For decades, Latin America and the Caribbean (LAC) has faced an energy paradox: it is one of the richest regions in renewable resources worldwide, yet it continues to operate under fragmented infrastructure and regulatory frameworks. In today’s context of global energy reconfiguration, this challenge has become impossible to ignore.
The recent presentation of the Regional Indicative Electric Interconnection Plan to 2040, promoted by OLACDE and supported by the European Union, raises a fundamental question: can LAC establish a common energy architecture before geopolitical and climate dynamics impose their own conditions?
The answer is highly consequential. The region has one of the cleanest electricity matrices in the world, with approximately 68% of its power generation coming from renewable sources, compared to a global average of around 30%. Yet this strength coexists with a structural weakness: limited cross-border interconnection capacity.
While the European Union has transformed its electricity grids into instruments of economic and strategic stability, LAC continues to operate through national systems with limited integration.
The regional plan seeks to demonstrate the benefits of changing this reality. It comprises 16 electricity infrastructure projects, requiring an estimated initial investment of US$3.5 billion by 2040—an amount that may seem modest in global energy terms when weighed against its potential impact. The projected benefit-cost ratio stands at 10 to 1, with annual returns that could reach up to US$5 billion under high-electrification scenarios. Furthermore, these investments could be amortized within two to six years; few infrastructure initiatives offer such systemic profitability. In practical terms, maintaining fragmentation means sacrificing regional competitiveness.
Yet the debate goes beyond financial returns.
Energy integration also enhances the region’s ability to manage volatility. Amid the growing frequency of extreme climate events—such as prolonged droughts and heatwaves—the capacity to exchange electricity across borders moves beyond a technical matter and becomes a strategic mechanism for strengthening regional resilience.
Chile could export solar power during peak generation hours; Brazil could supply hydropower during critical periods; Argentina and Bolivia could stabilize the system with natural gas as firm energy; while Central America has the potential to strengthen its Regional Electricity Market. Complementarity exists—the missing element is an adequate regional regulatory framework.
This is where the main challenge emerges.
Infrastructure without regulatory convergence is only an incomplete promise. The region operates under heterogeneous regulations, incompatible tariff structures, and operational mechanisms focused more on national priorities than regional ones. In other words, while electricity can cross borders, regulations still cannot.
That is why moving toward a Latin American and Caribbean Energy Integration Treaty—proposed by OLADE—represents one of the most significant institutional efforts in regional energy policy in recent years. This binding legal instrument would not only establish clear rules for energy exchange but also send a strong signal to investors, multilateral institutions, and global markets.
The energy transition has evolved beyond the climate agenda; it is now increasingly defined by disputes over technological sovereignty, economic security, and industrial leadership. Addressing these challenges collectively as a region strengthens our position in the global order.
LAC holds an unprecedented comparative advantage: critical minerals, vast renewable capacity, strong storage potential, and major reserves of lithium and copper, alongside significant oil and gas resources. But without effective integration, that advantage could be lost.
History offers a clear lesson: regions that share infrastructure also tend to share stability and prosperity.
