At their fifth bi-national cabinet meeting, held last week in Ilo, Moquegua, the Vizcarra and Morales administrations agreed outline terms for the import into Peru of Bolivian gas. The main argument proffered by the Peruvian side was that it would reduce energy prices substantially for consumers.

For Bolivia, entry into the Peruvian energy market would provide an important new source of demand for Bolivian gas at a point when the future of current export agreements with Brazil and Argentina are in doubt. Bolivia also hopes to use the port of Ilo to export liquified natural gas (LNG) to markets in Asia.

However, as Humberto Campodónico has argued, importing Bolivian gas raises serious questions about the future of the pipeline between Camisea and Peru’s southernmost regions. The project, the subject of corruption allegations on the part of Odebrecht, is currently suspended. Campodónico points to agreements by which Bolivian gas would be used to generate electricity in southern Peru.

The southern gas pipeline has long been a political hot potato. Business groups in Lima have expressed doubts as to whether supplying the south is the best use of this natural resource; it is more profitable to export gas than to consume it internally. At the same time, the allure of cheaper gas is a strong motivating factor in Peru’s southern regions in pushing for its approval.

While construction of the pipeline is halted, its future is becoming increasingly uncertain. As Campodónico notes, the Bolivian deal is not just to supply a few towns in southern Puno; the agreements to supply generating plants in Tacna and Moquegua are far more significant and are not just for the short term. They threaten the economic viability of the southern pipeline.