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Let's take a hypothetical example of economic integration:

Algeria, wanting to reduce its dependence on imported coal, decides to install solar panels to provide electricity. Algeria does not possess the capacity to manufacture solar panels domestically, or the capability to build that capacity. So in order to obtain that capacity, they borrow a suitcase full of either US$ or € and hire a bunch of American, SE Asian or German engineers to build them their factories and train their workforce to use them. Why not engineers from Sub-Saharan Africa? Because they don't precisely have a surplus to lend out.

In order to repay the loan, they need hard currency. For sufficiently long amortisation times, they might be able to pay out of the ForEx savings from not having to import coal. But let's say that they want to get out from under the debt relatively quickly so as to not present a target to ForEx piranhas. So they want to sell some of the electricity that they produce. Who are they going to sell it to? The Americas? Russia? Good luck making that economical. The Middle East? The rest of North Africa? They have equivalent solar resources within shorter transmission range. Sub-Saharan Africa? They have superior resources within shorter transmission range. So they make a thirty-year take-or-pay contract with a Spanish utility that rolls out some HVDC cables across the Med.

Net results: Algeria gets electricity paid for by Spanish electricity consumers (and Australian coal miners). After amortisation is complete, Algeria also gets ForEx revenues that can be used to make other infrastructure projects happen that are beyond the technical capabilities of indigenous industry. Algeria gets indigenous solar panel production capacity. Spain gets solar power cheaper than than they would if they had to install the panels at their own latitude. Everybody gets to benefit from the displacement of coal power with solar power.

What, precisely, is wrong with this picture? (Except from the perspective of the Australian coal miners...)

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Aug 24th, 2010 at 12:45:47 PM EST
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