Energy Subsidies in Latin America and the Caribbean: Stocktaking and Policy Challenges

80 Pages Posted: 7 Mar 2015

See all articles by C. Gabriel Di Bella

C. Gabriel Di Bella

International Monetary Fund (IMF)

Lawrence D. Norton

International Monetary Fund (IMF)

Joseph Ntamatungiro

International Monetary Fund (IMF)

Sumiko Ogawa

International Monetary Fund (IMF)

Issouf Samaké

International Monetary Fund (IMF)

Marika Santoro

International Monetary Fund (IMF)

Date Written: February 1, 2015

Abstract

The oil price decline creates an opportunity to dismantle energy subsidies, which escalated with high oil prices. This paper assesses energy subsidies in Latin America and the Caribbean — about 1.8 percent of GDP in 2011-13 (approximately evenly split between fuel and electricity), and about 3.8 percent of GDP including negative externalities. Countries with poorer institutions subsidize more. Energy-rich countries subsidize fuel more, but low-income countries are more likely to subsidize electricity, as are Central America and the Caribbean. Energy subsidies impose fiscal costs, hurting SOEs, competitiveness, and distribution. The paper overviews country experience with subsidy reform, drawing lessons.

Keywords: Energy sector, Latin America, Caribbean, Fiscal policy, Subsidies, Public enterprises, Private investments, Energy Subsidies, Latin America and the Caribbean, electricity, prices, fuel, oil, tariff, generation, diesel, fuel prices, gasoline, oil prices, power, oil company, electricity price, energy prices, balance, oil firm, electricity utility, thermal energy, rural electrification, access to energy, oil producer, power systems, natural gas, petroleum products, volatile energy, fuels, electricity generation, natural gas resources, tax revenues, availability, energy policies, electricity tariffs, fuel products, tariff structure, oil producers, rural energy, oil exporters, vehicles, oil impor

JEL Classification: E60, H20, H50, H60

Suggested Citation

Di Bella, C. Gabriel and Norton, Lawrence D. and Ntamatungiro, Joseph and Ogawa, Sumiko and Samaké, Issouf and Santoro, Marika, Energy Subsidies in Latin America and the Caribbean: Stocktaking and Policy Challenges (February 1, 2015). IMF Working Paper No. 15/30. Available at SSRN: https://ssrn.com/abstract=2574703

C. Gabriel Di Bella (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Lawrence D. Norton

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Joseph Ntamatungiro

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Sumiko Ogawa

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Issouf Samaké

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Marika Santoro

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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