Livin' la Vida Loca ( Living the crazy life)

Dealing with “The Curse of Natural Resources”
by Liseth Manrique Zeder -- February 19th, 2013

Why do countries with great natural resources wealth show lower growth rates than countries relatively poor  in natural resources?

Many poor countries are still rich in natural resources,  however their usually primary exporter models don’t let them develop industries that add value to commodities. For example in Latin America, where countries are highly dependent on mining, when the prices of commodities decrease economies suffer.

In the case of Peru, a very large portion of our territory, more than 60 percent,  is Amazonian rainforests. The Amazon Basin is considered the “lungs” of the world. The diversity of the natural resources is incredible. It is very lightly populated and developing economic activities is very difficult because the infrastructure is so poor. For example, oil and gas exploration and exploitation is very costly, around 50 million dollars per well, because drilling is an expensive activity and getting the rig in the spot is amazingly costly. If you are lucky enough to find hydrocarbons you might what to close the hole and move on if the resources aren’t big enough to offset the large investment to make a pipeline to get the petroleum out of there.

You might think that investing in highways to integrate this part of my country into the national economy is crucial for its development.  But imagine building a highway across the jungle!  It would be a huge undertaking, with far-reaching impacts — both good and bad.  Roads are the kind of infrastructure that have the greatest impacts on this fragile and wild ecosystem.  That’s bad.  But on the other hand, people live very deep in the jungle.  Without roads, how are they supposed to take their products to the markets, or even take their kids or relatives to the hospital when they are sick?  It takes days of walking and sailing to get to the city for some of them.

For better or worse, developing this region to improve the lives of the people who live in the “lungs of the world” is going to affect all of Amazonia.  Some NGOs support the idea of leaving the jungle as it is in order to protect the ecological services that it provides.  But what, then, do we do about the people living in the region who are struggling to get their basic needs satisfied?

There is one country that has a new approach to this dilemma.  Ecuador has established rights for nature. Yes, believe it or not Mother Nature has attorneys defending her rights!

In Ecuador anybody can demand that authorities comply with the rights of nature.

In 2007 the president of Ecuador, Rafael Correa, proposed to keep a wild area untouched by the petroleum exploration companies.  Correa proposed to keep  the Yasuni National Park unexploited  if a compensation to Ecuador was given to replace at least one half of the income that it would have made with the exploitation of the natural resources that are  supposed to be underground, about 856 millions of barrels of petroleum.  Ecuador asked for  about three billion dollars . Yasuni was declared a World Biosphere Reserve  in 1989 by UNESCO; it has more than 600 species of trees and bushes, and 590 species of birds among others.

The first country to pay a compensation was Chile with $100,000 (US). This year Italy excused a 47 million dollar debt to protect Yasuni Park.  Approximately $200 million dollars have been donated.

Ecuador claims that it needs this money to finance its development in other areas. These compensations make sense if we acknowledge the fact that leaving 856 millions of barrels of petroleum underground will have  a huge impact on the greenhouse gas emission abatement, about 407 millions of tons of CO2.

The question is: is this the only way to deal with the resource “curse”?  Are countries with natural resource-rich areas supposed to quit exploiting their natural resources in order to provide eco services to the rest of the world?  The obvious answer is not to quit developing these resources, but to develop them in a sustainable way.   But “sustainable ways” are usually expensive for developing economies … so the dilemma persists.


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