task for a landlocked state, with a diplomatic conflict with Chile and separated by the Andes Mountains from Peru. Moreover, the Bolivian government's bid to exploit lithium through national companies that integrate its processing to favor industrialization is a risky strategy that could leave the country out of the growing world lithium market. Finally, Evo Morales and the MAS have followed a growing authoritarian trend, allowing the reelection of the president, undermining the separation of powers and the recent 2009 constitution. The new Bolivia faces in the next decade the challenge of reorienting its natural gas exports, diversifying its Economics and consolidating a real democracy that will allow a sustained growth of its Economics and its role as a regional actor.

Natural Gas: at the center of the 21st century political discussion

During the failed oil explorations in the Chaco in the 1960's, abundant natural gas reserves of great economic potential were found at finding . Although it was a resource of lesser value than crude oil, an incipient gas industry was soon developed by foreign companies, mainly American, such as Standard Oil. In 1972 a first nationalization took place, with the emergence of YPFB as the state-owned business in charge of the exploration, production, transportation and refining of Bolivian energy resources in partnership with foreign companies. That same year, the first export gas pipeline to Argentina was built. By 1999, Bolivia will export natural gas to Brazil through the Santa Cruz-Sao Paulo pipeline, whose project took more than eight years of negotiations and construction work and introduced Petrobras as an important player in the sector. Thus, Bolivia enters the 21st century with a growing gas industry, mostly privatized by the first government of Gonzalo Sánchez de Lozada, and boosted by a very favorable fiscal model for foreign companies[2].

The year 2001 marks the beginning of a convulsive political stage in Bolivia with the so-called Water War. A wave of protests arose from the privatization of municipal water services in the framework of financial negotiations between the IMF and the government of Hugo Banzer. At the nerve center of these protests in Cochabamba emerged the figure of Evo Morales, a coca growers' leader who will increase his popularity unstoppably. Gas became the protagonist in 2003, with a new wave of protests against the construction of a natural gas pipeline from Tarija to Mejillones (Chile) for consumption by the Chilean mining industry and export to Mexico and the USA in the form of LNG. The civil service examination at project argued the historical incoherence of contributing Bolivian resources to the exploitation of the mining region lost to Chile in the War of the Pacific (1879-1883) and which deprived Bolivia of an outlet to the sea. In addition, an alternative, more costly gas pipeline through Peru was proposed, but which would supposedly benefit the northern region of Bolivia and would not be a national humiliation. The protests took a nationalist and indigenist turn and became a real revolution that blocked La Paz, the international airport and plunged the whole country into violence and shortages. President Lozada resigned and most of his government fled abroad, while the project was cancelled and buried forever.

The new president Mesa comes to power with the promise to call for a binding referendum on gas, the establishment of a Constituent Assembly and a reform of the Hydrocarbons Law, including a review of the privatization processes. The referendum ended up giving the victory to Carlos Mesa's proposals, although with a leave participation and a confusing essay of the questions. President Mesa, unable to capitalize on the legitimacy granted by the plebiscite Withdrawal to position and called early presidential elections in 2005, which brought to power the first indigenous president in the history of Bolivia, Evo Morales, with an absolute majority. Natural gas thus became the main catalyst for political change in Bolivia.

Hydrocarbon reform

The arrival of Evo Morales brought about a profound change in the hydrocarbons legal framework . In 2006 the new hydrocarbons law "Heroes del Chaco" was enacted, nationalizing Bolivia's energy resources, expropriating 51% of the shares of companies involved in the sector and establishing a direct tax on hydrocarbons of 50% subject to an extra royalty of 32% to YPFB in those fields with more than 100 mcf of annual production[3]. This legislation, in the words of Evo Morales "turned the tables, going from 18% to 82% of the State's income on hydrocarbons"[4]. The legislation, although adorned with a radical revolutionary rhetoric, has proven to be moderate and viable in the medium term, since it allows in the internship much less burdensome tax formulas for energy multinationals and did not imply large expropriations of assets. As can be seen in the graph below, tax revenues from natural gas have grown enormously since 2005, the year of the reform, without dramatically affecting natural gas production. Moreover, this reform was accompanied by record highs in the price of raw materials in 2006, 2007 and 2008, cushioning the percentage reduction in foreign companies' revenues. In 2009 Bolivia included in article 362 the primacy of oil service contracts, a formula in which multinationals do not obtain any rights over the hydrocarbons extracted, but are remunerated for the services rendered. 

Since the reform, exports have been relatively stable, buoyed by growing demand in both Brazil and Argentina. The most controversial case occurred in the particularly cold winter of 2016, when Bolivia halted exports due to maintenance work at the Margarita field. This event unmasked a stubborn reality about Bolivia's proven natural gas reserves and the need to increase exploration and drilling work in the country. Bolivia's current reserves amount to 283 bcm (10 tcf), enough for only 10 years of export activity at the current rate. Aware of this status limit, the YPFB corporation has launched an investment campaign for 2019 amounting to 1.45 billion dollars, of which 450 million dollars will be dedicated to exploration work[5]. Much of the investment in the sector in recent years has been aimed at industrializing natural gas production instead of exploration work, building refining plants such as the Bulo Bulo ammonia and urea plant[6]. Total, Shell, Repsol and Petrobras are currently working in exploration and production[7]. This effort is intended to answer the IMF's report , which considered Bolivia's natural gas reserves to be too scarce to turn the country into a regional energy center, Evo Morales' greatest aspiration[8]. For YPFB, there are probable reserves of 850 bcm (35 tfc) that would guarantee a long life for the gas sector, but it should rethink its fiscal policy in order to attract foreign companies, which currently account for only 20% of total investment[9].

The future of Bolivian natural gas

From agreement with the contracts signed with Brazil (1999) and Argentina (2005) export prices are indexed to a basket of hydrocarbons, which in general has guaranteed Bolivia a very favorable price, higher than the Henry Hub, but which makes the country equally dependent on fluctuations in international commodity prices. However, the revolution of non-conventional technology and new forms of transportation, now more economical, such as LNG, are transforming the reality of the natural gas market in the Southern Cone. This new situation, linked to the end of the contracts with Brazil in 2019 and Argentina in 2026, puts in check the future of the main asset of the Bolivian Economics .

As shown in the graph sample , the Bolivian trade balance and its fiscal stability depend on the exported volumes of natural gas and its international price. The survival of the current Bolivian economic model and the presidency of Evo Morales depend to a great extent on the income derived from this hydrocarbon, being a fundamental factor for the future of the Plurinational Republic of Bolivia.

Brazil

Since 1999, Brazil has become the main destination for natural gas exports, being Bolivia's only client in the 2001-2005 period. This position allowed the entrance of Petrobras as the main investor in the sector until the year of the nationalization, which meant an important diplomatic friction between both countries. It was the complicity between Morales and Lula, as well as the importance of maintaining harmony between the leftist governments in the region, which allowed avoiding a major confrontation between the two countries. Despite the words of Petrobras' president in 2006, Sergio Gabrielli, announcing the end forever of the company in Bolivia, it has continued to be an important investor due to the profitability of its activities and the strategic importance of Bolivian gas for Brazil.

It seems clear that natural gas will play an important role in Brazil's future, since the main source source of electricity in the country, hydroelectric power, requires other sources to replace it when there is a shortage of rainfall, as occurred between 2012 and 2014. This context favored the entrance of natural gas in the electricity mix, which went from 5% in 2011 to 25% by 2015[10]. However, Brazil started a decade ago with the revolutionary pre-salt hydrocarbon exploitations, which have allowed the country to increase its crude oil production from 1.8 mbd in 2008 to 2.6 mbd in 2018. Natural gas production associated with these fields is expected to enter the Brazilian market as the necessary infrastructure connecting the off-shore fields to the still insufficient network of gas pipelines is built, something that is expected to improve with the entrance of private players to the sector following the 2016 energy reform. Likewise, Brazil already has 3 plants to import LNG, allowing it to diversify its imports, as it did during 2018 when Bolivia was unable to supply the 26 million cubic meters per day agreed in 1999. All this puts Petrobras and Bolsonaro, located in the ideological antipodes of Morales, in a privileged position for negotiation, and who could bet on increasing imports of the increasingly cheaper North American LNG and reducing the volume of Bolivian gas. In any case, due to certain non-compliances in the supply of gas from Bolivia, the contract will be extended for at least two more years until the pending volumes of submit , which Brazil has already paid for, are reached.

Argentina

The other natural gas market for Bolivia is also undergoing profound transformations, in this case derived from unconventional shale and tight oil techniques. The Vaca Muerta field, considered one of the largest shale deposits in the world, has begun to produce the first returns after years of investments by YPF and other multinationals. Despite Argentina's economic instability and the fiscal reforms demanded by the IMF that will delay the total development of this giant field[11], it is expected that by 2022 its production will cover approximately 80% of Bolivian imports, returning to the path of self-sufficiency achieved in much of the 1990s and 2000s[12]. For the time being, Argentina has already managed to renegotiate the volumes of natural gas imported in summer and winter in a way that is more favorable to domestic demand[13]. In addition, Argentina authorized natural gas exports to Chile after 12 years of interruption[14] and made its first LNG export in May 2019[15], which are early signs of growing domestic production.

It seems clear that the Argentine market will not have a long run for Bolivian natural gas and will probably put an end to its imports when the contract ends in 2026. Other options are to use the complete network of Argentine pipelines as transit to other destinations via LNG or to neighbors such as Uruguay, Paraguay or even Chile.

Peru

For some months now, Bolivia has been engaged in a public diplomacy campaign to extend a gas export pipeline to Puno, a Peruvian city located on Lake Titikaka. Although Peru has significant natural gas production in Camisea that allows it to export large quantities of LNG, the country launched a program known as Siete Regiones (Seven Regions) to universalize access to natural gas. Southern Peru can be supplied more economically through Bolivian imports due to the proximity of the La Paz pipeline, but there is reluctance, especially in the pro-Fujimori civil service examination , to import a surplus good in the country. This formula would be integrated into a plan to export liquefied petroleum gas from Bolivia to the same area, while Peru would build a gas pipeline to import oil and derivatives from the Pacific port of Ilo to La Paz. For Bolivia, the Peruvian market may be a temporary solution while exports continue to diversify, but it will have an early expiration date given the Peruvian natural gas reserves, double the Bolivian reserves, and the logical trend towards greater domestic production to cover the demand of the entire country. Likewise, it seems sensible to think that the Peruvian coast will in the future be one of the points through which Bolivia could export its natural gas in the form of LNG if the regional market is saturated.

Chile

From an economic point of view, Chile is the most attractive country for Bolivian exports. It lacks natural gas reserves and its mining area, with high energy demand, is located in an area relatively close to Bolivia's gas pipelines and fields network . However, the now century-old dispute over Bolivia's original territories annexed by Chile in the War of the Pacific (1879-1883) has been an insurmountable obstacle in the present century. It is worth mentioning that during the 50's and 60's Bolivia exported oil to Chile and the USA through the Sica Sica-Arica pipeline; that is to say, the refusal to export natural gas to Chile has been a flag used by Evo Morales and not a historical tradition in the relationship between these countries.

After the huge mobilizations caused by the Gas War, Evo Morales was able to catalyze popular fervor and use the territorial dispute to increase his popularity. In fact, a good part of his efforts in the previous legislature were focused on achieving the longed-for exit to the sea through the International Court of Justice in The Hague. In 2018 this court ruled favorably for Chile, ruling that this country has no duty to negotiate with Bolivia a territorial settlement. Morales' refusal to export natural gas to Chile looks set to continue for the duration of his presidency.

However, the 1904 Treaty of Peace and Friendship signed by both states grants Bolivia full customs autonomy in the Chilean ports of Arica and Antofagasta and the right to keep goods in transit for 12 months, with free storage for its imports, and 60 days of free storage for its exports. These conditions seem ideal for the construction of an LNG plant in Arica or Antofagasta to export natural gas by sea while supplying the Chilean north, in need of cheap natural gas to displace coal. The difficult political relations between both countries complicate the viability of this project, which should not be discarded when Morales leaves the presidency and there is greater harmony, as happened with Pinochet and Banzer in power.

Domestic consumption

Domestic consumption of natural gas in Bolivia has grown at an annual rate of 4.5% in the 2008-2018 period driven by subsidized prices for consumption and the implementation of state projects that aim to provide added value natural gas extraction such as the Bulo Bulo urea plant or the Mutun steel industry. It is expected that per capita income in Bolivia and electricity consumption will continue to increase over the next decade. If the volume of natural gas subsidies grows similarly while export revenues decline, Bolivia's delicate fiscal balance could take a similar path to that of Argentina. The process of domestic industrialization through natural gas does not seem far-fetched either, as long as it is based on market rules and not at the expense of public finances. The country has already achieved self-sufficiency in fertilizers and is already a growing exporter, an example of the economic diversification pursued by the Morales government.

The question: Is there a market for everyone?

After reviewing the regional context, it may appear that the natural gas market in South America will be saturated by future oversupply. As can be seen in the graph, natural gas demand in the Bolivian neighborhood will increase from 107 bcm to 140 bcm per year by 2030. Peru, Argentina and Brazil are likely to increase their production and may reach self-sufficiency during the 2020s. This complicates the commercialization of Bolivian gas, but does not make it impossible. In the first place, the geographical reality of South America makes certain cross-border projects more economical than other internal ones, as in the case of southern Peru. Likewise, the increasingly lower costs of exporting gas by sea make it possible to find a market for surplus regional production, as in the case of Peru, which concentrates its gas exports to Spain. In a context of increasing energy interconnection, Bolivia will be able to continue exporting natural gas, albeit from a less privileged position and having to invest in export infrastructure. The major challenges are focused on increasing exploration activities by attracting more foreign and private investment, as well as the search for new markets, with the Chilean issue being a central element in this discussion.

One of the poorest countries in the Americas may become the world's largest oil producer per capita, disrupting the relationship with its neighbors.

Promising oil discoveries in Guyana's waters augur greater regional relevance for this small and poor South American country. Territorial disputes between Venezuela and its neighbor, on account of the Essequivo territory that Caracas has historically claimed (more than half of Guyana's surface area), may be exacerbated by the opening of wells in deep waters that Guyana administers but over which Venezuela seeks fair international arbitration.

Image created by ExxonMobil about its exploration in Guyana's waters.

article / Ignacio Urbasos Arbeloa

Guyana has found oil deposits 193 km off its coast by the hand of ExxonMobil that can completely change the course of its Economics and its international influence. After several decades of failed attempts in the search for hydrocarbons in its subsoil and an exhaustive search since 1999, in 2015 the Liza field responded positively to seismic analysis showing subsequently abundant oil reserves at a depth of 1,900 meters offshore. At the moment estimates speak of 3.2 billion barrels of recoverable oil to be found in the Guiana Basin, which extends to Suriname, another country with a promising oil future. Companies such as Total, Repsol or Anadarko have already obtained exploration rights in the different blocks offered so far by the Guyanese government, however it is the Stabroek Block, exploited by Exxon (45%), Hess (30%) and the Chinese CNOOC (25%), which will be the first to start producing, in 2020.

Expected to reach 700,000 barrels per day by 2025, this is the largest finding of the lustrum in deepwater globally and one of the most valuable additions to conventional oil production. The crude is Pass for middle distillates, precisely what Gulf of Mexico refiners are looking for in a market saturated by light crude from fracking. If agreement is to optimistic estimates, by 2025 this impoverished country of about 700,000 people would surpass OPEC member Ecuador in oil production, making it the world's largest producer of barrels per capita (ahead of current leader Kuwait, which has a production of 3.15 million barrels per day and 4.1 million inhabitants). Production costs per barrel are estimated at $26 considering taxes, so profits are expected to be abundant in practically any future scenario (currently the barrel of WTI is around $50), making Guyana one of the great attractions in the oil industry at the moment. Prospecting led by Exxon, a company that already dominates exploitation in the so-called deepwaters, had in 2018 fees hit rates close to 80%, which has generated enormous expectation in a sector accustomed to fees of 25%.

The positive impact that this finding will have for the Guyanese Economics is evident, although it is not Exempt of challenges, given the high levels of corruption or a bureaucracy and political class inexperienced for negotiations at this level. The IMF, which is advising Guyana, has already recommended freezing further negotiations until the tax system is reformed and the country's bureaucratic capacity is improved. The same agency has estimated a 28% GDP growth for Guyana by 2020, a historic figure for a Economics whose exports are based on rice, sugar cane and gold. The government is already designing an institutional framework to manage oil tax revenues and cushion their impact on other sectors. Among the proposals is the creation of a sovereign wealth fund similar to those of Norway, Qatar or the United Arab Emirates, which could become effective this year with partnership of experts from the Commonwealth, to which the country belongs.

Historic dispute with Venezuela

These new discoveries, however, increase the tension with Venezuela, which maintains a territorial dispute over 70% of the Guyanese territory, the Guayana Esequiba belonging to the Captaincy General of Venezuela during the Spanish Empire. The disputed territory was later de facto colonized by the British Empire when the British took control over the Dutch territories of Guyana in 1814. In 1899 an international tribunal ruled unanimously in favor of the United Kingdom against Venezuelan claims. However, later revelations demonstrated the existence of serious elements of corruption in the judicial process, making the award "null and void" (non-existent) in 1962. In 1966 the United Kingdom, as representative of British Guyana, and Venezuela signed the Genevaagreement , which established the commitment to reach an agreement agreement: the Port of Spain protocol of 1970, which froze negotiations for 12 years. After the end of this period, Venezuela demanded Guyana to return to direct negotiations, and in accordance with the United Nations Charter, the diplomatic formula of good offices has been agreed upon and remains in force to this day, without any significant progress having been made. Since Guyana's independence in 1966, Venezuela promoted an indigenous separatist movement in the region, Rupununi, which was harshly repressed by Georgetown, setting a precedent of military tension on the border.

Although a formal agreement has never been reached on the territorial dispute, the arrival of the socialist People's Progressive Party (PPP) to government in Guyana in 1992 and the electoral victory of Hugo Chávez in 1999 in Venezuela ideologically aligned both countries, which allowed them to reach Degrees of unprecedented cooperation during the first decade of the 21st century. In the framework of this golden era, Guyana participated between 2007 and 2015 in the Venezuelan Petrocaribe initiative, receiving some 25,000 barrels per day of oil and derivatives, which constituted 50% of its consumption, in exchange for rice valued on market price. On the other hand, Guyana supported Venezuela's candidacy to the United Nations Security committee in 2006 in exchange for an express promise by Caracas not to use the privileged position it temporarily acquired in the territorial dispute. An important precedent was the declaration of Hugo Chávez in 2004 of not opposing Guyana "to unilaterally grant concessions and contracts to multinational companies, as long as this favors the development of the region". In spite of the existence of unfriendly acts between the two States during this period, the vital importance that the Venezuelan anti-imperialist foreign policy gave to the Caribbean during Chávez's mandate, obliged him to treat topic from the most absolute moderation to avoid a disagreement with CARICOM and to maintain Guyana's support in the OAS.

New tensions

As a result of the oil discoveries, the historic territorial dispute with Venezuela has returned to the forefront. A change of sign in the Georgetown government has also contributed to this. The 2015 elections brought to power in Guyana the A Partnership for National Unity, led by former military officer David Granger. This is a multi-ethnic coalition that could be described as center-right and with less ideological sympathies towards neighboring Venezuela than those professed by the previous president, Bharrat Jagdeo of the PPP. At the end of 2018 there was an escalation of tension, following the seizure on December 23 by the Bolivarian National Navy of two Guyanese-flagged vessels belonging to ExxonMobil that were prospecting in the area and which, of agreement to the version of the Government of Nicolás Maduro, had entered Venezuelan waters. The international response was not long in coming and the United States urged Venezuela to "respect international law and the sovereignty of its neighbors". Precisely one of the most complex issues in the territorial dispute is the projection of the waters of each country. The position defended by Venezuela is to draw the maritime limits of agreement to the projection of the delta of the Orinoco River, as opposed to the Guyanese position which draws the line in a manner favorable to its territorial interests. Although this was a secondary element in the territorial dispute, the economic potential of these waters places them at the center of the discussion.

To all this is added the declaration of the group of Lima, of which Guyana is part, not to recognize the May elections in Venezuela and to threaten to economically sanction the country (although, to date, it has not recognized the opposition candidate Juan Guaidó as interim president). The international ostracism of the Bolivarian Republic has allowed Guyana to obtain important diplomatic support from the aforementioned group of Lima, CARICOM and the United States in relation to its international dispute and the detention of the Exxon ships.

result The future of relations between Venezuela and Guyana depends to some extent on the outcome of the future elections in March in the latter country, which will pit the hitherto president, David Granger, recently ousted from power by means of a motion of censure, against the leader of the PPP, Bharrat Jagdeo, whose party has maintained the best relations with Chavista Venezuela. The no-confidence motion is a historic milestone for the South American country, which will have to prove its social cohesion and political stability amidst geopolitical tensions and an international investment community that is watching closely the development of events.

Increased defense revenues

Georgetown, for the moment, limits itself to diplomatic action to defend its territorial sovereignty, but documents of the Guyanese Defense Forces prior to the oil discoveries already identified the need to develop military capabilities in case such resources were found in the country. According to Exxon's estimates, agreement , Guyana would earn 16 billion dollars a year from 2020, which would increase the military expense , currently at around 1% of the GDP. The Army of the Cooperative Republic of Guyana conducted in August 2018 the largest military exercises in its history, mobilizing 1,500 troops out of an Army estimated at around 7,000. Information available about the material resources of navy and aviation show the need for quantitative and qualitative improvement. Overcoming the existing ethnic divisions between the population of Indian and African origin must be one of the priorities of the Armed Forces, which suffer from a clear under-representation of the Indian community, a cause of historical suspicion of the civil society.

At final, the Caribbean region of South America will be marked in the coming years by the economic potential of Guyana and its struggle for territorial survival in the face of Venezuela's legitimate demands. Achieving a real development of the oil industry will undoubtedly be the best armor for its future as a sovereign and independent country. The political uncertainty in Venezuela, immersed in an enormous crisis, generates the fear of a possible military escalation as an escape valve to the internal economic and political pressure against a rival that lacks the resources to face it. The capacity of Guyana's political class to manage the brutal increase in its economic resources after 2020 is still an unknown, but it is possible to imagine that the second poorest country in the Western Hemisphere will reach great heights of development if it is capable of learning from its neighbors and managing a regional context that is favorable to its national interests.

Geopolitical misgivings about perceived foreign interests should not distract beneficiary countries from implementing sustainable use.

The Guarani Aquifer has given rise to a more political than scientific literature in South America, denouncing the alleged interest of great powers (formerly the United States, now China) to take away the water that naturally belongs to the countries of the region. These crusades often distract from a more indisputable fact: the risk comes not so much from outside as from uncontrolled practices and the lack of clear legislation in the aquifer countries themselves. This article reviews the results of some recent programs of study on the characteristics and status of the Guarani Aquifer.

▲ source: UC Irvine/NASA/JPL-Caltech

article / Albert Vidal

About one third of the large groundwater aquifers are at a critical status . Current technology does not allow us to accurately predict how much water we have left on the planet, and precisely because of this uncertainty, accelerated groundwater extraction is too great a risk not worth taking. 

The map above shows the 37 largest aquifers in the world, which have been studied by a NASA satellitemission statement known as the Gravity Recovery and Climate Experiment (GRACE). This mission statement has attempted to measure the water levels in the aquifers, in order to check the water stress to which they are subjected, as well as their level of renewal. Of these, there are 21 whose extraction is not sustainable, and they are losing water very rapidly. Among these, there are 13 whose status is particularly critical (darkest red), and threatens regional water security. There are 16 other aquifers that enjoy sufficient recharge to not lose water or even gain water; these are marked in blue.

This NASA research , the results of which are analyzed in a study by Water Resources Research, divides aquifer water stress into 4 different types, from highest to lowest intensity: extreme stress, variable stress, human-dominated variable stress, and no stress. Let us now look at another map, collected in that study, which shows sample the spatial distribution of groundwater abstraction in the world:

The color of the dots indicates the intensity of extraction, measured in millimeters per year. Thus, this statistic sample is the sum of withdrawals for industrial, agricultural and domestic use. At first glance, it can be seen that the countries that suffer the most accelerated extraction are India, Pakistan, China, Egypt and the United States. In the case of the Guarani Aquifer, the extraction points are located in Paraguayan territory and near Sao Paulo, with an extraction of between 0 and 5 millimeters per year.

The research has produced other maps that may be useful to financial aid for a deeper understanding of the problem. In this case, the following map sample shows an average of the annual recharge of aquifers in the world.

The yellow color represents negative recharge, i.e., systems that are losing water. The blue color, on the other hand, marks those aquifers that have a positive recharge (the more intense the blue color, the greater the recharge). The Guaraní aquifer, in particular, has a recharge of 225 millimeters per year.

Finally, we will see two maps referring to the water stress of aquifers.

The countries listed above (a) suffer from extreme water stress, i.e., natural recharge is negative, and there is also intense human use. This particularly affects the African continent, the United States, the Middle East and the heart of Asia.

Here we show (b) those aquifers with a variable stress level. This means that they have a positive natural recharge, but at the same time there is a human use that could be detrimental. The Guarani Aquifer is included in the latter group.

The Guarani Aquifer

Making reference letter to a famous phrase from one of Franklin D. Roosevelt's speech - "with great power comes great responsibility"- we can say that the countries that enjoy access to the Guarani Aquifer System (GAS), must assume the responsibility that comes with having been endowed with this important natural resource . They know that, many times, such riches bring competition, unrest and even problems such as internal instability and tensions between some large companies and governments.

The SAG is a transboundary aquifer that extends below the surface across 1.2 million km2 between Brazil, Uruguay, Paraguay and Argentina. According to the most recent research, this is the third largest groundwater reservation in the world in terms of surface area, and contains about 45,000 km3. The low recharge capacity is the most common problem in the aquifers of our planet, since it is usually not enough to cover the amount extracted, thus jeopardizing their sustainable use. This system is particularly important because of its very high renewal capacity (between 160 and 250 km3 per year), which takes place thanks to the abundant rainfall that feeds it.

Challenges posed by

Let us begin, then, with a brief historical contextualization. There have been several moments that will help us understand the current state of interests and challenges surrounding the SAG. In 1969 the La Plata Basin Treaty was signed, to carry out a series of programs of study on the hydrological basin of La Plata (which includes the Guarani Aquifer). Three decades later, in 2001, the agreement framework on the Environment of Mercosur was ratified, which highlighted the importance of the environment and proposed the creation of a legal framework to conserve it. Between 2003 and 2009, the project for the Environmental Protection and Sustainable development of the Guarani Aquifer System(PSAG) was developed thanks to the impulse of the four countries of the Rio de la Plata Basin, to prepare a framework of management of the SAG with environmental sustainability criteria (and to anticipate future problems). Finally, in 2010, the Treaty of San Juan was signed; a much broader treaty of cooperation, but one that was not ratified by all state parties. Also known as agreement of the Guarani Aquifer, it was influenced by many supranational bodies and transnational companies. So, the question arises, where are the problems?

Well, first of all, Argentina and Uruguay ratified the agreement of the Guarani Aquifer in 2012, which provided for a series of restrictions on water extraction, in order to manage the aquifer's resources in a more sustainable way. What happened is that neither Brazil nor Paraguay ratified it at that time and, their signatures are necessary for the agreement to enter into force. Surprisingly, Paraguay stepped forward in 2018 and ratified the agreement, showing signs of wanting more cooperation. Brazil depends heavily on the water extracted from the SAG (especially its southern provinces), so it wants to renegotiate the agreement of the Guarani Aquifer, to obtain more favorable conditions.

Of course, Brazil is not the only one that has problems with the current status . Paraguay, for example, did not ratify the agreement until 2018, alleging a violation of national sovereignty (something totally understandable, if we take into account that Paraguay owns the area aquifer recharge with the largest extension). As an example of all this, Miguel Giraut, from the Ministry of Mines and Energy of Argentina, commented in 2016 that coordination was non-existent.

In addition to these regional tensions, there are other subject problems related to interference from outside powers, international organizations and transnational corporations. Again, a reservation such as the SAG is especially attractive to companies and some countries that need to secure their supply of water resources. However, these dangers are relatively innocuous compared to others that could lead to aquifer contamination or irreversible change in the ecosystem.

If we face this question with some realism, it is unlikely that there will be intentional contamination of the aquifer (by chemical attack, for example), as this would benefit no one. Certainly, there is the danger of accidental contamination by the discharge of toxic substances from agriculture. In Brazil, specifically, there is a lot of agribusiness being developed over the aquifer (especially for soybean cultivation). It happens that, through the same cracks through which the water that recharges the aquifer passes, pesticides, residues and agrotoxins can also enter. In addition, the recent introduction of hydraulic fracturing techniques (known as fracking) is another potential source of contamination.

Another possible risk comes from an accelerated extraction by transnational companies or governments themselves, which would exceed the level of recharge and produce irreversible changes in the ecosystem. Deforestation brings another risk factor: water infiltration capacity is lower when trees are cut down, and the soil is exposed to erosion and pollutants as it loses nutrients (especially in recharge areas). In addition, population pressure and economic growth add even more variables to the uncertain future.

Uncertain but hopeful future

In summary, although these challenges may evolve negatively, there are many reasons that give us hope. After all, the aquifer water is highly valued for its medicinal purposes, its usefulness for the coffee industry and its use in geothermal energy production. That is why the owners of this precious resource are the first ones interested in conserving and managing it in a sustainable way, and they are fully aware that cooperation is crucial.

Moreover, the SAG could increase the geopolitical and geoeconomic importance of the region, which until now has been considered a peripheral region on the international scene. It is obvious that water is gaining importance as a natural resource given its scarcity and growing demand. Although it is unlikely that the region will become a major player, due to its geographical location and integration difficulties, it could give rise to the four Southern Cone countries taking leadership positions in areas related to sustainable extraction and fair distribution of water in the future. To seize this opportunity, it is necessary to adopt exemplary attitudes right now. If this happens, not only will they be considered exemplary countries, but they will surely attract investment in new and more efficient extraction methods. All this, in addition, will enhance the socio-economic development of the population living above the aquifer, which, if it can be maintained, will mark the future of South America.