Latin American economists frequently bemoan the fact that the region is heavily dependent on exports of raw materials such as minerals, timber, agricultural products, and, of course, oil and gas. Economies suffer from dependence on commodity markets that generally concentrate wealth in the hands of a minority elite. That in turn tends to breed corruption, unemployment, and social unrest.

High commodity prices have made things worse in the region, giving countries a false sense of economic security as G.D.P. growth outperforms the developed world. As a result, countries have done little to diversify their economies: Mexico still exports crude and imports gasoline; Chile exports raw copper and imports copper wiring; and Argentina depends heavily on Asian soy markets for its wealth.

While economists, investors, and government officials fear that the current global financial crisis will put downward pressure on demand – and in turn, prices – for commodities, a greater threat could be imminent. The region's status as a net energy exporter is at risk from bad government policies; in the long term, energy trade deficits could put pressure on Latin America’s economic health.

Of course Latin America will remain a net energy exporter in the short and mid-term, as its crude production is well above consumption and natural gas output is a wash. The region produces 14 percent of the world's energy and consumes just 9 percent, according to a July 2008 report from Spanish bank BBVA. And with the latest Santos finds, Brazil likely will become a net exporter in the mid-term, and possibly even join OPEC.

But Latin American countries are quickly eating into their energy reserves, which account for just 9 percent of the world's total. While consumption clearly has increased over the years, reserves have stayed static, declining sharply in Mexico's crude business and Argentina's natural gas market.

Two fundamental factors are at play. Government policies are failing to create the right incentives for production and reserve replacement, while subsidies and price controls are boosting consumption. Nationalization programs in Venezuela, Ecuador, and Bolivia have put a damper on production in the last two years. State-run oil companies have proved inefficient in taking over oil and gas fields, while private-sector operators have been reluctant to invest in their low-margin minority stakes. Venezuela, which produced over 3.2 million barrels of oil per day at the beginning of the decade, produced just 2.33 MMbbl/d in August 2008, according to OPEC data.

Mexico also has seen its production levels tumble to an average of 2.76 MMbbl/d in August 2008, down from 3.38 MMbbl/d in 2004, according to state oil company Pemex. The causes are well known. Pemex lacks the financial and operational flexibility to invest in its upstream and therefore replace declining fields.

Meanwhile energy consumption has showed no signs of abating – not even this year, with record high prices. That's because the region has high fuel subsidies. In fact, countries like Venezuela have some of the cheapest gasoline on the planet, while Argentina's government fixes oil and gas prices artificially low.

But as the gap narrows between exports and imports, governments will start to take measures to reverse the trend. After years of mulling reforms, Mexico's congress is making real progress in response to the country's alarming rate of production declines. But the final product will be far from what Mexico needs to get back on track.

Argentina's government likewise is taking steps to ease the pressure, as declining domestic production and increasing consumption have forced it to absorb the costs of astronomically high L.N.G. imports. As a result, the government has started increasing energy rates for industrial and high-end residential consumers. Unfortunately, once governments start feeling the fiscal pinch of increased imports, it’s usually too late to change course.