Local Content Frameworks in Latin American Oil and Gas sector: Lessons from Ecuador and Colombia

During recent decades, debate around non-renewable resources has mainly focused on finding sustainable and alternative ways to enhance development beyond the revenues generated by this sector and to avoid the resource curse. When it comes to extractive industries, particularly the oil and gas sector, these concerns are of major relevance due to the importance of this sector in many economies. For policy makers a key challenge is to find equilibrium between the short-term benefits of natural resource extraction and long-term requirements for achieving sustainable growth. Against a backdrop of contradictions and hard choices, local content is considered as an attractive solution to this dilemma. This paper provides an analysis of local content frameworks and their outcomes in seven oil and gas producing countries in Latin America. Based on a review of regional experiences, the research aims to identify which types of local content framework produce more positive outcomes in terms of local employment, national industry participation and skills development. In order to do so, a regional catalogue of local content frameworks has been developed with the aim of helping fill the current knowledge gap in this regard. This study also explores the factors that can influence the outcomes of local content by drawing on the experiences of Ecuador and Colombia and using evidence gathered through interviews and meetings with representatives from the public and private sectors, as well as academics and other experts in this field. Findings suggest that the greater the specificity of local content frameworks, the better the outcomes. Among countries with fairly similar frameworks in terms of specificity, a friendly business environment and a long-term vision of how the oil and gas sector can contribute to broader development goals appear to produce better results than a more protectionist and state-centric approach focused on short-term goals such as local employment. It is intended that the findings of this research provide policy makers in Africa with insights that help guide decision-making around local content strategies. It is expected that drawing lessons from a resource rich region such as Latin America, whose experiences are more relatable to the challenges many countries in Africa face now, will be especially useful given that most existing literature on local content focuses on countries with incomparable contexts. Finally, this research provides policy makers and practitioners in Latin America with a much-needed comparative and regional perspective on local content which builds on existing literature and paves the way for further research.