Latin America could lead the way on green power 

For centuries Latin America has been dogged by the resource curse. Its abundant natural resources have never translated into a lasting, society-wide ascent into broader prosperity. Many are hoping this will change with the global transition to clean energy. The region holds more than half the world’s lithium, used in electric-vehicle batteries; produces over a third of its copper, for electrical wiring; and churns out more than half its silver, crucial for solar panels. It is also home to around half of the world’s biodiversity and a quarter of its forests. In the coming years, regional leaders hope that Latin America can take off as a green power.

Its resources are not just material. Thanks to ample wind and sun, and strong rivers, more than a quarter of its primary energy currently comes from renewable sources, twice the global average. According to the Global Energy Monitor, a San Francisco-based charity, 320 gigawatts of solar- and wind-power projects are expected to come online by 2030, an increase of 460% over existing solar and wind capacity. The infrastructure to transmit this energy is expanding, too. In 2024 Brazil will auction transmission lines which, together with two auctions in 2023, could bring in as much as $14bn.

Latin America could also become a significant low-cost producer of so-called “green” hydrogen, made from renewable sources, a clean alternative to fossil fuels for some uses. Brazil’s congress is soon expected to pass regulatory frameworks for offshore wind and green hydrogen, which could unlock billions of dollars in investment. A quarter of all green-hydrogen projects are in Latin America, the highest share globally. Chile plans to produce the world’s cheapest by 2030, and be among the top three exporters by 2040.

The region is also at the forefront of climate-finance innovation. In 2022 Chile became the first country in the world to issue bonds with a reduced interest rate if it meets sustainability goals, raising $2bn. Uruguay followed suit, raising almost $4bn. In 2023 Ecuador conducted the world’s largest debt-for-nature swap, with the savings going towards protecting the Galapagos islands; the country’s departing president has called biodiversity a new “currency”. The trend will continue in 2024, following a sustainable-bond issue in Brazil worth $2bn.

The continent will offer two case studies of whether fossil-fuel-dependent economies can quickly go green. In August, Ecuadoreans voted to ban oil drilling in part of the Amazon rainforest, giving the state oil firm a year to shut down operations. The referendum was the first time in history that a country’s citizens voted to halt oil production. It could cost Ecuador, whose main export is crude, some $14bn in lost income over the next two decades. Gustavo Petro, Colombia’s unironically named president since 2022, has also pledged to end oil exploration, even though oil and its derivatives account for a third of exports.

Despite all the optimism, the shift will not be an easy one. Old reliances die hard. Brazil and Guyana are pouring money into oil exploration. Deforestation of the Amazon in Bolivia and Venezuela has rocketed. Moving up the value chain, from extracting raw materials to manufacturing green technologies, requires investment and expertise. And translating any of this into a broad increase in prosperity will linger as a challenge. But the green transition offers the region a historic opportunity to turn the resource curse into a blessing. ■

Ana Lankes, Latin America correspondent, The Economist, São Paulo