Latin America’s Challenge of Financing Energy Recovery

A covid vaccination center in Mexico City. Given the economic impact of the pandemic in Latin America, mass immunization is considered the indispensable step to the recovery of productive activities. Credit: Emilio Godoy / IPS

A covid vaccination center in Mexico City. Given the economic impact of the pandemic in Latin America, mass immunization is considered the indispensable step to the recovery of productive activities. Credit: Emilio Godoy / IPS

By Emilio Godoy
MEXICO CITY, May 31 2021 – Hit by the pandemic’s socioeconomic and health impacts, Latin America is facing the challenge of financing an economic recovery based on a sustainable energy sector and a transition to clean sources of energy.

Most of the region have embarked on disbursements to alleviate these consequences, but these resources seem to be insufficient and are aimed at rescuing the hydrocarbon industry, in spite of its environmental connotations.

During his participation this Friday 28th in the XXX La Jolla Energy Conference, the Uruguayan Alfonso Blanco, Latin American Energy Organization’s (Olade) executive secretary, reminded that the region was already in a precarious financial position due to the weakness of its fiscal revenues.

The region is debating between contracting more foreign debt and levying more taxes, but cases such as the failed tax reform in Colombia, which sparked protests at the end of April, exemplify the consequences of changes that punish the middle and lower classes and ignore big capital

The meeting was held virtually, due to covid-19, between May 7 and Friday 28, organized by the non-governmental Institute of the Americas (IA), based in the coastal city of La Jolla, California.

“In the recovery, the role of energy transition is important to create more and better jobs in the region. Accelerating the energy transition will have a major impact on the economic situation, it is the role of green recovery in the immediate future. The transition is part of the decarbonization strategy to achieve the environmental objectives of the international negotiations,” Blanco told IPS.

Following the outbreak of the pandemic in the region, Olade initiated a dialogue with energy ministers and other multilateral agencies to support governments for a post-pandemic recovery.

With more than half a million deaths and an economic contraction of 7.4 percent in 2020, the region has been the hardest hit in the world by covid, which has had repercussions not only on health, but also on employment, infrastructure and the economy as a whole, as highlighted by the International Monetary Fund (IMF).

In some countries, the blow was more severe, due to the decline in revenues from the production and export of hydrocarbons, such as oil and gas, due to the paralysis of global activities and the consequent drop in consumption.

And although the regional economy is already showing a rebound in 2021, the after-effects of the crisis will have a prolonged outcome, such as an increase in poverty.

The region is debating between contracting more foreign debt and levying more taxes, but cases such as the failed tax reform in Colombia, which sparked protests at the end of April, exemplify the consequences of changes that punish the middle and lower classes and ignore big capital.

Regional governments recognized the importance of sustainable recovery as early as October 2020, during the 38th session, also digital, of the Economic Commission for Latin America and the Caribbean (ECLAC). But this strategy is far from the measures implemented.


Looking for money

José Luis Manzano, the private fund Integra Capital’s director, said during the last day of the XXX Conference that “the tools the world has are multinationals, multilateral organizations and national development agencies. Money will come to the region, but we have to create competition.

The Argentine businessman suggested “turning to” Joe Biden’s government in the United States so that its policy of billionaire public investment “Build Back Better” expands to the south, beyond its borders, in an action that would have mutual benefits, and in a region in dispute with China -which in the last decade has sent public and private companies to invest in the area-.

In recent years, Latin America has made progress with wind and solar alternatives, but faces the challenge of reducing the burning of fossil fuels in the industry, transportation and improving energy efficiency.

This transition has come to a halt in countries such as Argentina and Mexico, which favor support for hydrocarbons, and Brazil, which promotes the gas industry.

In fact, data from the intergovernmental Organization for Economic Cooperation and Development (OECD) and the non-governmental International Institute for Sustainable Development agree that energy measures are far from sustainable.

Countries such as Argentina, Brazil and Peru apply unsustainable policies. In a recent episode, state-owned Petróleos Mexicanos (Pemex) announced on May 24th the purchase of 50 percent-stake of the Deer Park refinery, in the U.S. state of Texas, from the Anglo-Dutch firm Shell for 600 million dollars, to assume its total ownership.

The benefits of sustainable recovery and pursuing zero net emissions by 2050 are impressive, particularly in the context of the pandemic.

The region could achieve annual savings of 621 billion dollars by 2050 if the region’s energy and transport sectors achieve net zero emissions, which would also create 7.7 million new permanent jobs, according to the Inter-American Development Bank (IDB) and the United Nations Environment Programme (UNEP).

In this regard, Stéphane Hallegatte, lead economist of the World Bank’s Climate Change Group, highlighted the building of resilience to covid-19 and assured that it is still “early” to say whether the recommendations will be implemented.

“All the mechanisms that have been applied can help in the future if we maintain them. We can get out of the crisis that way and build resilience,” he told IPS during the “Innovate for Climate” virtual meeting.

“Governments can play a role in helping to create jobs and public investment,” Hallegatte stressed, during the meeting sponsored by the multilateral institution and which analyzed climate actions between Tuesday, May 25th, and Thursday, May 27th.


Green options

Innovative though still under-deployed, green bonds can serve for a partial recovery financing.

“There has been a lot of progress in green bonds. There is a lot of interest in Chile and some national development banks,” said Gema Sacristan, head of investments at Invest IDB, the IDB’s private financing arm, during the XXX La Jolla Energy Conference.

Green bonds are instruments to obtain exclusive financing for projects such as renewable energy, sustainable construction, energy efficiency, clean transportation, water, waste management and agriculture.

Between 2014 and 2021, the region sold more than 20 billion dollars in green bonds, led by Brazil and Mexico, with most sales occurring in the last two years.

From Olade’s headquarters in Quito, Blanco expressed his optimism regarding the economic recovery and job creation, but stressed that “better and more modern regulations are needed, focused on sustainable recovery. We have to incorporate new technologies and energies”.


Slower Population Growth: The Goods and the Bads

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Credit: Maricel Sequeira/IPS

By Joel E. Cohen and Joseph Chamie
NEW YORK, May 31 2021 – Results from the 2020 population censuses in the United States and China recently made headlines. But rather than recognizing the social, economic and environmental benefits of slower rates of population growth for the U.S., China and the planet, much of the media stressed the downsides of slower growth and wrote about population collapse, baby bust and demographic decline.

The U.S. population increase of 7.4 percent from 2010 to 2020 was the second lowest rate of growth since the country’s first census in 1790, and half typical growth rates since 1790. Only during the Great Depression of the 1930s did U.S. population grow more slowly, by 7.3 percent. However, even slower rates of U.S population growth are expected in the coming decades (Figure 1).


Source: U.S. Census Bureau.


The populations of 55 countries or areas will decrease by 1% or more between 2020 and 2050. China’s population is projected to fall by almost 3%, Italy by 10% and Japan by 16%. By contrast, the population of the United States, currently at 333 million, is projected to grow by nearly 14%

China’s population grew 5.3 percent in the decade ending in 2020, the lowest decadal growth rate since the catastrophic famine of the late 1950s. India projects for 2011-2021 its lowest decadal rate of population growth, 12.5 percent, since its independence.

Lopsided lamentations have focused on the downsides of slower population growth. For example, some commentators who favor more rapid U.S. population growth contend that Americans desire to have more children than they are presently having.

However, while some Americans want more children than they are having, some want fewer. In 2011 (the latest available year), of the 6.1 million pregnancies in the United States, 1.6 million (27 percent) were mistimed and 1.1 million (18 percent) were unwanted at any time. Of all 2011 U.S. pregnancies, 45 percent were not intended.

Some public handwringers maintain that a large population size aids the United States’ competition for economic and geopolitical dominance with China. But the mercantilist view that there is strength in numbers alone is obsolete by centuries. A large or rapidly growing population is hardly necessary or sufficient for prosperity.

Finland, ranked the happiest country in the world, has an average number of children per woman per lifetime of 1.4, compared to the U.S. rate of 1.6 children per woman, South Korea’s 0.8, Singapore’s 1.1, Italy’s 1.3, Japan’s 1.4, Norway’s 1.5 and Denmark’s 1.7. China currently has an average 1.3 children per woman per lifetime, markedly fewer than the United States (Figure 2).


Source: National Statistical Offices.


Some advocates of more rapid population growth argue that it would permit more people who want to move to the U.S. to do so. About 158 million adults in other countries would like to settle permanently in the U.S., according to the Gallup poll in 2018. Would the U.S. willingly accept many or most of these would-be migrants?

More rapid population growth, especially through increased immigration of working-age adults, would temporarily ease the pressures on pay-as-you-go public programs for the elderly, particularly Social Security and Medicare, by broadening the country’s tax base.

But there’s a catch: in the future those additional workers would retire, requiring additional workers to broaden the tax base again for the retiring workers. This demographic expansion would need to continue indefinitely.

Public discussion has largely ignored the notable social, economic and environmental upsides of slower American population growth. Slower population growth increases economic opportunities for women and minority groups, and exerts upward pressures on wages, especially for unskilled labor.

For a given rate of capital investment, slower population growth also raises capital per person, raising productivity. The Gross Domestic Product (GDP) grows more slowly, but GDP per person grows faster.

All else equal, slower population growth lessens America’s contributions to climate change, biodiversity loss, deforestation, and pollution from commercial, industrial, agricultural, and domestic activities such as heating and cooling buildings and fueling transport. Slower population growth makes it easier for governments, schools, and civic and religious organizations to adapt to increasing demands of more people.

Worries about impending demographic doom for the U.S. seem decidedly misplaced. The United Nations projects that the populations of 55 countries or areas will decrease by 1 percent or more between 2020 and 2050. China’s population is projected to fall by almost 3 percent, Italy by 10 percent and Japan by 16 percent (Figure 3). By contrast, the population of the United States, currently at 333 million, is projected to grow by nearly 14 percent, largely through immigration, to 379 million by 2050.


Source: United Nations Population Division.


The world’s population growth rate peaked in the 1960s and is falling in most regions except sub-Saharan Africa. Whereas the U.S. population increased nearly four-fold during the 20th century, it is expected to increase by roughly 50 percent in the 21st century.

The United States and many other countries, including China, face real population challenges, but not principally slower population growth or even gradual population decline. The problems include rapid population aging, managing cities and economies in recognition of climate change, regulating and responding to migration, and enabling people to have the children they want through reproductive health care and child-care support.

As COVID-19 has clearly demonstrated worldwide, real population challenges include protecting people against present and future pandemics, maintaining competitive technological change with better investments in education and worker training, and raising the value placed on today’s children, who are tomorrow’s future problem solvers. In 2021, 22 percent of all children under age 5 years are stunted from chronic undernutrition, despite record cereal production globally.

The global slowdown in population growth rates is not a transitory demographic phenomenon. It signals important durable successes. Couples are having smaller numbers of children in an increasingly urbanized world while men and women pursue education, employment and careers and live longer than ever before.

It is time to recognize that slower population growth benefits America, China, and the Earth.


Joel E. Cohen is Abby Rockefeller Mauzé Professor of Populations at The Rockefeller University and Columbia University in New York and author of “How Many People Can the Earth Support?”.

Joseph Chamie is a former Director of the United Nations Population Division, New York, former research director of the Center for Migration Studies and editor of International Migration Review, now an independent demographer and author of “Births, Deaths, Migrations and Other Important Population Matters”.


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