Every energy company in Latin America is adversely impacted in some degree by government regulation, taxation, or interference. However, state-owned petroleum companies are particularly vulnerable to intervention, mismanagement, and corruption.

Latin American energy monopolies: 

Boom or bust?

by Roger F. Noriega, Felipe Trigos 

At a time when several Latin American economies should be “firing on all cylinders” to sustain growth and development, their critical petroleum sectors are underperforming. Despite hopeful projections, the biggest energy companies in Latin America are controlled by the state and are hampered by government interference and short-term political agendas. 

Although these companies should be the engines of growth for their national economies, resource nationalism and popular gasoline subsidies limit these companies’ abilities to evolve into more efficient, competitive, and profitable enterprises. Brazil’s Petrobras, Mexico’s Petróleos Mexicanos (Pemex), and Venezuela’s Petróleos de Venezuela S.A. (PDVSA) are energy giants that are being consumed by mismanagement, corruption, and political agendas. For these companies to maximize their productivity and competitiveness and thereby deliver greater benefits to their countries, they should pursue professional management, transparency, and free competition with private companies and should open themselves to foreign capital and technology.

Key points in this Outlook:

• Energy monopolies in Latin America have proven highly susceptible to politicization, mismanagement, and corruption.
• Three energy companies in particular—Brazil’s Petrobras, Mexico’s Petróleos Mexicanos (Pemex), and Venezuela’s Petróleos de Venezuela S.A. (PDVSA)—are instructive examples of how government intervention can render oil companies uncompetitive and unsustainable. 
• Professional management, transparency, free competition with private companies, and openness to foreign capital and technology can help state-owned energy companies maximize their potential and deliver optimal long-term dividends for their nations. 

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