ARGENTINA: FOR LACK OF ENERGY, ECONOMY LAGS

Two points, one short term and one long term. Short term: This situation makes Argentina fresh meat for Hugo Chavez. Long term: This is what it looks like when a country runs low on energy. Sun and wind will always be there for the taking. Oil and gas, not necessarily.

Argentine Economy Probably Slowed In June On Energy Shortage
Bill Faries, August 16, 2007 (Bloomberg News)

WHO
Argentina’s economy (President Nestor Kirchner)

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WHAT
Argentina’s economic growth slowed 0.9% in 1 month as energy shortages led to rolling blackouts and electricity supply reductions to business/industry.

WHEN
2007: 8.5% May economic growth, 7.6% in June. 2006: 8.5% May, 8.6% June.

WHERE
Argentina is South America’s 2nd largest economy (1st: Brazil).

WHY
- June was cold. Energy was required for heating. With the government rationing electricity supply to 4000 companies at the start of the Southern Hemisphere winter, industrial production dropped to 5%, from 9.9% last year.
- The Argentine economy has grown 8+% for the last 4 years. Demand, spurred by higher wages and increased consumption, is stretching energy supply beyond its capacity.
- Pensions are being raised 12.5% to help retirees cope with inflation.
- Some forecasters think growth may eek up a bit but seem to agree it will be significantly below last year.

The Argentinian expansion has been going on for a long time. Fossil fuel resources are finite. Argentina is demonstrating what happens when economic growth exhausts fossil fuels. Sun and wind and wave-tide-current resources are only as finite as our commitment to build the infrastructure for them.

QUOTES
Juan Pablo Fuentes, Latin America economist, Moody's: “The energy crisis was a big factor in lowering industrial production in June…The government and the central bank are willing to see a moderation in economic growth that will take pressure off prices…”