For how long will Latin America depend on oil?

The reserves of Colombia could end in less than 5 years, while those of Ecuador would end in less than two decades

For how long will Latin America depend on oil?

According to data from the Organization of Petroleum Exporting Countries (OPEC), Latin America has 334,811 million barrels of oil in its certified reserves, which is equivalent to 22.8% of the reserves tested worldwide. A not inconsiderable portion, which historically has been used by the governments of the region to finance public policies that have progressively been reducing the levels of poverty in the region.

Leer en español: ¿Hasta cuándo va a depender Latinoamérica del petróleo?

The use of natural resources for export is just logical, countries need sources of income to provide their citizens. What it can cause serious problems for Latin America is the high dependence the region has on the extraction and commercialization of black gold, which is finite, and may have its days numbered. Finding alternatives and diversifying the economy is the key to guaranteeing the future of the region.

Reserves in Colombia and Ecuador can end

Colombia at this time is one of the countries that should be most concerned about dependence on oil. Despite having relatively small reserves, 1,782 million barrels in proven deposits, crude oil exports are the largest item in this country's exports, accounting for 25% of all exports.

What should worry Colombia is that, under its current rate of oil extraction, existing reserves will only last 4 and a half years, according to Orlando Velandia, president of the National Hydrocarbons Association. While it is possible to continue exploration of the subsoil to find more reserves, the situation is serious.

By 2022, Colombia must find the 15 billion dollars represented by crude oil exports, and what is more, it will again become a net importer, and must incur expenses to provide 350 thousand barrels per day, which the country consumes.

Another country that faces a similar future is Ecuador, which, according to the latest official figures, published in 2012 in El Comercio, only has 20 more years of oil to continue its current extraction rate. For Ecuador, despite having more time than Colombia, the situation is equally worrisome, since a report by La Caixa Research, oil represents 60% of its exports, and, in turn, its exports represent 86% of the GDP of the country.

For the entire region, the reduction of oil dependence will be essential to guarantee the future of the economy and to continue advancing the fight against poverty and inequality. The examples of Venezuela, Colombia, and Ecuador should alert other countries, that although they do not depend on oil at the same level, they still depend on other commodities such as minerals, which represent similar risks for the economy.

Also read: China closes the money tap to Venezuela

In Venezuela, oil is not scarce, but dependence subjects the economy

Venezuela is the country with the most proven reserves of oil in the world, with 299.95 billion barrels under its soil, which makes up 89% of the total reserves of the Latin American region. However, it is also the country in the region that depends the most on the extraction and sale of this resource, since it is estimated that it represents an overwhelming 96% of its income.

Although there are no official figures on how long oil reserves in Venezuela can last, the number of deposits they have seems to indicate that they will not end soon. However, the serious dependence of the Venezuelan economy on oil is still one of the most accurate causes of the economic crisis that the country has been going through in this decade.

The continued financing of the Venezuelan State, owner of the resources of the subsoil of this country, through exports of oil and its derivatives, has left the economy subject to the volatile prices of black gold in international markets, intensifying the crisis and conditioning the country's economic outlook completely to the price of a barrel of crude oil.

Given the lack of productive alternatives to balance the trade deficit generated by the current collapse in oil prices, the state oil company PDVSA has been forced to reduce its extraction to a minimum so that they can export profitably when prices return to tend to the rise.

Latin American Post | Pedro Bernal
Translated from “¿Hasta cuándo va a depender América Latina del petróleo?”

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