Call it a triple-edged sword… or a dog and pony show with cats… or a rain of fire…

Or you can just call it plain old nonsensical. That’s what the past few days have been for Latin American markets. From the Mexican border to the tip of Cape Horn, Chile, markets have tumbled fiercely on the news that both Brazil and Argentina are injecting government into the private investment sector.

Brazil’s government wants its state-controled banks to buy stakes in private financial institutions. The announcement, made on Wednesday, did not include any names, but there are several well-known institutions that could be affected by this:

Banco Bradesco (BBD:NYSE)
Banco Itau Holding Financeira (ITU:NYSE)
Unibanco (UBB:NYSE)

Things may be a little worse in Argentina. President Cristina Fernandez de Kirchner announced that the government will take over the $30 billion private pension fund.

She said that Argentina must protect its retirees, and that the country’s constitution requires the president to provide pensions. Last year when the government allowed citizens to chose between privatized pensions and government pensions, only 20% of all people with pensions chose the government’s plan.

In response, markets plummeted.

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On Monday, September 1, 2008, the lights in Caracas and eight surrounding states in Venezuela went out.

An 800,000-volt transmission line failed, and five gigawatts of power were eliminated from the powergrid. A press report said that Zulia, the Venezuelan state a the heart of the oil industry, was “the state most affected by the blackout.”

Now, the national power company, Corpoelec says it will spend $13 billion in power investments for thermo and hydro plants. More than 30 new projects are expected to be funded.

Transmission and distribution networks will account for roughly half the number of new projects. But there are some rumors of diversification in the OPEC member’s power generation. In fact, Menpet, Venezuela’s energy and oil ministry, has installed 779 solar panel systems and is planning a solar panel factory.

And last year, Chavez said he would use oil money to build an offshore wind farm on the Caribbean coast.

Turns out, Venezuela is not alone when it comes to renewable energy investments…

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There are those who will tell you that oil is a cyclical business and a global fungible commodity. It rises and falls with the business phase. If you look at a hundred-year chart, it is as obvious as a sidewinder on a sand dune. A sine wave through time — up and down in seven-year cycles.

But there are others who believe in the “Peak Oil” argument, the ultimate end-game, like a Suburban crushing a Subaru at the end of a long hill. Peak Oil enthusiasts will point to long lists of numbers, detailed maps of known reserves, past prognosticators of genius, and declare with tinfoil-hat fervor that “we are running out of oil.”

I’ve read these books and listened to the speeches. The idea that there is a finite amount of oil on the planet, and we are near the point where we will extract less in the next hundred years than we did in the past. Makes sense to me, as does the business cycle. I don’t know if the hundred-year history of the oil cycle is over. There is always a “this time it’s different” ideology at the peak. But then again, sometimes, it is different.

What we do know — what isn’t in dispute — is that oil is expensive, and that by all accounts the easy oil has already been found and is being extracted at a furious pace.

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