South America has vast energy resources, but countries in the region are unable to guarantee adequate energy security levels for their consumers. This paper argues that the potential economic benefits from the process of South America’s regional energy integration are high, though national regulations impose strong barriers to such a process. The study deems regional energy cooperation is particularly essential for removing the insecurity of energy supplies facing the region. Findings are:

energy integration policies have been focused on the construction of the infrastructure needed to increase energy flows among the countries of the region
nonetheless, there have been no significant efforts either to develop regulations for these flows or to establish trading mechanisms for them
climate change policies open a window of opportunity for South America, which is particularly well placed in this regard, but also create challenges
a multilateral energy security reserve treaty can give countries access to the region’s reserve supplies by providing regulations and pricing mechanisms to facilitate such access
Brazil’s geographical position, market size, oil resources and leadership in renewable energy sources make it a real candidate to take over the coordination of the South America’s energy markets

However, there are three obstacles to integration: coordination of the output of the region’s power plants, the environmental licensing of energy projects, and the legal deficit that adversely affects private investment in energy generation. To help overcoming the obstacles, the document recommends that:

South America needs to proceed with its energy integration process using the institutions-market approach
an institutional mechanism to settle regional disputes is also needed

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