Guatemala: Oil Companies and the Subservience of the Government

Guatemala is the only oil-producing country in Central America, with “black gold” being its fourth highest export.

Guatemala is the only oil-producing country in Central America, with “black gold” being its fourth highest export. And according to a study conducted by Sarah Aid and Adrian Boutereiva, Guatemala is located on an old geological belt across which 75% of the world’s oil reserves can be found. Oilwatch Mesoamerica has pointed out the discrepancy between statistics distributed by the Ministry of Energy and Mines (MEM) on oil extraction and a growing corporate presence, which seems to indicate a poorly-hidden black market for buying and selling oil. Regardless, it is undeniable that the four oil companies established in the country—Perenco Guatemala Limited, Compañía General de Combustibles, Petro Latina Guatemala Corp., and Petro Energy S.A.—delight in the favorable conditions available to them: for example, 1% royalties, and ‘environmental impact studies’ that end up providing very little by way of requirements for the companies.

In Guatemala, there are five regions being explored for oil deposits, located within Izabal, Alta Verapaz, and Petén, where one can find the Xan. This oilfield, where more than 95% of the annual national product of oil is extracted, is owned by Perenco since it acquired Basic Resources (2001).  The arrival of the French company on the Guatemalan oil market has coincided with an overall drop in environmental protections, industrial security, and social assistance programs, as well as the firing of 50% of personnel working for Basic Resources.

Suspicions abound about the Guatemalan government displaying favoritism towards Perenco, a company that works essentially as a monopoly (it owns 98% of concessions in the country), and consequently wields enormous political influence, given the importance of its sector to the national economy.

The sycophancy the Executive has shown towards Perenco is evident if one analyzes the Law of the Fund for Economic Development of the Nation (“Fonpetrol”, for short) of 2008, approved just before the expiration of a few of the company’s large contracts.  The law was billed as capable of benefiting the interests of communities, in that it stipulated that part of all funds from royalties would be distributed to COCODES (Community Councils on Development), which would then use them for constructing public works. According to R, an independent journalist from Petén who wished to remain anonymous, in actuality the money often does not reach those aforementioned communities, but rather ends up in mayors’ pockets. In addition, the Fonpetrol law ‘reforms’ the bidding process for oil contracts, undoubtedly favoring oil companies and anyone that does business with them. So, in effect, after the expiration of its 25-year contract, MEM can renew it for another 15, while the previous laws would have caused the contract to be automatically suspended, and eventually renegotiated.

An example of the new regulation being put into effect, which raises even more suspicions about the intentions of the Colom administration, is the July 2010 renewal of the Xan Field drilling contract. The Xan Field is found in the central area of the Laguna del Tigre National Park, one of the Mayan Biosphere Reserves with a high priority for conservation.

According to Colom, the new contract has Perenco contribute economically to the functioning of six military posts in the area, send 0.1 dollars per barrel to the National Council on Protected Areas (CONAP) for reforestation efforts, as well as 0.15 dollars per barrel to communities where the oil pipeline passes through, to go towards mitigating the environmental effects of the project. So, if on the one hand Perenco extracts oil from a protected area, running the risk of oil spills and the contamination of 300 interconnected bodies of water, and on the other, they offer handouts to communities and to the military, then they ultimately have very little to do with actually protecting the environment.

Francisco Castañeda, of the Center for Conservation Studies at the University of San Carlos, confirms that the extension of the contract “was not a good deal for the country”. The profit generated by oil “could be equally generated by tourism, fishing, and other Park activities,” he said. The Institute for Agriculture, Natural Resources, and Environment at Rafael Landívar University adds that the royalties obtained from exploiting Laguna del Tigre could amount to about 500 mllion dollars in the next 15 years, while conservation would generate 700 million. And, truth be told, the refusal to continue extracting oil from the Xan Field would have brought much more than 700 million to the State’s coffers: in the months leading up to the contract’s extension, a group of German parliamentarians made Colom a proposal which, in exchange for the renunciation of crude oil extraction in the National Park would have created an ‘economic compensation fund’, taking the Ecuadorian Yasuní-ITT initiative as its model.

The ministers of Environment, Governance, Culture, as well as CONAP, did not authorize the contract’s extension, and the agreement furthermore contravenes various laws: the Protected Areas law, the Hydrocarbon Law, and a few international treaties like the Convention on Wetlands of International Importance (Ramsar) and the Free Trade Agreement between the Dominican Republic, Central America, and the United States (DR-Cafta). On March 29th, the Secretary for Environmental Affairs of DR-Cafta recommended that the extension of the oil contract in the Laguna del Tigre National Park should be investigated, while one month earlier congressman Aníbal García presented his denunciation of the government’s cabinet for having falsified documents pertaining to the final CONAP resolution on Perenco’s extension.

Those who have been most affected by the contract’s extension are the communities in Petén. In September of 2010, a group of delegates from the Petén communities stood before Congress and condemned the lack of consultation with the 37 settlements located in Laguna del Tigre about Perenco’s extension, a procedure that is called for by Convention 169 of the International Labor Organization (ILO). The delegates also criticized one of Colom’s speeches, in which he accused the residents of Laguna del Tigre of ‘occupying’ the protected area—as a pretext to evict them. In their manifesto, the communities from Petén write: “We were already living in Sierra Lacandón and in Laguna del Tigre when the government established the Protected Areas law—without informing nor consulting us. Now we are not even allowed to participate as a population, or even just communities, in the administration and development of these protected areas, something which the same law is supposed to allow for. The only option it gives us is to abandon our land.”

The strategy—taken up by BID and USAID, which is the main benefactor of the project—seems to be doing just that, creating protected areas in order to “take people away from their communities. What I think they want is to leave the path open to Perenco so that these communities stop bothering them,” says R. The paradox is, in effect, that the settlements found in the protected areas are evacuated, while all of the contamination that comes with extraction of natural resources from subsoil is allowed in.

These communities are fighting against Perenco, but the repression is strong: countless are the bloody deeds carried out by “Perenco’s hitmen”—as Robert Arias called them in 2006 in his La Hora column, after the murder of Mayco Jonatán García—against those who have denounced the company.

R told me that “there’s a priest within those 37 communities in Laguna del Tigre who is working to organize them through historical memory. Out of this process community leaders have emerged, who are now being identified and persecuted by Perenco—they want to kill them. Just 20 days ago they killed one of them. Perenco has its private guards, and they buy off people from these communities to identify the leaders. And anyone who wants to investigate, or do critical, independent journalism, as I do, faces a difficult, uphill battle.”