In the oil industry, as in many other areas, state enterprise in Latin America has developed as an alternative to foreign investment. Such an alternative suggests an obvious point of comparison. This chapter will therefore begin by considering those areas in which the foreign companies might be thought to possess an advantage – scale economies, access to technology and finance, and experience of diversity – and will go on to examine the extent to which state companies can be given greater freedom in pricing and investment decisions. Finally, it will go on to consider the less tangible but perhaps even more important question of political control.

In order to evaluate these questions, it will be useful to look again at the activities of the main state oil companies and the position of their oil industries. It can be seen from table 23.1 that two state companies (Pemex and Petrovén) which already control very extensive hydrocarbon reserves are the only ones to have maintained a completely unqualified state monopoly upstream. It is much more common, however, for state oil companies to maintain a monopoly of refining and of the marketing of natural gas; of the six companies already considered, only YPF allows private refineries to operate and there is evidence that this policy has inflicted significant extra costs upon the state enterprise.