Energy and technological development in Latin America

Abstract

By now, the relationship between energy consumption and economic growth is familiar to everyone: it is an almost perfect positive correlation which appears across time and in cross-national comparisons. Figure 1 shows the relationship between energy consumption and GNP in 1973 for select countries at different levels of development. The robustness of this relationship will necessitate macroeconomic adjustments due to oil price increases of 1973 and subsequent changes in the world oil market. Low fuel prices, which were instrumental in enabling rapid economic growth rates in the industrial west, can no longer be counted upon for growth in the developing world. While considerable ambiguity remains regarding the direction of causation whether from energy to economy or the other way around—the robustness of energy-economy interactions is not at issue: energy use, a necessary input for economic growth, is also a function of growth. Technological change in the energy area emerges in the forefront of policy concerns worldwide.