Stratfor (subscription required) recently reported that Argentine and Bolivian leaders kicked off the $1.8 billion Northeast Argentine Pipeline (GNEA) project in Buenos Aires on Jan. 25.  While this has important ramifications for the South American hydrocarbon picture, Stratfor insightfully notes that this is just another harbinger that the geopolitical structure of South America is changing:  once again Brazil seems to be growing into a regional powerhouse at the same time that many of Brazil’s regional rivals — specifically Argentina, Bolivia and Venezuela — have descended into populism.  As the analysis detailed:

“…Argentina used to export natural gas to both Brazil and Chile, but the 2001 crash followed by the populist policies — primarily price freezes that force energy firms to operate at a loss — of former Argentine President Nestor Kirchner and now President Cristina Fernandez de Kirchner have all but halted investment…

Rather than buckle down and do the hard work of re-investing — which would require higher prices a restive population is unwilling to pay — Kirchner/Fernandez have chosen to up imports from Bolivia to close the widening gap. If realized, GNEA would increase potential imports from Bolivia to Argentina from 2.8 billion cubic meters (bcm) a year to 10.1 bcm. Argentina’s plan is to push off the upfront cost of developing its own production on to Bolivia.

This would be a great short-term fix for Argentina’s energy woes if not for the fact that Bolivia does not have the production to export. Once domestic demand is removed from the equation, Bolivia has only about 10.9 bcm in total to export, and all but 2.2 bcm already is absorbed by pre-existing contracts with Brazil. Bolivia is of similar mind to Argentina in that populist leaders — in this case, President Evo Morales — are unwilling (or perhaps more accurately, unable) to fund the development of their own resources.

Yet Argentina’s plans will probably still work out…. Brazil has decided to deal with Bolivian populism by divorcing itself from Bolivian supplies, opting instead for expanded domestic production, imported liquefied natural gas, and fresh investments into nuclear power. By the time GNEA comes on line in about three years, the decrease in Brazilian demand for Bolivian natural gas should free up all that Argentina needs.

But there is one niggling catch: Brazil is not washing its hands of Bolivia. Brazilian energy giant Petroleo Brasileiro already is the largest foreign investor in Bolivia and, not coincidentally, leads most of the consortia that produce natural gas in that country. (Bolivia’s capability for producing natural gas leaves about as much to be desired as Argentina’s development plans.)…”