Revisiting energy policies in Latin America and Africa: A redefinition of public and private sector roles

Abstract

In spite of vast local energy resources, economic development in Latin America and Africa is not supported by reliable energy supplies, although increasing energy use is inevitable. Oil and electricity are currently delivered through inefficient regulated systems, consuming large shares of scarce capital and foreign exchange. Furthermore, fuelwood is being burned beyond sustainable levels, threatening the environment. Projects to develop adequate energy supplies call for capital which these economies are not generating internally. Lending from external commercial banks, affected by the debt crisis, together with credits from bilateral and multilateral agencies, remains limited. There is a need for a policy reformulation to enhance direct equity financing of energy sector activities. To reduce governments' involvement and to increase the role of private companies, new institutional frameworks together with market based energy price systems must be established. In this context, multilateral agencies could encourage direct investment by making known the results of successful cases of privatization and by introducing innovative guarantee mechanisms.