MDB & Energy Project: Regional Studies: Latin America Report

Energy and the Multilateral Development Banks in Latin America Contradictions between facts and discourse

Chapter 5
MDBs and energy contradictions and dogmatic errors

The MDBs have great influence on energy policy in Latin America, not only because they articulate the basic policy guidelines, and also because of their financing power. "Do as I say or don’t expect a cent" seems to be the philosophy of the banks—as was mentioned in Chapter 2. National sovereignty does not seem to exist. The MDBs bear a large part of the responsibility for the energy policies being implemented in the region, hence the importance of their "official thoughts" on energy.

In their documents, the MDBs show concern—and establish requirements—with regard to the environment, energy efficiency and social equity. But their actual priorities seem to be different, and the resulting contradictions are quite evident. Likewise, the "official thought" of the MDBs is based on dogmatic neoliberal precepts, but these are frequently incompatible with or even contradict reality.

Dogmatism results in disregard for the striking inconsistencies that exist between the various targets and strategies proposed. Some examples below will illustrate this point.

Some declared targets...

With reference to environmental issues, the MDBs state concerns, objectives and requirements.

The IDB’s declared objectives are:

To satisfy the energy requirements of the population;
To accelerate the increase and diversification of energy supply; and
To promote energy conservation.

For this purpose, the IDB’s lending will not only include typical energy projects but also technical assistance for those projects considered socio-economically, technically and financially feasible, such as:

Development of alternative energy sources, preferably renewable;
Substitution for, or reduction of hydrocarbons as an energy source; and
Encouragement for the efficient use of energy.

Among the criteria for approval or rejection of a project, the following are included:

Energy supply reliability;
Energy conservation;
Increase in energy supply, with maximum power performance and greater efficiency of conversion systems.

The WB, for its part, with reference to energy projects, places emphasis on:

Identifying environmental problems;
Project designs with environmental improvement;
Avoiding, attenuating or compensating negative impacts.

Global environmental concerns and regulation targets are mainly:

1. Atmospheric pollution

Reduction of emissions through strategies such as:

More efficient use of fossil fuel energy;
Development of alternative renewable sources;
Reduction of deforestation rate and increase in reforestation rate;
Collection and use of methane from coal fields and anaerobic systems as an energy source.

2. Biodiversity

The targets are:

The preservation of endangered species and habitats in critical state;
Wild land conservation;
Not to finance projects that entail severe or irreversible damage including species extinction, unless appropriate mitigation measures are included.

The following characteristics are considered of high negative impact:

Hydroelectric projects involving great watercourse deviation, flooding or other significant transformation of natural aquatic or land areas that may reduce or modify natural habitats with the subsequent migration of species toward new areas and the possible violation of their capacity for survival;
Large-scale habitat loss due to mining and mineral exploration.

When practice and conceptions contradict each other...

Who would be against the above "declared" objectives and eligibility criteria? But to what extent does practice conform to these declarations?

In all cases, the MDB’s priority is structural reform of the energy sector or assistance to big projects that are supply-side oriented, rather than stressing environmental sustainability or energy efficiency. This can easily be observed from their resource allocation. Their own declarations, however, also show the banks’ primary concerns.

The IDB’s environmental declarations, for instance, state that "[t]he reduction of heavy-fuel consumption and its partial replacement with natural gas will decrease the overall amount of nitrogen and sulfur (NO^x and SO^x) emitted into the atmosphere, and would also reduce carbon dioxide emission and its effects on global warming". The IDB’s environmental concern is focused on emissions and their solution is replacement of a high emitting fuel with a lower emitting—but still highly centralized, corporately controlled—fuel. They completely disregard the complexity of the Latin American case, other potential alternatives, and other environmental problems caused by the energy sector, such as in Urrá I, a hydropower plant on the Colombian Atlantic coast which poses social and environmental dangers to a large area.

Environmental sustainability is not the IDB’s primary issue. Its attitude could be qualified as environmentally poor, while highly sanitary. This is to say, contamination control technologies are proposed as the solution for a problem that, in fact, requires environmental management within the sector enterprises, technological conversion, energy efficiency and strategies for promoting the rational use of energy. To optimize the present resources related to the energy sector, the strategy should not be mitigation but prevention.

However,

The solution to the problem is focused on centralized technologies and pollution control, instead of on low or zero-emission technologies;
Environmental damage is not acknowledged as economic inefficiency;
Very few countries consider the efficient use of energy. In fact, efficiency occupies less than 5% of the IDB’s investment portfolio.

The governments do not offer incentives favoring the use of renewable energy; nor do the MDBs..

For the MDBs, energy efficiency means the avoidance of energy loss in the process of production, transmission and consumption. Efficiency measures are not supported by incentives for social and technological strategies for conservation and lower consumption. In terms of conservation and efficiency, the World Bank’s activities in Mexico, for example, focus on supply-side management by means of plant maintenance. Demand-side management in major WB projects has been handled through the promotion of new tariffs, which have adversely affected the poorest sectors of the population.

In 1992, the World Bank produced two separate policy papers on energy (The World Bank's Role in the Electric Power Sector and Energy Efficiency and Conservation in the Developing World). This indicates that the Bank addressed energy conservation and efficiency as an issue separate from good management. These policies should necessarily come together. Energy efficiency and conservation are both key elements of proper management of the sector. Furthermore, proper management of the sector is needed to ensure implementation of energy efficiency and conservation measures. The result of failure to integrate these policies is, in practice, prioritization of the Bank’s most urgent goals (privatization, new regulatory frameworks, real cost pricing) over the needs of society and the environment—especially those for efficiency and conservation.

Although not acknowledged in MDB documents, some of the banks’ main strategies (encouraging and facilitating private sector involvement in the energy sector, fostering competition) can—and frequently do—contradict those alleged objectives of environmental protection and energy efficiency. This is because of the short-term approach imposed by the prevailing objective of private-sector profitability.

Private investment, characterized by short-term profitability objectives, tends to foster thermal electric projects with short-term return and centralization of service, which—as in Brazil—do not include provision of services to remote areas. Private investors do not undertake—with a few exceptions—hydroelectric or alternative energy projects with long-term return.

There are problems of compatibility in the combination of energy efficiency, privatization and private management of energy companies. Private sector participation, commercialization and corporatization of public utilities in a competitive market foster growing energy consumption rather than rational end-use.

Hence environmental and energy efficiency issues are not among the priorities of the MDBs. Furthermore, some of the banks’ key policies (those of "structural reform") are in disagreement with those issues. Neoliberal dogmatism prevents the objective analysis of these implications. Case studies, country by country, should be performed, addressing the specific situation of each country and not the implementation of one dogmatic recipe which is supposed to be valid for all situations.

Equity and social participation issues are dealt with in a similar manner.

Equity and social participation, reality or wishful thinking?

Here, too, the MDBs promote contradictory aims. In a WB document on Mexico (CAS of the World Bank Group for the United Mexican States, 15 October 1996), two critical criteria are established for approving infrastructure projects: they should promote and complement private-sector involvement, and they should bring improvements to less privileged and poor service areas. In this document, the WB does not acknowledge the contradiction between these criteria, although it is well-documented, even by the WB itself, that the private sector is not interested in extending services to the poor areas since these generally involve high costs and low profit. IDB documents also acknowledge the low interest of the private sector in serving poor sectors given the current lack of incentives.

When the time comes to choose, is there any doubt about which of these two contradictory options is taken? The explicit and implicit priority is to promote private capital investment in the energy sector. Access to electricity is not ensured to the poorest sectors, but subsidies and loans are granted to large transnational corporations to facilitate their investment in the Latin American energy sector.

The process of structural reform in Latin America—promoted by the banks—has not advanced the aim of equitable access to modern energy sources. On the contrary, at least in the first stages of the restructuring, the problem of access to electricity for the poorest sectors has deepened, for the following reasons:

a rise in tariffs following removal of subsidies and promotion of tariffs reflecting real costs and profits, which resulted in many poor families losing electricity services; and
an aggressive policy on the part of the electric utilities to eliminate clandestine connections to the network, through which many in the poorest sector accessed electricity.

In Chile, for instance, power sector reform meant that tens of thousands of families faced serious difficulties of payment and in many cases their power was cut off. The new tariff policies enabled modernization and development of the electric power subsector, but at the expense of the welfare of the poorest sectors.

In Argentina, in March 1997 after most of the reform was implemented, three million people (10% of the population) had serious difficulties accessing indispensable electricity services. In other countries, eg, Colombia and Mexico, the fear of popular uprising led to delay in implementing tariff policies encouraged by the MDBs.

The MDB’s preference for neoliberal dogma over social equity considerations is shown, for instance, by their ban, in energy exporting countries, on the use of surplus from energy exports to benefit local populations. According to the IDB, reform in the energy sector has been hindered by pressures in host countries to transfer the revenues obtained from exports to local consumers via low local prices. Debt repayment and corporate profit are clearly prioritized over local economic development and social sustainability.

The fact that new investors—at least in the first phases of reform—are subsidized by consumers through higher energy prices, is apparently not seen by the MDBs as a contradiction in their policies. Investments in the region have been financed by consumers. The transfer of income from consumers to power companies through higher prices reduces foreign capital investments required, since part of it is taken from consumers. In Argentina, for instance, prices rose from US$50/kW to US$80/kW after the first privatization, although they were later lowered. Much of the financial investment for system improvements came from consumers and once the improvements were made, tariffs were lowered. Are we then talking of foreign investment, or are we talking of large companies obtaining funding from clients? In Chile in a first stage of privatization, tariffs increased almost ten-fold, and were later lowered. Enabled by the monopolistic character of the energy business, corporations raise their own investment funds from consumers.

From the corporate point of view, efficiency is accomplished by reducing economic losses rather than technical losses. What does this mean? There are illegal connections everywhere; families—generally from the lowest income sectors—clandestinely connected to the grid obtain power for free. The first action of the new power enterprises was to campaign against these free connections. In Argentina, for instance, Edenor and Edesur reduced by 50% the number of illegal grid connections. This saved them US$300 million, at the expense of the poorest sectors.

The MDBs do not accept any sort of subsidy to consumers, but they contradict themselves by subsidizing private companies. They argue that foreign investment is needed because there is a lack of local capital for the development of energy infrastructure. They then provide direct financing to private companies, which are supposed to be supplying capital investment, or they give assistance to Latin American banks.

The IDB, for example, loaned US$75 for project Samalayuca II (a natural gas-diesel plant) in Mexico, with US$75 million. This is a private project with the participation of General Electric Co., one of the largest industrial companies of the world, ICA Fluor Daniel, an affiliate of one of the largest Mexican construction companies (ICA), Bechtel Enterprises, a foreign company that supports project development, and El Paso Natural Gas Company, a big company that supplies and distributes natural gas in the USA. It is hard to believe that some of the greatest companies in the world and the government of Mexico cannot obtain financing for this project from private sources if it is effectively a profitable investment.

It seems that the IDB has fallen into the same erroneous practice as the International Finance Corporation (IFC), which seeks huge and secure projects for investment, rather than financing smaller companies that are trying to break into business. This not only affects small companies, which have trouble competing with larger companies even when these are not supported by the MDBs; it also directly violates bank policy not to finance private-sector projects that may be privately financed.

The IDB is also financing an AES Corporation project in Brazil for construction of a gas-steam power plant, with a loan for US$132.8 million complemented by US$100 million provided by the National Bank for Economic and Social Development (BNDES). AES is one of the strongest US-based corporate groups, and one of the largest investors in the Latin American energy sector.

In Brazil, BNDES finances local and transnational groups investing in the power sector. But was it not precisely due to the lack of local capital that privatization and the entry of foreign investors were justified?

There are no subsidies for the poor, as they are "inefficient", but subsidies and loans are given to the most powerful international companies in the world. Is this what is left of the MDBs’ discourse* on equity?

No protection for consumers

"Structural reforms" have also not advanced social participation. Nowhere has reform supported the participation of consumers in planning and control of the energy sector.

Reforms, such as those in Chile, have promoted the predominance of the private sector, with little participation of public institutions and no participation at all of consumers, who should be the main party. This situation has given rise to many complex conflicts. Crucial aspects such as equity, environmental protection, and development of a really competitive environment—not just the substitution of a new private oligopoly for the old state monopoly—have not been dealt with appropriately.

The reforms did not implement mechanisms to put a stop to the abuses of private energy companies. In general, there are no regulations to control service quality and, frequently, the new systems do not stimulate companies to invest in assistance to clients.

An example of this is Light in Rio de Janeiro—the "star" of privatization in Brazil—which is now owned by EDF (France), AES (US), and others. The chronicle of the business journal Gazeta Mercantil is quite illustrative on the subject:

"Light decided to expand its investment programs in order to face the recent crisis of power blockage in Rio. According to Benjamin Steinbruch, the company must invest an additional amount of US$50 - $100 million in equipment upgrading. The original program called for US$ 350 million."

"Steinbruch admitted that the service rendered by Light did not meet the needs of the population of Rio. But he stated that when the new stockholders took over the company, the equipment was in very precarious conditions.."

"Steinbruch reported that Light will intensify its work to upgrade equipment. The idea is to buy new power transformers. If necessary, the company may import these machines. But a Light executive warned that there is a limit to what changes can take place without compromising power supply even to a greater extent the electricity supply."

"The president of Light’s Management Board acknowledges that the company has made mistakes in reference to its relationship with consumers..."

The electricity emergency in Chile. An alert for the region?

Structural reform of the energy sector in Chile has been presented as the "model to be followed". Chile’s radical process of privatization and liberalization, as well as introduction of rules governing the competitive energy market, are being copied in other Latin American countries. The Chilean electric power reform seemed to prove the neoliberal paradigm based on the superiority of competition and private efficiency, which would in themselves, bring benefits to consumers (service security, lower tariffs, etc.).

The electrical emergency that occurred in November 1998, however, showed the weakness of this paradigm and challenged its alleged advantages. Unexpected and repeated large-scale power outages, nighttime power cuts in municipalities that were left completely in the dark, clashes between the government and the electric utilities, conflicts between the utilities and farmers (for water), are just some of the aspects of this crisis.

In January 1998 the power generating companies had made a key decision, based on cost considerations, to shut down thermal plants and operate solely with hydropower. The decision—criticized as a "water spree"—continued until April, and in this period the country spent a significant part of its water reserves. This careless use of water meant that when a drought occurred, the power utilities were not able to generate power and outages began.

The power system in Chile is operating at its limit: any failure at any plant means that the country as a whole goes without power. An estimated eight hours minimum is required to get the central interconnected system (SIC) fully working again. According to the National Energy Commission, power cuts cost the country one million dollars/day. The newspaper El Mercurio reported November 18th, 1998: "As days go by the number of cuts grow, and with it the concern of the population. Yesterday, the Mayor of Las Condes, Joaquín Lavín, filed a claim for $100 million against Chilectra in the county court. Trade agents, in turn, claim that the corresponding compensations should be paid by the electric utilities. The Ministry of Transport quantified daily losses of the sector at US$1.5 million, while the Minister of Health, Alex Figueroa, reported that the expenses incurred are being quantified in view of legal action. The main problem, he said, is that of medical tests."

The Minister of Economy, Oscar Landerretche, accused power generators of placing their own economic interests above national interests and refusing to coordinate operations, which made the crisis worse. "He pointed out that the crisis was clearly caused by the drought but has been aggravated by the chaos prevailing in the sector. As an example, he pointed out that last Friday , Codelco offered a power supply equivalent to 10% of the present deficit, and none of the generators who were involved in the problems bought it as a result of disagreements on pricing."

"Minister Pickering, clearly upset by the attitude of the power generating companies, repeated yesterday that the origin of the crisis faced by the country in reference to power supply is not in the drought but in what he defined as the inefficiency of the private companies, since they have not been able to operate the so-called open cycle appropriately. He also stated that it was the duty of these firms to render uninterrupted high-quality service to the population, which they have not done; and that the Government has been forced to adopt measures to provide a remedy to the power cuts in the shortest possible term."

An editorial in Las Ultimas Noticias (22/11/98) explains the defenselessness of Chilean consumers vis à vis private utilities: "The unexpected and repeated large-scale power outages, which will continue to occur, show the absolute defenselessness of the man of the street. Non-compliance with power production and distribution requirements has already cost one human life. And in view of all the damage caused by this situation it is essential that the Government plays its role, that of solving this chaotic situation and demanding fair and immediate compensations for all damages instead of simply lamenting. Undoubtedly, power generators and distributors have trespassed all tolerable limits, even by hiding their own inability to deal with foreseeable situations until the last minute. It is highly discouraging that these power utilities can manage power production to their own convenience; overproduction, which might favor the consumers with lower tariffs, will never occur. But when some known element which should have been foreseen, such as a drought, shows a lack of preparedness on the part of the utilities and makes production fall, the big companies reel off a repeated string of excuses and explanations."

"The man in the street is forced to pay his electricity bill within strict terms, including additional costs for delay and expense charges, and to accept rate increase without complaining. He must obediently comply with every maintenance item. He is, however completely defenseless when a large company suddenly leaves him without power, causing him serious damage by preventing him from using his electric appliances and even damaging them, and also by exposing him to danger, as is the case of traffic chaos; all of these arise from irresponsibility on the part of the companies. The common citizen is the main victim."

"Let us remember the gas leaks in apartment buildings, which were discovered by the Government only after several deaths occurred. Also in this case the enterprises shirked responsibility. The Superintendency of Electricity and Fuels is the responsible governmental agency, in cases of both the gas and power outages of today."

"The outages highlight the disproportion between power producers and distributors who are out of reach of the people, and the man in the street who has no chance to defend himself or to assert his rights. There is no effective mechanism to provide him compensation for being the only party damaged by the gigantic losses. The Government has shirked its responsibility: it should have shown its concern in an infinite number of declarations, but it should also have put an end to the situation."

The Chilean energy crisis has given rise to another conflict: the fight over the use of water between power generators and farmers who use water for irrigation. In the emergency, the government established control over the river Maule so as to ensure water for power generation. "The president of the National Association for Agriculture (SNA) after reasserting disapproval of the intervention on the Maule river, stated that it is quite striking that the private sector (generators) has asked for State intervention and that he was astonished by what he defined as the infringement of the farmers property right to the water that belongs to them... ." Meanwhile, "farmers are upset, since generators, in particular Colbun, have not acknowledged the debt in water resources they owe to the local farmers' irrigation systems."

Displacement of people

The social impacts arising from power generation investments include the displacement of communities as a consequence of the construction of hydropower plants. In Brazil, for instance, 200 thousand riverside families were expelled from their homes with the subsequent impact on their cultural and material lives. Similar situations occurred in Colombia, Mexico and other countries.

At the hydropower plants Zimapan and Aguamilpa in Mexico over 3,500 people were affected—many of them indigenous people. Social pressure and the new policy of the World Bank, which financed the projects, led to a negotiating process for resettlement that involved the displaced peasants. The WB views Zimapan as an example of how resettlement should be carried out. Since some factors were ignored in the resettlement process, however, and since the bank never made a follow-up, most of the resettled people do not have access to stable jobs and earnings. Hence, many of them have been forced to emigrate. Local observers consider that, in fact, the World Bank simply washed its hands of the resettlement.

The end of monopolistic practices?

A key argument for "structural reform" of the energy sector—strongly emphasized by the MDBs—is the advantages gained by vertical segregation and the creation of competitive conditions in all possible segments.

In fact, neither vertical integration nor monopolistic or oligopolistic practices have been eliminated—they have simply taken new forms. Thus markets have not been transformed—as foreseen by the promoters of reform—into truly competitive markets.

A study undertaken by the Fundación Bariloche of Argentina shows the current problem with vertical disintegration. The regulation separated the market into segments (generation, transmission and distribution) aiming at obtaining competition in the generation sub-market and regulating transport and distribution in accordance with the natural monopolistic character of these activities. The same applies in the case of gas.

According to the Fundación Bariloche, since this division is not natural—it separates what is simply a technical sequence—these activities have been re-integrated by the private stockholders and operators. This integration took place at three levels: first, regrouping generation plants through common shareholders; second, integrating various industrial processes through the same procedure; and third, linking power interests to those of other energy activities (gas).

This structural problem is related to the mechanism for setting spot tariffs on an hourly basis that results from economic load dispatch (from the cheapest generator to the more expensive) given the marginal cost of fuel. The spot price or marginal price is equivalent to the cost of the last unit brought on line to satisfy the demand. If it is a thermal power plant, the spot price will be higher; if it is downstream water which, should it not be used for generation would be just flowing, the spot price is zero.

According to experts, this mechanism entails the appearance of sectors that dominate (distributors and transporters) and sectors that are dominated (generators) at the different points of the chain; this situation can only be overcome by a vertical re-integration of the energy system.

Regulatory frameworks initially forbade one single company from participating in the various segments of the industry. But the urge to privatize made this requirement more flexible. In fact, the regulatory bodies became more flexible and permitted companies to hold ever-growing percentages of shares in the various consortiums, thus any eventual loss at one step of the process was compensated at another.

This has been acknowledged in the business press. Under the headline "The electricity business advances to concentration in Buenos Aires," El Cronista states: "With the transfer of distributor Edelap to American AES, the electricity business advances towards concentration.. The original electricity framework devised by the Government for the sector pursued the avoidance of concentration in the sector, by hindering the participation of distributors in the generation and transmission businesses, and the same held for generators and transmission companies."

"It is clear, however, that business naturally tends towards vertical integration. Thus, some specialists in the sector consider that, somehow, the Government has understood the message and tolerated some deviations. Such is the case of Endesa Spain, which participates, directly and indirectly, in the power distributors of the Federal Capital, Edenor and Edesur."

The process of concentration, whereby markets become even less competitive, is also evident in Chile, which the MDBs presented as the "model to be followed". The main generator of the Central Interconnected System (SIC) of the country, Endesa, together with its subsidiaries, controls 61% of the power capacity; Chilgener controls 16%, Colbun 11%, and the rest is controlled by other private generators. Endesa also owns Transelec SA, a firm that dominates the transmission market. This situation creates problems for firms that deal only in generation and have to use Transelec SA’s transmission grid; it has even led to public accusations in the press of monopolistic practice. In the distribution segment, Enersis SA is the main stockholder of Chilmetro with 72.84%; it controlled 9.07% of the stock of Endesa in 1993.

A review of new generation projects shows that concentration is worsening. Endesa, Chile’s most important generator, has become owner of the transmission system. The regulatory framework, which is not very precise in its definition of some factors influencing transmission costs, has hampered the establishment of well-defined, informed and universal prices for users of the transmission system.

As a result of the ambiguity and imprecision of the legal framework with respect to the calculation of wheeling tolls, Endesa has been able to prevail in pricing according to its own interests. As owner of the system, it is in the best position to impose its own conditions for negotiation.

This trend toward concentration can be explained by the existence of barriers that hinder entry in the generation market, the access to water resources being one of the most important. The rights over the most profitable water resources are concentrated within a few firms that currently control most of Chile’s generation.

A second element is the greater risks faced by new investors, as compared with those enterprises that operate the system, since newcomers do not participate in the transmission business. New generation plants are increasingly more expensive for the same capacity; or else projects should be larger in order to benefit from lower unit costs.

Is this the "model to be followed" in order to achieve more competitive markets and greater efficiency?

Single project for heterogeneous realities

The IDB acknowledges the existence of various realities in the energy sector in the Latin American countries. Indeed, Latin American is characterized by big differences between countries and sub-regions. There are disparities in availability and use of energy sources in the various countries, in production volume and the global and per-capita consumption, and in the degree of energy self-sufficiency of each country.

Despite this heterogeneity, the MDBs offer only one type of solution. It seems that their project has not been devised in response to the specific needs of each country, but rather in pursuit of a program with an explicit ideology that they have elaborated and disseminated with little local adaptation. Otherwise, it is hard to explain how the same "solutions" (privatization, demonopolization, new regulations, regional integration, etc.) are applied, both to surplus countries and to countries with serious foreign dependencies, to highly electrified countries and to countries where half the population lacks electricity services, to industrialized countries with a high-level of urbanization and to predominantly agricultural countries with rural populations.

This lack in adaptation makes these projects inconsistent, as the Uruguayan case exemplifies.

• In reference to tariffs

Uruguayan public utilities in general, and those of the electric power sector in particular, maintain tariff levels that make government support unnecessary. Uruguayan utilities generate funds for the central administration. This contrasts with the situation of other Latin American countries where tariffs do not cover costs. This must be underlined, because the MDBs argue for private sector participation in the energy sector on the grounds that low energy prices are mainly responsible for the financial crisis in the sector in Latin America.

• In reference to the goals

According to the World Bank, as stated in the document "The World Bank’s role in the Electric Power Sector", the goals for the Uruguayan power sector include:

Goal 1.
To increase power supply
"Where justified expand the provision of electric power in developing countries"

Uruguay has not made any particular effort in terms of energy saving and efficiency and 96% of its territory is already electrified. Therefore, it would seem plausible and concordant with the objectives and commitments of the MDBs to encourage and support efficiency programs as well as an increase of supply.

Goal 2
To reduce the burden for the state
"Reduction in the financial and debt burden of the power sector on public finances"

In the case of Uruguay, public utilities do not represent a burden on government. On the contrary they are a source of revenues for the government and may be used as vehicle for redistribution of social wealth. Thus, the MDBs' measures, conversely to their objective, will mean financial losses for the government if compensatory measures are not proposed.

The MDBs advance socially valuable objectives (environmental defense, social equity, etc.) in their declarations, but in practice, these are not given priority. Moreover, the MDBs’ actions are often in contradiction with these objectives.

The MDBs outline and impose their policies from a paradigm that they assume is valid for all time and place, and they apply the same recipe to heterogeneous countries with very different problems in their energy sectors. The banks do not discuss or analyze the dogmatic errors of this paradigm, nor do they acknowledge its contradictions with the facts. The MDBs should recognize that Latin American reality should be viewed, not through biased eyes of a dogma that benefits only a few, but with truer vision that takes into account the region’s heterogeneity and benefits everybody.