Energy is ever more becoming the piston driving Latin America to the contemporary world stage.

This reality arrives in lieu of major Chinese and Russian investments in Venezuela’s petroleum belt, Mexico’s intense debate over how to diversify foreign investment in its state-run energy powerhouse, and Brazil’s ever-expanding oil coffers that continue to propel its economy upward in the face of a global economic recession.

These three states lead energy production in Latin America and will increasingly become a lifeline for the world’s swelling consumer demand, and key to its sustainable growth. Petroleum and natural gas have for a time been assets sought heavily by the US and Europe, but now draw clientele from the surging populace of China, India, and wider Eurasia.

Amid this equation, guaranteed global supplies remain variable, tending to degrade in both refining ease and reserve accessibility. This, coupled with security concerns in the Middle East, marks a unique opportunity for the region to fund much needed domestic reform and present viable energy initiatives to the international community, beyond the distant third tier.

A fundamental challenge in scaling these energy companies to meet such global demand will be the state’s ability to balance its investment and revenue model. All three of these Latin American countries highlighted here have state-run energy sectors, though all are not created equal. For a more informative look, see the comparative breakdown below:

Country	México	Brazil	Venezuela
Founded	1938	1953	1975
Petro Profile	Heavy Crude (2/3, Maya), Light Crude (1/3, Isthmus & Olmeca)	Predominantly Heavy Crude (Marlim), although newly discovered, subsalt fields are of Light grade and Sweet substance	Almost entirely Extra-Heavy Crude, of Sour substance (high sulfur)
Proven Reserve Capacity	10-13.68 billion	12.35 billion	99 billion
Largest Reserve	Cantarell	Sugar Loaf	Orinoco Belt
Onshore / Offshore %	20/80	40/60	Predominately onshore reserves, spread across 4 principal fields. Shallow water reserves in the Maracaibo Basin
Production Output	2.8 million bbl/d	2.72 million bbl/d	1.5 million bbl/d
Refining Capabilities	1.5 million bbl/d (6 refineries)	2.223 million bbl/d (16 refineries)	1.28 million bbl/d (Domestic & foreign refineries- Citgo USA)
Annual Revenue	US $98 Billion (2008)	US $118.3 billion (2008)	US $120 billion (2008), est. US $50 billion  (2009)
Foreign Investors	Sparse due to tight regulation by state apparatus, although the Calderón adminstration has opened doors for foreign investment on the deep sea exploration front	Private sector energy (Shell, Cheveron), BP (biofuels), China	Previous investors included major intl. petroleum giants, but after state reappropriation, Russia, Iran, China, & Brazil have agreed to looser terms under the Bolivarian regime
Principal Export Recipient(s)	United States	Largely utilized for growing domestic consumption, biofuels (ethanol) make up bulk of energy export	United States & Europe, China fastest growing consumer

SOURCES: US Energy Information Administration, Oil & Gas Journal, Business Week, CIA World Factbook

These numbers are enlightening in the sense that they present a snapshot of current carrying capacity and orientation of each state’s petroleum sector. However, a deeper study of energy futures can prove to be a bit speculative.

In the case of México, PEMEX has long been the case study on state investment of natural resource and economic autonomy. It relies heavily on taxes from its rich output to fund an array of federal initiatives and deliver energy to the Mexican consumer at a subsidized price. But, wrought with declining output on its principal oil field, Cantarell, the company has a need to exploit deeper off-shore deposits that require sophisticated equipment and a niche expertise– tasks honed upon by transnational powerhouses such as ExxonMobil, BP, and other state companies such as PETROBRAS. Due to this shifting source dynamic, the Calderón administration has worked diligently to promote external investment. This however remains a major political hot button due to historic precedent, as the industry’s sovereignty is seen as a sacred right to the Mexican populace. PEMEX has more than the necessary resources to carry onward, but significant institutional reform will remain fundamental.

PETROBRAS has gained measurable authority in the international energy sector both for the diversification of its investments, and the expertise of its workforce. President Luiz Inácio Lula da Silva has worked diligently to build a state model that profit shares with private enterprise, while promoting a solid domestic refining infrastructure. Recent offshore discoveries in sub-salt reserves via the Tupi fields continue to grow the Brazilian lot, while Brazilian officials are aiming to funnel revenue to direct state initiatives and maintain energy independence. For the time being, Brazil appears to be playing its cards right to promote sizable production in means to maximize internal growth. It will be interesting to see when it goes net positive in its production, to which countries it will direct its resources.

Turning to the more volatile petroleum sector, Venezuela has seen its share of production ebbs and waves in the past decade. President Hugo Chávez has too tapped into the ‘petro vein’ to fund large swaths of state initiatives, however often with a playbook at odds with much of its professional workforce. Lack of international investment (due to restrictive reappropriation efforts) and flight of expertise have reduced export capacity and bogged down exploratory projects in the Llanos sector and Orinoco Basin. The state energy company, PDVSA, however sits upon perhaps the world’s largest crude reserves in the Orinoco Belt, rivaling fields in Saudi Arabia. Due to its heavy tar-like viscosity though, special refining capabilities are needed to extract petroleum from sand and sludge– a role the United States currently fulfills. This is where large investment by China and Russia will float PDVSA initiatives in the near future despite waste from within. This, while the Venezuelan state maintains institutional direction and pads its GDP.

Overall, with the exception of Brazilian offshore reserves, it appears that most new petroleum pools are of heavier grade crude. This will require a more expensive refining process and specialized facilities, promoting favorable conditions for foreign direct investment (FDI) and transnational partnerships.

The manner in which each of these companies respond to its new role in the world energy sector will be developments watched closely by all, but seems to present favorable prospects to a long-forgotten region.

Felipe Ariza, Presidencia – SP

Not surprisingly, the bilateral defense agreement to extend terms of US presence in Colombia has ruffled the feathers of a few Latin American leaders at the Unasur conference in the mountain oasis of Bariloche, Argentina this week.

In reality, most everyone who follows this agreement, and the two countries’ historic defense cooperation, realizes this is merely a formalization of affairs. It’s no secret the US had a definitive role assisting Colombian officials in the hostage dupe against the FARC (Operation Jaque) last year, nor that they continue to provide intelligence, logistics, and training to its officials in means to undermine insurgent opposition and disrupt narco factions.

However, by no means have we seen a surge of in US troop/contractor levels, ceding of Colombian sovereignty, nor direct engagement that even remotely presents a bellicose shift toward neighboring American states. Any quips of this nature are fabrications of pure ‘Pixar’ scale. Now, whether or not this extended agreement is truly an effective defense measure for either country, alongside Plan Colombia, is another debate entirely.

Nonetheless, verbal crossfire ensued between the ALBA-aligned nations and president Álvaro Uribe of Colombia surrounding the sealed agreement. While Uribe outlined the case of mutual responsibility in such partnership and preached its concrete results that extend beyond verbal apathy, Venezuelan president Hugo Chávez and Ecuadorian president Rafael Correa emphasized the ulterior motives of US force projection and the destabilizing nature of such a move.

This is rather ironic considering that it was Correa’s mandate to scrub the lower-profile U.S. base in Manta that spurred this broadened initiative. And, in literal terms of regional destabilization, Chávez has a wrap sheet of saber rattling, ‘covert’ support for illicit factions, and arms acquisition from Russia and elsewhere that clearly trump any augmentative facet of this development.

Perhaps the most amusing exchange in this reunion came from Peruvian president Alan García, in lieu of Chávez’s insinuation that the US was preparing to invade Venezuela for its vast energy resources:

“Man, why are they going to dominate the petroleum if you already sell it all to the United States?” Mr. García said. The remark drew laughter, though not from Mr. Chávez.”

For a solid video recap of the summit, check out BBC Mundo (in Spanish), or its article review (in English).

Also, for more on the Chávez front, check out the polarizing profile by former U.S. Ambassador to Venezuela, Otto Reich, at ForeignPolicy.com.

Photo by Andres via Flickr

No tanks grind along the washed-out streets of Caracas, nor have battalions stormed breakaway sectors of Venezuela this Monday. No revolutions were to be televised. Rest assured Ms. O’Grady, the Andean state lives to see another day.

Record numbers of Venezuelans hit the streets yesterday, enduring long lines to partake in the country’s regional and municipal elections.

After months of lofty expectations for a political showdown between Chavistas and opposition to the current regime, results dictated in the early hours this morning permit neither side to boast of fervent victory.

Charged for many months by an aura of executive scale, the vote would gauge popular sentiment for President Hugo Chávez’s Bolivarian mandate and the fate of candidates who positioned themselves to such. Given his widespread grip upon the allied majority of Venezuela’s 22 states, it would test support for his ‘por ahora‘ stance, an onward pursuit toward expanding his grandiose socialist agenda.

Upon the announced results from the national election board (CNE), Chávez publicly declared:

We have a map almost completely dressed in of red, just a bit of red [...] It’s a great victory for our people, for the PSUV (United Socialist Party of Venezuela). The road toward the construction of socialism has ratified itself– the new historic project of Venezuela; and now, we will move to deepen and extend it.

Although pro-Chávez candidates claimed victory in major swaths of the country, the most populous sectors with significant political sway, including the greater mayor of the nation’s capital Caracas, ceded to opposition. These decisive blows included wins in oil-heavy Zulia, north central Miranda, Tachira, and the industrial powerhouse, Carabobo. It appears grassroot frustrations with public security, inflation, high cost of food commodities, and lack of alternative chopped a leg from under the president on his country’s throne.

Chávez, however, contines to hold solid river cards at the governing table, brandishing broad insitutional control and consolidating party loyalists at nearly every level. Yet, his absolute goal of rehashing the failed 2007 constitutional referendum (allowing among other items, unlimited reelection) continues to sink, further washed over by the political riptide of yesterday’s ballot draw.

Looks as though PBS Frontline will offer us a delectable Thanksgiving-week special this upcoming November 25. Before Americans’ traditional overeating, and the turkey’s dose of L-tryptophan set in, the documentary series aims to “[chronicle] Hugo Chavez’s ascent to power and his efforts to use the powers of the presidency to stay there.”

Considering this documentary will have a timely release amid upcoming Venezuelan regional elections (Nov. 23), it shall be intriguing to see what analytical conclusions the film draws in the wake of this critical political juncture for Venezuela. Although Chavez has been able to eliminate a swath of his key rivals, this race threatens his projection in pivotal sectors of the country— a prospect that would not settle well with the ire of ‘Chavistas’.

The program written, produced, and directed by filmmaker, Ofra Bikel, will pre-release on Frontline’s web site beginning Nov. 19.

Check out a preview below, and give us your take on the film upon its release— Chavez undoubtedly will.

Photo via Andy Zeigert, Flickr.
Medellín boss Pablo Escobar moments after being gunned down in Dec. 1993, after a joint Colombian-U.S. manhunt operation.

A telling article featured this past Wednesday in the Washington Post underlines a flux of coca cultivation in the Andean region over the past five years– not that this should come as some inherent revelation to us all. With the United States Government spending nearly $4 billion on drug eradication and interdiction programs during this period and the crop yield flowing rather unabated, the aims of U.S. security initiatives in Latin America can be labeled a bit, shall we dare say, out of touch?

The irony of course is that these five years stretch back to another three decades of almost stagnant policy, littered with short-lived tactical successes and exhausted rhetoric. Indeed, the nature of narcotics trafficking and its actors have morphed over time, however the bottom line for U.S. drug policy has not. It continues to emphasize the destroying of the product rather than addressing the conditions under which its trade flourishes.

Recently, I debated the merits of the multifaceted Plan Colombia, detailing how American efforts in counternarcotics have challenged traditional political paradigms and have been blurred by the lofty aims of several administrations. As I note, there has been a fair measure of success in Colombia via a restoring of state legitimacy and relative sovereignty over major territory. This, however, remains a secondary objective to U.S. eradication efforts in the region.

With drug related violence spilling across greater Mexico and the United States moving to counteract its influence in much the same manner via its Plan Merida, history can offer us some choice wisdom. Here follow ten lessons Uncle Sam can hash from his fabled ‘War on Drugs’:

1. Understand the changing nature of the beast: Narcotics trafficking in Latin America has continually evolved in both organizational structure and operational orientation in recent decades, moving away from hierarchical vulnerabilities toward flexible, “snap-in” nodes. These operate among a viral network of transnational organized crime and fringe political groups now utilizing established routes to North America via Mexico and through western Africa onward to the European theatre.

2. Counternarcotics and counterinsurgency are not mutually exclusive: Illicit actors capitalize on bureaucratic rules of engagement. Seen early on in Plan Colombia, U.S. policy under the Clinton administration held the prerequisite that action taken with its material support, active or implicit, should strictly target narcotics strongholds. This essentially fractured a unified strategy toward combating armed actors that threatened state legitimacy before the Colombian populace. U.S. counternarcotics operations must be conducted within the lens of bolstering domestic state security and fortifying of judicial apparatuses against corruption.

3. The prevalence of narco affairs in Latin America, in part, results from U.S. neglect to engage the region on larger issues: Let’s face it, Latin America has until very recently been the forgotten theatre in U.S. foreign policy endeavors and its national security agenda. Sure, the usually banter of Hugo Chávez and his Bolivarian revolution stir the Washington pot every now and then, but the more illusive reality remains that the tide of illicit commerce and migration found in the region, be it human smuggling, gun-running, or narcotics trafficking, is testament to sparse economic opportunity and rabid corruption of state institutions by powerful mafia actors. Measures by the U.S. to promote transparent governance, state responsibility, and economic incentives for fulfilling such have been sorely lacking to bear much resemblance of Good Neighbor policy.

4. While narcotics trade may not always be politically oriented, fighting it is: Ardent diplomacy and political negotiation among American states remains crucial in combating the transnational threat posed by cartels and sub-state insurgents. Unless a level of cooperation and a unified initiative are adopted to promote inter-state security, subversive organizations will aim to exploit these state quarrels, whether they are politically oriented in orientation or not– it’s in their own self interest to pit the region’s regimes against themselves and the lever of U.S. strategy.

5. Targeting narcos draws strange bedfellows: Aka. “blowback”. As one can readily see in the unfolding parapolitcal scandal on the contemporary Colombian stage, and through much of U.S. cold war policy in the region, crushing insurgencies forges some ugly alliances with vigil ante groups. Remember Los Pepes stalking drug kingpin Pablo Escobar amid U.S. support?…those same leaders subsequently led paramilitary death squads in record disappearances of Colombian campesinos.

6. This is a domestic battle as much as a transnational plague: There is a fundamental reason the narcotics industry draws billions of dollars annually from its sales and arms itself with military grade weapons– yep you guessed it, U.S. supply and demand. Until this issue is addressed from both sides of the aisle, its going to take a lot of Hail Mary’s and super-duper border walls to combat American demand for blow and ganja.

7. It is a campaign that can never be won, but can be properly managed: No way to kill all the cannabis and coca plants south of the border, even with the magic touch of Round-up. No way to blockade every one of those superfluous routes to the U.S. or Europe, or even to hunt down the industry’s school of big flounders. This is not a war that can be won by numbers or decisive blows, it is a campaign that should aim to manage state authority, exercise territorial control, and provide attractive alternatives to the struggling populace.

8. States should be rewarded for complicity, not shunned and isolated for alternative agendas: U.S. policy of disengagement has not proven to be very fruitful in terms of national security or furthering of inter-American cooperation. Shunning Venezuela, Bolivia, and Ecuador as pariahs for their “alternative” approach to collective nationalism has only worked against efforts at diminishing supply and financing of fringe opposition. While these states work to build opposition to American influence, they dangle carrots to smaller nations prone to sway by incentive (petroleum, mining, natural gas, medical aid, etc.). U.S. apathy imparts a political vacuum in the region.

9. Foreign aid should be distributed based on fulfilled benchmarks: Instead of penalizing and sanctioning American states for not complying directly with U.S. strategy, reward their demonstrated efforts to achieve compromised objectives. Demonizing regimes such as that of Morales, Chávez, and Correa only plays into their domestic cards. Hasn’t the United States had a fair measure of success in other regions of the world following this very same premise?

10. The United States Government is more than capable of leading a regional security initiative and promoting a level of stability to the Americas: The United States with its regional partners has had more than its fair share of known tactical successes against cartels and insurgent groups in Latin America. Look to the training of Colombian special forces in recent years to curtail the FARC, the capture and extradition of major mafiosos, the fall of the Medellín and Cali cartels in the 1990s, the disruption of international cells operating in the southern cone, among thousands of major seizures and raids from actionable intelligence. The problem has never been one of capability or even sheer logistics when cooperation is forged…it has been a matter of political vision and overarching strategy. That shift needs to be made to the larger picture, foregoing the eternal quest to burn the mother of all drug caches, toward the understanding that security interests are served by promoting strong governance of the American states.

Among these few, I’m quite sure there are many more valuable lessons that can be gleaned from the counternarcotic campaigns of Latin America, amid other international bouts of transnational crime. Feel free to weigh in and let us know, what do you see as cornerstone to pan-American security?