This report examines the connections, if any, between efforts to enhance development through electrification of the world's poorest households with the parallel efforts to introduce market forces in the power sector. Advocates for equitable economic development have rightly signaled many concerns about the process of electricity reform. Their fears range from the higher prices that often accompany reform to the concern that private firms motivated for profits will not have an incentive to provide public services. Some of these fears have been articulated by implying the existence of a "golden era" when state owned firms dominated the power sector and provided energy services equitably across societies; in fact, that golden era never existed in most countries. Public utilities traditionally have been highly politicized; in many countries they have concentrated their services on urban elites and often neglected the poorest populations.

The Brazilian energy sector reform followed a textbook model from early 1990s Latin America - specifically Chile and Argentina - premised on introducing competition to the wholesale power market while maintaining monopolies in transmission and distribution. The textbook electricity reform model also established an independent system operator and independent regulator to oversee system management. Brazil began its power sector reform by privatizing distribution, followed by generation and transmission. And because the drought and successive power rationing of 2001-02, the Brazilian power market is being reformed again. The wholesale market will be ruled by long term contracts and new institutions are being developed to coordinate the sector. In this contract environment, IPPs stand out less than in countries with a single buyer model (e.g. South East Asia, Mexico).

Discussions of trade in natural gas in South America's Southern Cone (Argentina, Bolivia, Brazil, Chile, Paraguay and Uruguay) began as early as the 1950s. But it was not until 1972 that the first international gas pipeline in the region, linking Bolivia and Argentina, was built. It was twenty years later before significant gas pipeline projects integrating Chile and Argentina were proposed, followed by one large project connecting Bolivia and Brazil.

This paper examines three historical cases to understand why there was a 25 year lag between the first international pipeline project and the others, and to uncover key factors that determine why particular pipeline projects were built while similar proposed pipelines languished.

Starting in the late 1980s many nations began to reform their electric power markets away from state-dominated systems to those with a greater role for market forces. In developing countries, especially, these reforms have proved challenging. Successful reform requires a complex set of institutions and complementary reforms, such as in public finance and corporate governance. State-dominated systems typically create their own powerful constituencies that block or redirect the reform process. In an earlier detailed study of reform in five key developing countries, the Program on Energy and Sustainable Development (PESD) found that the result of these pressures, in most cases, is a “hybrid” outcome—an electric power system that is partly reformed and partly dominated by the state 2. Almost always the first step in hybrid reform is the encouragement of private investors to build independent power projects (IPPs)—generators that are hooked to the main power system and, typically, supply electricity according to long-term power purchase agreements (PPAs).

Since Brazil and West Germany surprised the world by announcing that they had reached the nuclear "deal of the century" in 1975, many national and international observers have feared that Brazil sought to develop atomic weapons. Brazilian rejection of the Nuclear Non-Proliferation and Tlatelolco treaties, insistence on its legal right to develop so-called peaceful nuclear explosives (PNEs), aspirations to great power status, authoritarian military government, and tacit nuclear rivalry with Argentina aroused concern that this ambitious program of reactor construction and technology transfer would mask an effort to reach the bomb.

Although difficult financial circumstances derailed this program in the late 1970s, by the early 1980s press reports began to emerge indicating that a secretive "parallel" nuclear program under military direction was underway. Transition to democratic rule in 1985 failed to clarify the nature and objectives of this second effort, and provocative statements by senior military officers intensified concerns. This second effort persevered in the face of the severe economic conditions that made the 1980s a "lost decade" for Latin American countries, increasing international stress on nonproliferation, and protests from domestic anti-nuclear and environmental groups, as well as a 1990 investigation by the national congress.

By 1991, however, Brazil had formally renounced PNEs, agreed to establish bilateral safeguards with Argentina and to accept International Atomic Energy Agency (IAEA) inspection of formerly secret nuclear facilities, and committed to ratifying the Treaty of Tlatelolco. This marked the apparent reversal of a long trajectory toward the proliferation threshold, and thus assuaged apprehension within and outside the country. Yet military involvement in nuclear technological development continued essentially unaltered, and Brazil now enjoys the distinction of being one of the few states with the indigenous capacity to produce fissile material necessary to construct atomic weapons.

This paper seeks to answer two questions: Given limited resources and domestic and foreign opposition, how did the Brazilian military succeed in developing this capacity? Given their determined effort and enduring role in nuclear development, why did the armed forces stop short of the bomb?

This study answers these two questions through investigation of domestic political processes, which involve the formation and maintenance of programmatic coalitions that marshal human, material, and political resources for technological development. Such coalitions encounter constraints which include competition for scarce human and financial capital, international technological denial, and domestic and international opposition. Such programs must be either effectively insulated from domestic challenges, or politically defended and normatively legitimated in spite of them.

This paper examines technical and institutional possibilities for improving the ability of the international safeguards regime to prevent or slow the spread of nuclear weapons. It relies strongly on the experience of the recently uncovered Iraqi nuclear-weapons program and the role of the International Atomic Energy Agency (IAEA) and the United Nations in the discovery of the program's extent and scope.

The Iraqi program and its exposure following the Gulf War surprised and disturbed much of the international community. However, the shock generated by the extent and the size of an effort that had been suspected but remained grossly underestimated and misunderstood has given a strong political impetus to the will of the international community for strengthening the non-proliferation regime.

This paper makes a number of suggestions based on a review of the Iraqi effort and on an assessment of possible future attempts by other nations to acquire nuclear weapons.