The Limits of Extractive Growth in Latin America

Mining

This article has been co-authored by Tobias Franz, Lecturer of Economics at SOAS University of London and Angus McNelly, Lecturer at University of Greenwich

Latin America is one of the regions worst affected by the COVID-19 pandemic. It has the world’s highest excess death rate, the steepest economic recessions, and social indicators drastically declining

Bolivia, Colombia and Peru were particularly hard hit as their extractive-led, export-orientated economies proved to be vulnerable to the external shocks triggered by the COVID-19 pandemic. Shutdowns reduced global production and transportation, shrinking demand for commodities, and leaving exporters of natural resources such as oil, gas and coal, exposed to the global economic crisis triggered by COVID-19. 

There were economic and social fallouts from the pandemic. This has led to increased political instability following historic and contested elections in Peru, an intensification of the ongoing political crisis in Bolivia following the 2019 coup, and social unrest and violent repressions of protests in Colombia. In these three countries, capital flight intensified fiscal and economic crises leading to further political unrest and social mobilisations. 

The move to green technologies 

One of the central questions in economic research is regarding how the move towards new green technologies – to tackle climate change – is pushing the prices of metals such as copper, lithium, and nickel far above their long-term levels, with resource-abundant countries in Latin America yet again at the extractive frontier of the global demand for natural resources. With a rising demand for commodities used in the production of green technologies, the three countries find themselves at the foothills of the next commodity super-cycle. As the governments of Colombia and Peru are historically of neoliberal character and Bolivia has pursued a resource nationalist agenda, the three countries lend themselves perfectly to a comparative political economic analysis.

The fragilities of an export-orientated development model focused on extracted natural resources are well known. However, the political and economic elites see resource-led extraction as the dominant post-COVID-19 future and understand the main challenge to simply be “getting the institutions right”.

Silhouette of factories

Latin America’s road to recovery

Framing extractive-led development models as the road to recovery from COVID-19 in Latin America not only ignores their associated vulnerabilities, such as increased inequalities, institutional weaknesses, and political instability. It also misses the opportunity to use the COVID-19 crisis as an inflection point to develop and propose radical policy changes to confront the accelerating climate crisis.

These issues raise several research questions: Why is the continuation of the extractive growth model seen as the road to recovery for many Latin American countries? Given the increasing pressure to mitigate the negative effects of climate change, can a continued extractive model be compatible with transitioning towards more resilient and sustainable growth? 

Addressing these questions allows exploration of the limitations of the mainstream literature. It also allows proposals for an alternative place-based political economy approach to understand the governance of natural resources and three of its interconnected dimensions: international markets for commodities and multinational enterprises; national-level public sector capacities to manage natural resources; and local practices of social and environmental development. 

Developing an alternative future

Such a research endeavour would benefit from adding space, place, and temporal dimensions to the political settlements framework in its analysis of power, institutions, and extractive development. This will support our research on how place-based political settlements between different elite and local groups are constructed, evolve over time and shape natural resource governance across different spatial scales, and to develop alternative futures to capital-driven natural resource extraction. For the empirical analysis, we chose Bolivia, Colombia and Peru due to their experiences of the COVID-19 crisis and their place within global efforts to mitigate the damaging effects of climate change. 

But what lessons have been learned from the past when the 2000-2014 commodity boom generated above average incomes for Bolivia, Colombia, and Peru? And how can public sector capacities be strengthened for a more inclusive governance of extractive incomes resulting from a new commodity super-cycle? Is there another, more resilient, democratic, and sustainable way of managing natural resources and recovering from crises in Latin America that considers practices and knowledge of marginalised communities? These are the urgent questions that drive this project. 

Research consortium

To answer these questions, we have put together a research consortium and applied for funding from the Trans-Atlantic Platform for Social Sciences and Humanities addressing Recovery, Renewal and Resilience in a Post-Pandemic World

The partnership includes Tobias Franz at SOAS, Angus McNelly at Greenwich, Maria Cecilia Roa Garcia at Universidad de los Andes in Colombia, and José Carlos Orihuela at the Peruvian University Pontificia Universidad Católica and a variety of local and international NGOs, such as the Bolivian Centre for Studies for Labour and Agrarian Development (CEDLA), the Peruvian NGO CooperAcción, the Colombian Foro Nacional por Colombia, the Bogota-based Stockholm Environment Institute (SEI), and the Natural Resource Governance Institute (NRGI). 

We hope to receive funding for this project in order to analyse governance of natural resources, the policy responses to the COVID-19 crisis, and climate change adaptation policy through the configurations of power between different groups involved in (or affected by) natural resource extraction in the three country cases.

 

Editor’s note: The full title of this article is ‘The Limits of Extractive Growth in Latin America: Research on Post-Pandemic futures and Climate Resilience in Bolivia, Colombia, and Peru’.

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