Exploiting Natural Resources
By Nick Miroff, Washington Post
A commodity boom has pulled millions of people out of poverty across South America over the past decade. It also unleashed a scramble for oil, minerals and cropland that is accelerating deforestation and fueling a new wave of land conflicts from Colombia to Chile.
Now, as prices for oil and other commodities slide, economists and environmental researchers warn that the loss of forest cover may be hastened, leading to new clashes, as governments in the region try to maintain growth rates and spending levels by driving deeper into the jungle.
Satellite imagery of the Amazon basin, the world’s largest tropical forest and a critical bulwark against climate change, shows a stark divergence in the continent’s preservation efforts. In Brazil, the pace of deforestation has been reduced 75 percent since 2004, largely the result of tighter regulation and new environmental protections.
But in Colombia, Peru, Bolivia and the other five nations whose territories cover 40 percent of the Amazon basin, the loss of vegetation increased threefold in the same period, wiping out a combined area of forest larger than the state of Maryland. Last year, the pace of deforestation in those nations jumped 120 percent.
“Commodity prices, directly or indirectly, have increased deforestation in the Amazon,” said Kevin Gallagher, a development economist at Boston University who specializes in Latin America’s trade relations with China. “Price increases create the perception of scarcity, which pushes investors into new terrain,” he said.
More than 80 million Latin Americans were lifted out of poverty in the past decade, according to the World Bank, which reports that as of 2011, “for the first time in recorded history, the region has a larger number of people in the middle class than in poverty.”
But a decline in commodity prices and a slowdown in the rate of China’s growth will sap Latin America’s expansion, the bank predicts, making it difficult “to expand the social gains amassed over the economic boom over the past decade.”
In several South American nations, the export bonanza has enabled populist leaders to significantly expand the role and the size of the state, by boosting social spending, developing infrastructure and taking greater control of major national industries.
Those measures have made leaders such as Bolivia’s Evo Morales and Ecuador’s Rafael Correa extremely popular at the polls, allowing them to preside over long periods of political stability and economic growth. But those presidents have pegged their ambitious development plans to export revenue, which has been squeezed by falling commodity prices. The loss of income is likely to leave some countries progressively indebted to resource-hungry China.
In Ecuador, the smallest member state of the Organization of the Petroleum Exporting Countries, president Rafael Correa turned to Beijing after his country defaulted on its bonds in 2008, and found a deep-pocketed business partner. Now, Chinese loans account for more than 60 percent of the government’s financing, according to a Reuters analysis, and more than 90 percent of Ecuador’s oil exports are earmarked for China. Much of the oil never reaches Chinese shores, however, but is resold by Chinese traders on world markets, often ending up in refineries on the West Coast of the United States.
But the recent slump in oil prices leaves Ecuador owing more and more crude to China, creating new pressure for the government to expand the drilling frontier in the Amazon. In 2014, the government auctioned off new sectors of its Amazon territory, much of it to Chinese firms.
Chinese road-building crews and drilling rigs will cut into ancient forests where indigenous groups and un-contacted tribes living in “voluntary isolation” have violently resisted the oil industry.
“The Correa administration seems intent on trying to drill its way to prosperity, which has turned what was once pristine rain forest into a natural sacrifice zone crisscrossed by oil wells, roads and palm plantations,” said Kevin Koenig of the group Amazon Watch.
“Now Ecuador is financially beholden to China, so it’s seeking to auction off the rest of its Amazon forests for oil concessions,” he said. “That could spell disaster for its remaining forests and the indigenous peoples who call them home.”
The struggling socialist government of oil-rich Venezuela, where the deforestation rate was the worst last year in South America, is similarly indebted to Beijing. But the resource push is hardly exclusive to the region’s left-leaning governments.
In Colombia, illegal mining, petroleum extraction and the expansion of the country’s fast-growing palm oil industry have contributed to deforestation and violence involving Marxist rebels, government troops and paramilitary groups often acting on behalf of landowners, according to rights groups.
Despite the simmering civil conflict, Colombia’s economy is the fastest-growing in South America, and the government has spent the past two years in peace talks with commanders of the country’s largest rebel group, the Revolutionary Armed Forces of Colombia. A peace agreement could bring a flood of investment into extractive industries and exacerbate deforestation.
Peru’s economy expanded more than any other during the decade of high commodity prices, led by its mining industry. A new highway linking the country to Brazil opened a gateway for tens of thousands of impoverished highlanders to fan out into the jungle prospecting for alluvial gold. In a matter of months, their dredgers and mercury kits can convert vast tracts of green forest into lunar-like wastes.
With gold prices falling, struggling President Ollanta Humala has scaled back environmental regulations in a bid to attract new capital, while also pushing to open up more jungle areas to oil and natural gas development.
“Price declines and slower growth make nations more desperate, and they can be more apt to weakening environmental standards in order to grab at any investment,” said Gallagher, the development economist, who is the co-author of “The Dragon in the Room: China & the future of Latin American Industrialization.”
When prices fall, “countries and investors seeking bargain-basement prices swoop into the Amazon,” he said. “We can expect to see a surge in Chinese investment in the Amazon in this manner in years to come.”
Louis Reymondin is the main developer of a satellite imagery program called Terra-i, which is used by governments and environmental groups to monitor deforestation, and he said the technology offers a dose of optimism.
“The ability to monitor where and when deforestation occurs was key to support the decrease in deforestation rates in Brazil by allowing the local authorities to identify illegal events and quickly act,” he said.
“I think in most countries, the authorities are aware of the importance of Amazon forest and recognize the importance of implementing efficient ways to conserve it, or use it in a sustainable way,” Reymondin said.