Workshop on International Law, Natural Resources and Sustainable
Development
Governance of Natural Resources and the Demand for Greater Policy Space: Reflections
on the Recent Experience of Brazil, Chile and Ecuador
Julio Faundez
School of Law, University of Warwick
Until recently, the international legal framework governing natural resources in developing
countries was widely regarded as one of the main achievements of the Washington
Consensus approach to global economic liberalization. Indeed, the decentralized investment
regime established by international investment agreements seemed to have forever
eliminated the threat of nationalization of natural resources, which was prevalent in the
1960s and 1970s. While critics of globalization have consistently pointed out that the legal
framework established by the international investment regime was deeply flawed because
of its structural features and inequitable outcomes, their views could be safely ignored since
virtually all governments in developing countries were willing to accept the legitimacy of the
prevailing international legal framework. Today, however, there is growing dissatisfaction
with this legal framework as it does not seem to provide states in developing countries with
adequate scope to formulate and implement political and economic policies aimed at
generating economic growth and strengthening local political institutions. Hence, a
consensus is emerging among development economists, policy makers and academics that
the solution to this problem is to provide developing countries with greater policy space.
In this presentation I take a close look at the experience of three countries in Latin America:
Brazil, Chile and Ecuador. Although these countries have very different domestic policies
and their international reputations also differ, their policies in the governance of natural
resources are remarkably similar and to some extent equally flawed. Brazil, a prominent
member of the BRICs, has world power aspirations that are supported by progressive social
policies, interventionist economic policies and a solid record of sustained economic growth.
Chile is still regarded as the model of neoliberal economic policies and sound financial and
fiscal management. For its part, Ecuador, which is currently led by a socialist President, is
unequivocally hostile to Western multinationals, has had serious legal conflicts with foreign
companies in the oil sector and is currently leading a regional revolt against the investorstate dispute settlement mechanism. Yet, despite their different political and economic
profiles, these three countries have encountered similar obstacles in their attempts to
formulate natural resource policies consistent with their constitutional and legislative norms
and their international legal obligations. Thus the main question that emerges is whether
these obstacle stem from lack of adequate policy space and, if so, whether enhancing it
would enable these countries to formulate more coherent policies. If the answer is negative,
then perhaps we should either define more precisely what we mean by policy space or
perhaps look elsewhere.