Natural Resources Governance Is Key to Regional Development, Claims ECLAC

Photo: Carlos Vera/ECLAC

According to recent figures presented by the Economic Commission for Latin America and the Caribbean (ECLAC), 13 countries of the region are among the 15 largest suppliers of mineral resources in the world. Chile is the first copper producer; Brazil is among the three largest iron producers; Mexico is number one when it comes to silver; Bolivia is number four regarding tin; and Colombia, number seven, regarding refined nickel. Alltogether, the region has 65% of lithium, 49% of silver, 44% of copper and 33% of tin reserves in the planet.

Between 2006 and 2010, Latin America and the Caribbean was the region with the second largest oil reserves in the world after the Middle East and it currently accounts for one third of the world’s bioethanol production, nearly 25% of biofuels and 13% of oil.

The region has one third of the planet’s fresh water reserves,12% of the arable land, 48% of soybeans production and 21% of natural forest areas.

Nonetheless, despite their abundance of natural resources, the countries of Latin America and the Caribbean have historically had difficulties to translate the exploitation and commercialization of commodities into long-term economic development processes.

The turning point in the economy as a result of the 2008-2011 crisis, as well as a favorable cycle of international prices of hydrocarbons, minerals and agricultural products, could offer – according to ECLAC experts – a new opportunity to open a profound debate on how to leverage the exploitation and export of natural resources for maximizing their contribution to equal and environmentally-sustainable development.

This topic, which is central to the ECLAC’s reflection and research agenda, will be the core of three new publications currently being drafted by the Organization’s Natural Resources and Infrastructure Division (NRID), as announced by Hugo Altomonte, Director of NRID.

These studies will be launched in the coming months and will present various approaches to natural resources governance, understood as “a series of sovereign decisions made by countries concerning property, ownership of and distribution of profits deriving from natural resources”.

“Governance in any field of public and collective life is a result of an agreement and balance among the State, the market and the society”, said the Executive Secretary of ECLAC Alicia Bárcena at the International Seminar on Natural Resources Governance in Latin America and the Caribbean, held at ECLAC in April.

At the seminar, specialists from all over the region agreed that Latin America and the Caribbean should leverage existing diversity and work in mutual respect in order to capture and make efficient use of the extraordinary income deriving from natural resources for achieving inclusive development.

The countries of the region need to institutionalize mechanisms for macroeconomic management to face the volatile cycles of international prices through new active policies for productive development, that allow better linkages, so that natural resources corporations become productive convergence engines, states ECLAC.

In the production chain, the size and articulation of corporations do matter. Large enterprises often prevail in sectors such as extraction, transformation and export of commodities, and they significantly contribute to resource-rich economies’ GDP. On the other hand, micro, small and mid-sized corporations, which generate 60% of jobs, are poorly linked to global value chains, according to the Organization.

Approaching productive convergence requires closing productivity, innovation, investment and infrastructure gaps, remarks ECLAC.

While progress has been made for ensuring an increased participation of the State in the income deriving from the exploitation of natural resources in the last decades, according to ECLAC, there are still several challenges to address regarding the organization of these sectors for maximizing their contribution to development.

It is paramount to close social gaps and foster inclusive development, that the exploitation of natural resources be carried out in an environmentally and socially responsible manner and that the dialogue be acknowledged by the authorities and citizens both as a means and an end.