Latin American Energy Efficiency Gains Lagging Rest of World
By Claudio Loser
Published in the Dialogue’s Latin America Advisor, July 9, 2008
Latin American Energy Efficiency Gains Lagging Rest of World
Originally published in Claudio Loser’s monthly “By the Numbers” column for the Dialogue's daily Latin America Advisor
WASHINGTON, DC—Often we look at important worldwide economic issues, and we find evidence that Latin America is well positioned but losing out to the rest of the world. The region's GDP per capita is higher than in any other emerging area of the world, but the gap is narrowing fast. The region is a major food and oil exporter, but policies do not help reduce vulnerabilities to price fluctuations; and gas and oil resources are declining at a dangerous pace. This month my column deals with energy use. The picture again is mixed, with relatively high efficiency but limited gains at a time of a re-emerging energy crisis.
The table below provides information on energy consumption for selected countries in Latin America and elsewhere. The data includes 2007 GDP on a purchasing power parity basis 
(PPP) to avoid the problems related to exchange rate fluctuations; total use of energy for 2007 (in terms of cubic meters of oil equivalence); the ratio of energy consumption to GDP, an indicator of energy efficiency (a lower value indicates higher efficiency); and the improvement of energy efficiency (in percentage terms) from 1992 to 2005 based on comprehensive data from the US Energy Information Administration.
The data is striking in terms of the greater energy efficiency of Latin America compared to other regions. The exception is Venezuela, with values well above the average for the world and most industrial countries in the sample, and which clearly reflects the high subsidies to energy in that country. Argentina is also above the average for the region, again on account of existing subsidies, particularly gas and electricity. The regional numbers tend to be higher than in Europe, where energy is expensive, but lower than in North America and Asia, particularly in China. Low energy intensity is associated with an economy that is natural resources-based, shielding it from the recent rise in energy prices. In this regard, the region has also benefited from its high availability of hydroelectricity, about one quarter of the total energy production, compared to some 6 percent worldwide.
The blessing of this natural wealth carries with it its own curse. The energy price boom led to greater complacency in terms of macro policies, as discussed in earlier columns. Equally concerning is that in a world where the mantra is to improve energy efficiency Latin America has lagged badly. A few countries have experienced improvements, but even those compare poorly with the improvements observed in North America, most of Europe, as well as in energy-inefficient China and Russia. It is possible that the increase in energy use reflects changes in the economic structure, but it is more likely to reflect poor policies and foresight. Again, it is in the hands of policymakers to move away from pain-postponing populism and prepare the region for a sustainable path in a world of scarce and expensive energy.
Claudio Loser is a Senior Fellow at the Inter-American Dialogue and former Head of the Western Hemisphere Department at the International Monetary Fund.