New and varied corruption scandals and execution of horrific and inefficient projects, executed by state-owned energy companies throughout Latin America, continue to be revealed day by day. We adhere the existing feeling to maintain our state companies and the decision to do so is something sovereign. However, if it is decided to maintain them, it is to turn them into solid economic pillars in the long term. For this we must necessarily try to shield them from the current government political power.
Armored and acting in a corporate manner, with competitiveness and independence they bring high value to the countries and can: 1) Break market control agreements that are often made by the private sector. 2) Study strategic projects for the country and support very fragile Energy Ministries, 3) Participate in projects that are considered profitable, alone or associated and where the private sector don’t wish to participate, 4) Generate profits and taxes for the countries, 5) Et cetera (e.g.: Statoil in Norway and others).
How to shield them? Boards should be composed by state members (ministries, etc.) and independent institutions (College of Engineers, etc.) and professional requirements and responsibilities clearly defined for their nomination and appointment. Better results are observed when independents are the majority.
This directory or the president of the country can choose the president of the company, from a shortlist proposed by a head-hunter recruitment company (human resources), with clearly established requirements. This gives it a corporate governance that does not necessarily respond to the designs and whims of the current governments and is the course to be sustainable and robust.
In Brazil, PETROBRAS, the leading company of the region, is slowly coming out of the abyss, privatizing several inoperable assets and many built with overprice. Corruption thrashed PETROBRAS by several flanks as reported.
In Venezuela, former Minister and president of PDVSA, Rafael Ramírez, is with warrant for arrest and fugitive. He is accused for many crimes and obtaining more than 1,347 million euros through money laundering between 2011 and 2012 in Spain. He is accused of hiring a natural gas ghost ship in Mariscal Sucre and where 1,175,300.00 dollars were paid for a ship that was inoperative 60% of the time. This is only the tip of the iceberg and is unprecedented for a country plunged into poverty and economic chaos.
In Ecuador, 8 hydroelectric projects were built without serious technical or market research studies. An international audit has been initiated by the State to detect technical and operational deficiencies and market failures in infrastructure executed by PETROECUADOR (Esmeraldas and Pacific refineries, Bajo Alto gas liquefaction plant, Pascuales-Cuenca pipeline and Monteverde LPG complex). If on top of the above we add various corruption scandals that are being unveiled in the Ecuadorian energy sector, where managers, executives and officials of Petroecuador, ministers, vice ministers, authorities and prebendary entrepreneurs are imprisoned, fugitives and many others under investigation, the equation for the ordinary citizen becomes grotesque and unacceptable.
There is much more to analyze in ECOPETROL (Reficar), ANCAP (former vice president dismissed for corruption when he was in office), PEMEX / YPFB (several presidents and/or officials imprisoned and projects executed with doubtful feasibility), PETROPERU (dantesque investment in Talara refinery) and in many other state-owned energy companies in the region.
Ineptitude and corruption when facing projects and investments executed by state companies are detrimental to the long-term economic well-being of countries. Is it possible that the Entrepreneur State does not work? Will we be able to shield our companies from the current government political power? Readers have the last word.
In Bolivia, the legal framework has just been approved so that projects and investments can be conceived under a Public-Private Partnership regime and leaving aside that the State continues to create companies on its own. A step much more appropriate to our understanding within this subject.
* Current Managing Partner of Gas Energy Latin America