Latin America begins to debate the management of its natural resources

Governments and multilateral organisations are discussing how to make the most of Latin America’s rich natural resources, in a way that avoids the risk of socio-environmental conflicts and encourages social and economic development.

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While raw materials may no longer be worth as much as they were for much of the past decade, they will surely continue to play a crucial role in Latin America’s future – in the medium term as much as in the long term. It’s not exactly as if they are set to lose their value entirely, nor that the region is going to stop digging them up and exporting them, but quite simply it is set to receive less in the way of economic rewards for its efforts, in terms of both revenue and inward investment. One thing that remains certain, though, is that concerns over the environmental impact of extracting them, and their management as strategic resources that are largely non-renewable, will continue to be as pressing as ever.

For this reason, in January ministers and other governmental dignitaries – from Brazil, Chile, Colombia, the Dominican Republic, Ecuador, Peru, Uruguay and Venezuela – gathered in the Chilean capital of Santiago for a meeting organised jointly by Norway and the Economic Commission for Latin America and the Caribbean (CEPAL), as a first step towards a developing a regional pact on the governance of natural resources.

Essentially, what CEPAL is proposing that the Community of Latin American and Caribbean States (CELAC) does consists of four strategies. The first consists of the creation of a long-term policy that safeguards the contribution of the extractives sector to social inclusion and the diversification of national production. The second calls for the reform of fiscal frameworks in countries where extractive operations take place, so that the State can benefit from a more progressive portion of the revenues generated (to go towards public spending).

The third point of CEPAL’s proposals consider the institutionalisation of economic mechanisms that enable long-term strategies of saving and investing the financial benefits of natural resource extraction. Finally, the proposals emphasise the need to strengthen the capacity of public institutions for the management and resolution of socio-environmental and labour conflicts that are associated with the extractives sector.

Degraded forest in the Brazilian state of Pará, in the northern Amazon region. Logging, due to high demand for the area’s vast forestry resources, has often been one of the major headaches for authorities attempting to find a balance between exploitation of natural resources and sustainability. Photo courtesy of Reuters via El País.

Latin America is host to one fifth of the world’s forested area, in spite of the fact that it covers just 13% of the total land surface area. It also enjoys around 15% of the planet’s arable land and one third of total fresh water reserves. In terms of subsoil resources, the continent holds a fifth of petroleum reserves, as well as a quarter of the world’s biofuel reserves. Just as significantly, hidden below the region’s surface is 44% of the world’s copper, nearly 50% of silver, 65% of lithium, 33% of tin, and 22% of iron. Furthermore, its fields produce 52% of the global soy harvest, as well as 16% of the world’s beef and corn and 11% of milk.

“Having an inclusive and democratic system, solid and competent public institutions, and a society that is able to exercise effective control over its own energy resources, are all essential”, the Norwegian Ambassador in Chile, Hege Araldsen, claimed at the Santiago summit. Among the others who took part were experts from the World Economic Forum (WEF), the World Bank, and the German Federal Enterprise for International Cooperation (GIZ by its initials in German).

Another CEPAL report suggests that mining revenue through 2010-2012 made up some 16.7% of GDP in Chile, 9% in Peru, and 4.9% in Bolivia. For these countries, tax receipts from the industry are of utmost importance: they represent 19.4% of all fiscal income in Chile, 8.3% in Peru, and 4.2% in Bolivia. However, if one compares the amount of revenue that mining generates to its tax contributions, the 36% that Canada collects sounds like a lot when shown against the 17.2% collected in Peru, 15.7% in Colombia, 15.3% in Mexico, or just 9.3% in Brazil. Meanwhile Argentina collects 25.8%, Bolivia 24.5%, and Chile 25.9%. These states collect income not only from taxes and royalties, but also thanks to the presence of state mining companies.

The hydrocarbons industry, meanwhile, makes up 12.6% of GDP in Ecuador, 11.2% in Venezuela, 7.7% in Mexico, 7.6% in Colombia, and 6% in Bolivia. Tax receipts generated by the sector make up 42.7% of the total in Ecuador, 41.5% in Venezuela, 35.1% in Mexico, and 31.8% in Bolivia. Among those countries examined by CEPAL’s study, Mexico was the one that captured the greatest proportion of income from its hydrocarbons sector (78.4% in 2010/12), although the Mexican government’s recent reforms to the energy sector – opening it up to private capital and foreign investment – is likely to change the equation. In Bolivia the equivalent rate was 62.6%, in Ecuador 61.9%, in Peru 51.6%, in Colombia 41.6%, in Venezuela 39.2%, in Brazil 36.8%, and in Argentina 33.6% (although this figure is likely to have changed since the renationalisation of a controlling stake in YPF – which was formerly a subsidiary of the Spanish company Repsol – in 2012).

Demand for Latin American oil and gas is projected to keep growing, in spite of the recent drop in the price of oil and other commodities, meaning that major projects such as the controversial Camisea gas concession in the Peruvian Amazon are not going away any time soon. Photo courtesy of AFP via The Guardian.

In a keynote address at the National Autonomous University of Mexico, the executive secretary of CEPAL, Alicia Bárcena, warned that in the current context of falling exports and lower international commodity prices, Latin America and the Caribbean is at a crossroads. “The export model is exhausted in economic terms, just as the welfare model is in social terms”, she explained. For this reason, Bárcena suggested that “in the short and medium term, the region’s countries need to confront the challenge of attracting and investing efficiently any extraordinary income that remains to be had, using criteria of social and environmental sustainability”. The aim is, on the one hand, to move beyond the “extractivist paradigm” towards productive diversification, and on the other, to bring about a transformation of capital originating from the region’s non-renewable resources into human capital, such as education and capacity-building, physical and social infrastructure, and innovation and technological development.

Yet just as there are those who reject the vision set out by Bárcena and who instead favour a free market model that would govern natural resources without the intervention of the State, there are also some other ecological academics who criticise what they have labelled the ‘raw materials consensus’ that has united governments of all colours across Latin America, in their quest to exploit natural resources.

One of these critical voices is the Argentinean sociologist Maristella Svampa, who is one among many who opposes open-cast mining, fracking, and transgenic (or genetically modified – GM) agriculture, among other methods of mass production. She also rejects the prevailing “productivist vision”, which “sees [economic] growth as an end in itself, as if natural resources were infinite”. She warns against “the idea of a Latin America with a prodigious nature which will come to the rescue and pave the way for development, an ‘El Dorado-ist’ vision that has always accompanied the Latin American tradition”.

This article is an adaptation into English of the Spanish-language original, which was written by Alejandro Rebossio and appeared in El País in March 2015, and can be found here.