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Paper short abstract:

Development banks can better promote socially-oriented green industrial policies, especially in (neo)extractivist economies, for energy transitions to serve as developmental opportunities, and to overcome a globally hegemonic green transition dominated by high-income countries and private interests.

Paper long abstract:

For South America’s developing and fossil fuel-dependent economies, energy transitions create openings with the potential to transform (neo-)extractivist development models. Decarbonization can reduce hydrocarbon extraction and generate industrial capacity for more sustainable energy sectors to improve terms-of-trade and progress social welfare. At the same time, these openings pose risk whereby pursuing new energy sectors can entrench (neo-)extractivist challenges. Development financing institutions (DFIs) have an outsized financial and policy influence on whether opportunities outweigh challenges for South America’s hydrocarbon economies. They impact green industrialization approaches—critical to whether energy transition can serve long-term development goals and escape the existing trend of being concentrated in high-income countries and by private transnational corporations.

This article examines DFIs’ impact on energy transitions in Brazil and Ecuador, as two paradigmatic yet diverse sites of hydrocarbon (neo-)extractivism and energy transitions heavily leaning on predominantly United States- and Chinese-led DFIs. By advancing a critical international political economy (IPE) perspective to analyze patterns of DFI energy initiatives in Brazil and Ecuador, I made three key arguments. First, US- and Chinese-led DFIs strategies tend toward maintaining existing globalized capitalist dynamics of energy and financial networks. There is a particularly detrimental lack of focus on green and just industrialization. Second, Brazil and Ecuador are increasingly turning to regional and national DFIs to serve developmental goals, with varying degrees of success that can be attributed to their respective positions in the IPE. Third, this shifting landscape uncovers opportunities for a more productive reform of the existing DFI network.