State-owned enterprises gaining power in South America

State-owned enterprises are becoming more important players in South America’s economic development, international markets, and revenue generators for state treasuries.

Gonzalo Alcalde of FORO writes,

"In recent months and years, there have been many signs suggesting that the role of public enterprises will continue to gain strength in South America, and there is even an emerging international dimension in their actions. The most visible case is that of the Brazilian giant Petrobrás, which dominates the market in its home country and has announced its intention of becoming one of the of the top five oil companies globally, and is active in exploration and extraction around the world. Petrobas has ascended dramatically and, thanks to its particular public-private nature, was still able to generate large profits in 2009 while the world’s large oil companies had big decreases in their profits.

Other state enterprises are also following the trend of expanding into other markets. For examples, Ecopetrol, like Petrobras, entered the Peruvian market several years ago. Meanwhile, in both Bolivia and Exuador, new state enterprises have been created in recent years, including Exuador’s first-ever state-mining companies. In Chile, the regions market reform pioneer, the state mining firm Codelco has lost ground to private copper firms, but in 2010, President Pinera, instead of announcing its privatization, announced new injection of capital and management reforms."

Implications

Recent trends suggest that large state enterprises will continue to be important in the economic development of South America, and in particular, will contniue to generate substantial revenues for public treasuries. The sharp distinction between state and market that seemed to be developing in previous decades seems poised to blur in the context of international expansion of state firms, creation of new state firms, and public-private partnerships for the exploitation of natural resources and infrastructure development.