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Latin America Week 2006
Ownership of Natural Resources in Latin America and Ireland:
The Issues
So, what is the issue with natural resources in Latin America?
Latin America is a continent rich in natural resources but over the last five hundred
years most of its people have not benefited from the exploitation of these. On the
contrary, this process has meant displacement, pollution and even death for
thousands over the centuries. Currently, all over Latin America, the rate of extraction
of minerals, timber, hydrocarbons and other resources is accelerating. The control of
mines, rivers, forests and other assets is being handed over to transnational
companies who have the capital to finance these enterprises.
If more and more resources are being extracted, surely that means there is
more money for development in the countries?
That would depend on who is extracting the resources and under what conditions. In
general, poverty and inequality have not decreased in Latin America. They are
actually growing. (Just google poverty & Latin America and see for yourself) Worse
still, in the case of privatisation of water for example, this has frequently meant less
access to this vital resource for thousands of ordinary people. In Bolivia, water
charges increased several fold overnight, forcing many to drink contaminated water.
How can that be the case?
To understand this situation, you have to look at the history of Latin America. The
arrival of the Europeans to the continent in 1492 spelled the beginning of a genocide
(90% of the 100 million people there died of disease and warfare) and also of the
mass extraction of any gold and silver that could be found. It is said that with the
silver extracted from the bowel of the Bolivian mountain of Cerro Rico, it would have
been possible to build a gigantic bridge to connect Potosi with Madrid. Until the mid1800s, mineral resources and later cash crops enriched the colonial leaders and their
descendents.
Things must have got better for the ordinary people after independence.
Independence meant little change. Local elites replaced colonial viceroys and ran
each country for their own profit. They were propped up by the US on the condition
that they subjected their economies to the will of transnational corporations. The
rulers allowed these companies to extract raw materials and monopolize
infrastructure, vital industries, land and banks while they kept labour oppressed. On
the other end of the production process, Latin American markets were kept open to
foreign companies’ goods. This neocolonial system was backed up by military force.
There were approximately 80 military incursions or indirect operations by the US into
Latin America between 1826 and 1996.
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Thankfully Uncle Sam doesn’t interfere directly in Latin American leadership
anymore..?
Well, most of Latin America is now considered democratic, but while political
freedoms have increased, violations of human rights continues. Additionally many
social, economic and cultural rights are not upheld, weakening the emergent
democracies. While the days of overt coups and puppet dictators are largely gone
(with the notable exception of the 2001 coup against Chavez in Venezuela), the
resources of Latin America are still being extracted mainly by transnational
companies with little improvement in the lives of the people in this region.
Why do Latin American governments comply with this?
Regardless of what kind of economic and political policies they support, the reality is
that Latin American governments are no longer in charge of the economies of their
own countries. In the 1970s, Latin American countries were offered generous, low
interest loans by the World Bank and the International Monetary Fund in order to
industrialise and develop. Much of this money was lent to unaccountable rulers for
inappropriate projects, which didn’t benefit the people. By the 1980s however, high
interest rates and soaring inflation, combined with deteriorating export prices and
purchasing power, caused a debt crisis in Latin America and the rest of the
developing world. Desperately in need of new loans and investments to meet their
obligations, countries were forced to accept IMF conditionalities.
What are these conditionalities?
Put simply, the conditions are that the countries radically change the way their
economies run. Regardless of the level of development in the country, they are
forced to completely liberalise their economies. While the argument goes that these
changes are for the countries’ benefit, poverty statistics and mass protest tell a
different story. The structural adjustments imposed on countries included rapid
privatisation of government-owned enterprises (mainly to US and European
corporations), reductions in subsidies for basic goods and agricultural inputs, hikes in
interest rates, reduction in public spending on health and education and other
government services, deregulation of trade and investment rules to entice foreign
businesses, and a strong export orientation, meaning an emphasis on agricultural
and unprocessed commodities from tropical zones and the cheap labour of the
people. Coupled with trade agreements, which reduce tariffs to the detriment of small
farms and manufacturers, and give foreign corporations the right to sue governments
over profits “lost” to regulations or protectionism, this has meant the continued
draining of Latin American natural and other resources out of the continent, and a
deepening of poverty and inequality.
So why is water so important in all of this?
The water crisis links all of us. Global warming and other factors threatens fresh
water supplies and competition for dwindling water resources is predicted to cause
huge conflict within the next 25 years.
In Latin America plenty of water is available but inequality of access to it causes
hardship and disease. Growing urban populations, pollution, bad management,
inefficient irrigation, and neglect of shantytowns and other poor areas all contribute to
the problem of access. The situation has been exasperated hugely by privatisation of
water however. As we already discussed, Latin America governments are being
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forced to hand over control of their water services to profit-driven enterprises. During
the 1990s there was a flurry of privatisation of water systems in Latin America, mainly
involving European water companies.
The message from the IFIs (international financial institutions who impose
privatisation on Latin America countries) is that foreign investors will make water and
sanitation services more efficient. The experience, however, was that companies
motivated by profit with little or no accountability or regulation had exactly the
opposite effect.
By January 2003, there were clear signs that this policy was not working. According
to the University of Greenwich’s ‘Public Services International Research Unit
(PSIRU) 2001 report on Water Privatisation in Latin America, a number of problems
can be observed in the existing water privatisations. They can be categorised in a
number of ways:
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not extended – where the service is not extended to the poor, despite
contractual obligations
water quality – where performance is poor in terms of water quality
prices and investment – where prices are raised without proper justification
under-investment – where less money is invested than was specified
corruption – where politicians, parties or public authorities are induced to
make bad choices
In Tucuman, Argentina, in Colombia and in Bolivia public opposition to transnational
control of water supplies has been so strong that private operators have been
expelled. However some of these cities are now facing law suits against them
through the ICSID (the World Bank´s International Centre for Settlement of
Investment Disputes). Amidst the debate on private versus public control of water a
referendum was passed in 2004 to change the Uruguayan constitution. It declared
that water was a human right and should not be in private hands. After the
experience of the Bolivian Water Wars, the new Bolivian government under Evo
Morales is emphasising democratic, national control of water and other resource.
What happened with water in Bolivia?
In Bolivia the issue of water privatisation led to the two ‘Water Wars’ in 2000 and
2005. In January 2000, just months after it took over control of the water system of
Bolivia’s third largest city, Cochabamba, a Bechtel Corporation subsidiary hit water
users with enormous price increases. These increases forced some of the poorest
families in South America to literally choose between food or water. A popular
uprising against the company, repressed violently by government troops, left one 17
year old boy dead and more than a hundred people wounded. In April 2000 Bechtel
was finally forced to leave. In November 2001 Bechtel decided to add to the suffering
it had already caused by filing a legal demand for $25 million against the Bolivian
people – compensation for its lost opportunity to make future profits. It has since
withdrawn this demand. In January 2005 Bolivia’s second water war was launched in
the city of El Alto. Armed with sticks, traditional indigenous Aymara flags and the
words -‘Fuera Aguas del Illimani! Aguas del Illimani must go!’ - the people of El Alto
challenged Bolivia’s President and the World Bank to expel Suez- one of the world’s
largest water corporations and return water to public control. In a city of 800,000 poor
indigenous rural migrants -the privatisation of water had left 200,000 people without
access to a water service and charged a $500 connection fee from people living on
less than $1 a day. On Thursday, January 13, 2005 President Mesa issued a formal
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decree stating that the state would take back control of water and sewage services in
El Alto and La Paz. But later the government rolled back on its’ promise of a publicly
controlled company when Suez threatened to bring a multi-million dollar lawsuit
against the Bolivian state. Over the last year, El Alto’s community interest group, el
Fejuve has struggled to negotiate a fair and just water service for the people of El
Alto. Improvements are hoped for since the election of Evo Morales in January 2006.
The Latin American struggle for a model of local and participatory management in
which communities devise and execute, in coordination with the pertinent public
sector entities, policies aimed at the protection, conservation, and sustainable and
equitable use of water continues. We hope that the Latin American Week speakers
Tanja Quiroz, from the Coordinadora de Defensa del Agua y de la Vida in Bolivia, a
social movement which has been very prominent in the water and gas wars there will
be able to update us on this when she visits during Latin America Week. It is hoped
that Irish groups may be able to learn from the Bolivian experience and vice versa.
What about other resources? Doesn’t Bolivia also want to nationalise its gas?
Unfortunately there are plenty of other examples of disputes over natural resources
controlled by foreign interests, with high a social, environmental and cultural cost.
Mining, particularly gold mining, is still a huge issue, one which LASC highlighted in
2003-2004. Logging is also a problem, and during LAW one of the Latin America
speakers, Belisario Nieto, will talk about illegal logging in Honduras.
On the subject of gas... In 2003, the people of Bolivia staged a huge uprising which
became known as the Gas War and ultimately led to the departure of two presidents,
Sánchez de Lozada and Carlos Mesa. Tens of people were killed by the armed
forces during the days of civil unrest. The people were protesting against the
proposed export of natural gas (of which Bolivia has huge reserves, the second
largest in the continent after Venezuela) to California via a long pipeline to the coast
at Chile. Royalties for Bolivia on this gas were at the rate of 18%, but this has now
been fixed at 50% under a new Hydrocarbons Law brought in after the gas war. The
recently elected president of Bolivia, Evo Morales, has now vowed to nationalise gas
in order to alleviate poverty in the country.
In Peru also, the Camisea gas pipeline, which aims to bring gas from the Peruvian
Amazon to the Pacific Coast is under construction but has provoked protests from
the indigenous communities of the Bajo Urubamba. Amazonwatch have taken their
side, and there has been a government enquiry into the pipeline after four major
leaks of liquid gas occurred. There is ample precedent, which should act as a
warning about what may happen. In the Amazon region of Ecuador between 1971
and 1991, Texaco routinely dumped toxic wastes from its oil operations into the
pristine rivers, forest streams and wetlands. As a result, 2.5 million acres of rainforest
were lost and indigenous peoples of the region continue to suffer an exploding health
crisis, recording cancer rates 30 times higher than in non-oil producing areas of
Ecuador. Our Ecuadorian speaker, Ricardo Buitrón from Acción Ecológica in
Ecuador www.accionecologica.org will be able to talk to us about this experience.
So what is the solution to all of this?
The answer for this comes from the Latin American social movements and civil
society organizations. They are calling for radical changes. The IFIs cannot be
allowed to impose conditions such as privatization on Latin American countries. So-
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called debt cancellation also needs to include major lenders such as the
InterAmerican Development Band (Bolivia is one of the HIPCs, Highly Indebted Poor
Countries qualifying for 100% debt cancellation – but this only means 40% as the
remainder is owed to the InterAmerican Development Band which is not included in
this cancellation).
Exploitation of resources, whether with or without foreign investment, needs to
happen with the consultation of the people directly affected by the process and that
revenue from this process must be directed towards human development in the
countries involved.
In regards to the water situation, LASC believes that the recent statement on water
by the Bolivian government sums up what needs to happen. You can read this on
http://www.lasc.ie/news/water-forum.html. Basically it states that water must be seen
as a human right and not a commodity and that the management and control of water
needs to be in a sphere that is public, social, community-based, participative and not
based on profit. Additionally it calls for the withdrawal of water from all free trade
agreements and for all development to be based on the principals of sustainability.
Lastly, how can we relate all of this to our lives in Ireland?
We in Ireland also need to ensure a safe, democratic and sustainable supply of
resources, such as water and energy resources, into the future. Ireland is facing a bill
of more than €100 million for failing to abide by its Kyoto limits to greenhouse gas
emissions. Not only are we contributing to climate change – which will affect Ireland
as well as other countries – we are also overly dependent on energy sources which
are running out. While few people doubt that the present conflict in Iraq has more to
do with oil than ‘freedom for the people’, our consumption of fossil fuels links us
inextricably to this inequitable geopolitical reality. Ireland’s forestry policies also came
under attack by the EU recently – the policy of planting mainly quick growing spruce
is limiting biodiversity.
An obvious parallel between what is happening in Ireland and Latin America is the
recent controversy about the Corrib gas pipeline in mayo. According to The Centre
for Public Inquiry, ‘residents of the area have expressed deep concerns over the
safety of the proposed pipeline which runs within 70 metres of people's homes and
over the suitability of the location of the proposed processing plant to be constructed
on bog land acquired by the Corrib consortium which is comprised of Shell E&P
Ireland Ltd, Statoil and Marathon, three global players in the international oil and gas
industry. The campaign and the response by both the Government and the
corporations involved has also highlighted the manner in which successive
governments have granted major fiscal and licensing concessions to the oil and gas
majors over a thirty year period’.