The flawed oil policies in Venezuela and Argentina can now be seen across an ocean. Despite some tough regimes and smaller reserves, Africa is poised to overtake Latin America’s crude output. The unlikely reversal reflects an investor-friendly approach. It’s also the clearest sign yet of how misguided the Latin region’s course is.
By all rights Latin America, from Mexico to Argentina, should be leaving Africa well behind. Latin states among them possess the world’s second-largest crude reserves with about a fifth of the global total, trailing only the Middle East. By comparison, Africa’s 8 per cent is tiny.
For the past decade, however, Africa has been cranking out on average an extra 230,000 barrels a day annually. The vast Latin American reserves still only yield the same amount as in 2000. With output now at around 10.1 million barrels a day, including Libya’s restored production, Africa is on track to surpass Latin America’s 10.3 million by the end of this year.
Angola is a good example why. It has more than doubled production to 1.8 million barrels a day over 10 years. Ghana’s deep-water output is also increasing. It’s partly because these African states have welcomed outsiders, opening reserves to technically skilled foreign oil companies without preposterous royalties and tax demands. Where Western expertise has been less available, places like Sudan and the Republic of Congo have invited Chinese capital instead.
The contrast with Latin America is stark. Mexico and Venezuela have been almost entirely closed to overseas investors, helping explain production declines of close to 15 per cent over the past decade. Argentina, whose nationalization of energy assets owned by Spain’s Repsol is emblematic of its contempt for foreign-run businesses, has extracted a quarter less than it did in 2000. Even in Brazil, which has helped offset the region’s large declines, state meddling is retarding output.
Regional pride isn’t what’s at stake, though. Sluggish Latin American output keeps inching global oil prices higher, pinching consumers on other continents, too. The troubles caused by such protectionist production programs won’t be a revelation. But Africa’s ability to generate more with so much less magnifies the matter.