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

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