Source: La Jornada
Every year, Latin America climbs in global geopolitical rankings because of the steady increase in its declared reserves of strategic resources. When Petrobras announced the discovery of oil in the pre-salt layer in 2006, which may contain up to 100 billion barrels of crude, Brazil’s significance in the world grew significantly: It is on track to becoming the fourth-largest global oil producer by 2020.
Last week it emerged that Brazil also has enormous natural gas reserves in the states of Mato Grosso and Minas Gerais. Edison Lobão, minister of Mines and Energy, said that in five years the country will be self-sufficient and will become an exporter, although it will continue to import natural gas from Bolivia (O Globo, 29 April 2012). Brazil has been only a modest producer of natural gas up to now, with reserves of 340 billion cubic meters, making the country the 36th natural gas producer.
The figures announced recently by the government of Dilma Rousseff increase the natural gas reserves to 7 trillion cubic meters, which places Brazil among the five largest gas-producing countries, behind Russia, Iran, and Qatar, and on a par with Saudi Arabia. According to Lobão, it’s a spectacular increase, not unlike the jump in oil reserves resulting from the pre-salt layer discovery. In short, the sixth-largest economy in the world finds itself as a gas and oil power, in a region whose importance regarding mineral and energy resources continues to rise.
Barely a year ago, Venezuela displaced Saudi Arabia as the country with the largest oil reserves. In addition, Venezuela is the third-largest globally in bauxite reserves, fourth in gold, sixth in natural gas and tenth in iron. In 2007 it emerged that Peru has enormous reserves of uranium, scattered in 13 of its 25 regions. Extraction has already started in the southern Carabaya Province, in Puno Region. And we mustn’t forget that Chile is the largest global producer of copper, and Brazil the largest producer of iron.
A recent report by Metals Economics Group indicates that the fall of the stock market favors investments in the mining industry: It grew 44 percent in 2010 and 50 percent in 2011, after a sharp drop in 2009 (World Exploration Trends 2012). Latin America is the primary destination for mining investment in the world, with 25 percent of total investment, primarily in Chile, Peru, Brazil, Colombia, Mexico and Argentina. The latter three countries are large producers of gold. In 2003, hardly 10 percent of global mining investment was headed towards Latin America.
Peru is the primary destination for mining investment in the region, followed by Mexico, Chile and Brazil. In 2010, the region produced 51 percent of the world's silver, half the lithium, 45 percent of the copper, 27 percent of molybdenum, 25 percent of tin, 23 percent of zinc and bauxite, 19 percent of gold, and 18 percent of iron (Reuters, 16 April 2012). By 2020, $300 billion will have been invested in the mining sector.
This is a true disaster, since it reinforces the dependence of the region on the exploitation and exportation of its natural resources. Peruvian journalist Raúl Wiener states that 30 percent of tax revenues in his country originate from mining, and that “more investment in mining is the only way to more or less rapidly increase these funds in the short-term, and to move ahead with the social programs that every candidate must promise to win the elections, because to fight this sector would be to commit “harakiri” (La Primera, 12 April 2012).
The region occupies a prominent place, not only for its reserves of natural gas, shale gas, oil and iron, but also for reserves in various other metals. For multinationals, it’s time to do business. How can we avoid this avalanche of investments that prey on nature and solidify our dependence? What can we do so that the earth’s riches do not become a curse, as Alberto Acosta, ex-president of the Constituent Assembly of Ecuador, has asked?
First of all, the governments do not have a clear awareness that the region has become a new Middle East. Tied to a short-term view to increase tax revenues, they don't even know what to do to defend their riches. The second matter is that the resistance of [social] movements, although vigorous and courageous, does not have the power necessary to slow this process. For each endeavor that is slowed or postponed, such as the Conga gold mining project in Peru, dozens of others follow.
Thirdly, the only country in the region that has the technological and financial ability to take on such resource extraction and industrialization projects is Brazil, through Vale (second-largest mining company in the world), Petrobras (fourth-largest oil company), Braskem (fifth-largest petrochemical), and its large construction firms such as Odebrecht, OAS, Andrade Gutierrez, Camargo Correa and Queiroz Galvão. And count on the Brazilian Development Bank (BNDES) – the world’s largest development bank – to finance any project.
The failure of the refinery project that Ecuadorian state-owned companies Petroecuador and PDVSA chose to build in Manabí, creating a binational company to develop the project, shows the limits of regional initiatives. The project was announced by Ecuadorian President Rafael Correa in 2008 but was never realized. In mid-April, Correa announced that China would be willing to finance the Refinería del Pacífico project, to the tune of $13 billion, and with a 2016 completion date (La Hora, 21 April 2012). Ecuador had to turn to China after the crisis and breakup with the Brazilian companies in 2008.
The prevailing feeling is that not only are the regional governments willing to intensify use of the extractive model with greater state involvement, but also the conditions do not exist in order to avoid the multinationals. The good news – if only relatively so – is that the options have increased: The traditional North American mega-firms have been joined by those of China and Brazil. Those who believe the latter firms are better can ask the people – and the governments – that must bear them.