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Nationalization and Its Discontents

How Low Energy Prices Could Push Latin America to Privatize Its Energy Sector

Workers walk on a bridge at the Mexico's state-run oil monopoly Pemex platform "Ku Maloob Zaap" in the Northeast Marine Region of Pemex Exploration and Production in the Bay of Campeche April 19, 2013. Picture taken April 19, 2013. Victor Ruiz Garcia / Reuters

Latin America is on the brink of a new era in oil politics. Over the past century, resource nationalism—when governments assert control over their nation’s natural resources—has ebbed and flowed, often in line with movements in global oil prices. In the 1990s, historically low oil prices created room for privatization in many of Latin America’s oil industries. After that, when oil prices rose again, the pendulum swung back toward state control.

But as global oil prices collapsed over the last two years, regional governments have started to lose their leverage in the energy industry. To attract international investors, they must offer increasingly favorable terms, which means ceding more of their own control. Meanwhile, governments that have banked on using the profits from high prices of oil and other commodities to redistribute wealth and gain popularity are at a loss. Without this revenue, these governments have delivered

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