Keynote Address at the Connect 2022 Ministerial

Keynote Address at the Connect 2022 Ministerial

Remarks

Wendy R. Sherman
Under Secretary for Political Affairs 
Inter-American Development Bank

Washington, DC

June 27, 2013

Good morning.  Buenos dias.

It is truly a privilege to be here today with so many distinguished representatives from Central and Latin America, regional and development organizations, and leaders from the private sector.  I want to thank Executive Director Gustavo Arnavat for that introduction and President Moreno and the Inter-American Development Bank for hosting the first Connect 2022 Ministerial.  Thanks to President Moreno’s extraordinary leadership, the IDB is today one of the premier regional development banks in the world. 

In many ways, the Bank’s recent reforms and growth mirror the transformation of the region itself.  The Western Hemisphere is on a clear trajectory of greater opportunity, greater democracy, and greater prosperity.  We see the consolidation of democratic values and freer and more inclusive societies.  We see some of the world’s biggest and fastest growing economies.  We see a growing middle class that today is nearly 300 million strong.  And increasingly, we see a region that is becoming a vital part of the global energy market, responsible for significant portion of the world’s oil, gas, and coal and home to a rich and diverse array of renewable energy sources, from geothermal in El Salvador and Guatemala, to wind in Nicaragua and Mexico, to hydropower in Brazil and Chile, and biomass in Honduras and Costa Rica.

While we see the incredible progress the region has made, there are still some very basic and important questions that need to be answered.  We emphasize the importance of education, but how can children focus on their studies when there are regular blackouts?  How can we improve health when some still rely on burning coal and wood for light and heat?  Can we talk honestly about expanding economic opportunity to all when many in our region still lack access to affordable, reliable electricity?

Today we look to the future of our Hemisphere not with trepidation about looming conflicts and crises, but with confidence that together -- as equal partners -- we can face what President Moreno has called the “good challenges” of sustainable economic growth and development. This is why the United States has launched one of the most active periods of American engagement with our hemispheric partners in a very long time.  Recent trips to the region by President Obama, Vice-President Biden, and Secretary Kerry, as well as visits to the White House by the Presidents of Chile and Peru and the upcoming state visit of President Rousseff of Brazil, demonstrate a conscious effort by the Obama Administration to define a shared vision for the future of our Hemisphere and outline a practical and concrete agenda for action.  We gather here today to advance a central item on that agenda – our need to transition to a more reliable, affordable, interconnected, commercially viable, and sustainable electricity network. 

The Challenge

The simple fact is that we will not reach our full potential as a region – not in economic competitiveness, not in job creation, not in education, and not in healthcare – if tens of millions of people in our hemisphere are off the grid and hundreds of millions more are limited to unreliable and expensive electricity. 

The scope of the challenge is clear. 

First, thanks to booming economies and a growing middle class, energy demand in our region is skyrocketing.  Studies suggest that most Central American countries will need to double their energy supply in the next 15 years to keep up with demand – an endeavor that will require $25 billion in power sector investment by 2030.  

Second, increased demand is driving up the cost of energy.  Central America and much of the Caribbean pay very high prices for electricity – ranging from two to five times what we pay here in Washington, DC.  Expensive electricity hurts competitiveness, undermines investment, slows job growth, and ultimately undercuts the welfare and security of households.

Third, climate change threatens the region’s energy security and environment.  In the Caribbean, continued reliance on conventional, imported heavy oil and diesel, is releasing toxins into communities and greenhouse gases into the atmosphere.  In Central America, climate change is affecting patterns and levels of water availability – a troubling development in a region that depends on hydropower for more than half of its energy generation.  Climate change also puts the region’s biodiversity – which is a source of 40% of global biodiversity – at risk. 

As President Obama noted in his speech on Tuesday, no country in our region can confront the energy and climate challenge on its own.  It is not viable from a technical perspective, it is not viable from a business perspective, and it is not viable from a political perspective.

The Response

This is why we supported Colombia’s launch of the Connecting the Americas 2022 initiative at the Sixth Summit of the Americas last year.  The goal of this initiative is unambiguous: universal access to reliable, clean, and affordable electricity in one decade so families and businesses have the energy they need at a price they can afford. To achieve this goal, we all pledged to work together to create a modern, commercially viable electricity network in the Western Hemisphere that attracts private investment and transforms power markets to incorporate cleaner, renewable, and more efficient sources of energy. 

We have made important progress over the past year.  As of this month, new regional market rules are in place.  These rules are essential prerequisites to creating the business and legal climate that encourages investors to take capital and development risks.  Later this summer, the Electrical Interconnection System of Central America, or SIEPAC [SEE-ay-pack] line should be completed – connecting 37 million consumers in Panama, Costa Rica, Honduras, Nicaragua, El Salvador, and Guatemala. 

We must build on this momentum by taking three important steps.

The first is, by far, the easiest: complete the physical construction of the SIEPAC line in Costa Rica, ensure that the physical infrastructure is strong and resilient, and that the company operating the line has the requisite resources to invest in the line’s maintenance and expansion.

The second is contractual.  Companies will not make long-term investments in power generation if they don’t have confidence in their long-term access to a power line.  And banks will not finance these investments if there is no common model for contracts and credible mechanisms to resolve disputes.  We can and we must solve these issues over the next two days.

The third challenge is financial.  We need to leverage private capital to support the Connect 2022 initiative.  The $25 billion in power sector investment we need by 2030 will not come from the collective treasuries of the countries in this region.  If we can create the conditions that allow businesses to make a return on their investments, it will not have to.  This is an area where the United States can help.  The Export-Import Bank and the Overseas Private Investment Corporation are able to provide excellent terms for projects that include an element of U.S. industry.  Just in this past year, these two institutions lined up $650 million in potential new projects.  Our development, energy, commerce, and trade agencies all stand ready to assist and support your efforts however and wherever we can.

Now is the time for definitive action – to clear the outstanding technical, contractual, and financial hurdles…to finalize the legal, regulatory, operational, and market conditions required for greater investment… and to diversify our energy supplies. We have the knowledge and the means to do all of these things.  All we need is political will, leadership, and courage.  Political will to focus our governments on this effort in the midst of competing and often urgent priorities.  Leadership to stand up to powerful interest groups protecting legacy investments in dirty and expensive energy sources and promote low-cost and clean energy alternatives.  And courage to innovate, take risks, and transcend our differences for the common good. 

I wish all of you a productive and successful ministerial. 

Thank you very much. 

ENDS

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