14, November, 2011

Oil Industry Investment Policies

What policy strategy should countries use to boost their oil sector, increasing their revenue from exports while reducing their oil dependency? The Latin American experience offers useful lessons learned for countries evaluating their investment policy options.

This brief presents a concise overview of the context of the Latin American oil industry and its performance. It analyses the advantages and disadvantages of the three main investment models followed, focusing primarily on the policy experience of Argentina, Brazil, Colombia, Peru, and Venezuela. Finally, it presents evidence and analysis suggesting that the state-private competitive model seems to have had the best performance in the current regional context.

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Key Lessons:

  • The state-private model, with a dominant state role in an open market, seems to be the most economically successful and politically stable model in Latin America.
  • For this model to be successful, however, governments need to directly invest in the state oil company to improve its technical, financial and institutional performance.
  • (Español) El fortalecimiento institucional es clave para el crecimiento del sector petrolero. Las políticas estatales deben fomentar la transparencia y una competencia justa.
  • (Español) Es necesario lograr un equilibrio entre inversión extranjera y control nacional para crear un ambiente político estable.

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