Regional electricity trade is gaining importance in many parts of the world. In LAC, however, most electricity is still traded bilaterally, as seen in the interconnections between Brazil, Paraguay and Argentina. The volume of cross-border electricity trade in the region makes up less than 5% of the total regional generation (6% in Central America, 1.5% in the Andean region and 5% in the Southern Cone). In the Caribbean, cross-border electricity trade is at an early stage, with progress limited to initial studies for binational interconnections. Bilateral trade, while valuable, is limited to direct exchanges between two countries, often based on specific contracts, treaties or physical interconnections, which restricts market flexibility and the optimization of resources at a broader scale. In contrast, progressive market integration involves establishing regional electricity markets with multilateral trading platforms, enabling multiple participants to buy and sell electricity across borders more freely and efficiently. Moving from bilateral trade to deeper, multilateral market integration represents a critical pathway to fully exploit regional complementarities, reduce costs, increase renewables integration and improve system reliability. Some of the primary obstacles to regional electricity trade in LAC include a fragmented vision for regional planning and benefits, the need to enforce existing regulations and treaties to maximize the use of available infrastructure, and limited or slow investment in new transmission infrastructure. The region must also strengthen existing assets to ensure continuity in transactions. Another impediment is the willingness to support the structure of ad-hoc financing mechanisms that maximize benefits, and multilateral development banks can play a catalytic role here. Platforms for cooperation and trust-building BOX 5 Beyond infrastructure and finance, effective integration requires institutional mechanisms that sustain dialogue and build trust. Regional cooperation platforms play a critical role by enabling countries to share experiences, align standards and coordinate long-term planning. Such platforms are indispensable for moving beyond ad-hoc bilateral exchanges and laying the foundations for true multilateral electricity markets. 16 Advancing Latin America’s Power System Transformation

Advancing Latin America%27s Power System Transformation 2025