Leveraging natural resources through regionalism in South America

By Dr Pía Riggirozzi, Politics & International Relations

Natural resources play a very important role in the economy of the Latin America countries but historically models of resource exploitation and exchange were considered to create a dependency-trap as they don’t add value to the products or services compared to other knowledge-based industries. However, this is being revisited as South America is seeking to leverage its natural resources through a continental project of scientific and technological development to increase the value of natural resources and redefining the terms of regional integration.

Like all forms of governance, regionalism is a form of coordination across and between different policy areas. Regionalism is organised in different forms of institutional architecture that open different kinds of political engagement; and thus different types of activism. Regionalism can be seen as the place ‘where politics happen’, a space for policy deliberation and action. These of course are not spontaneous deliberations and actions but context dependent and politically contingent. Latin American regionalism, from this perspective, manifested as different projects of political economy. Historically, the debate concerning the political economy of regionalism in Latin America has been marked by a tension between two development paradigms; namely ‘neoclassical’ free trade view versus ‘structuralist’ view based on building long term comparative advantage. This debate was fuelled by uneven growth despite early insertion into the global political economy as Latin America was tapped in a cycle of unfair terms of exchange based on the export of its natural resources and the import of industrial machinery. These tensions translated in tensions between production for the internal market and the global economy; difficulties with domestic capital formation and the presence of foreign capital across important sectors of regional economies; and class struggles over the direction of state policy – all this exacerbated by the presence of the U.S as regional (hegemonic) power that never ceased to loom large. The regional project thus echoed deliberations and actions in search for ‘a viable’ model of development, where regional integration became an instrument to promote national development and a platform for international economic insertion.

This situation has hardly changed, but what has changed is the context in which national policies, rules of integration and the projection of Latin America to the rest of the world is unfolding. The financial crisis in 2008 that brought down years of economic stability in the core economies has re-opened the political and academic debate regarding the appropriate balance of state- and market-led economic governance. This, however, is nothing new. Economic crises, boom and bust cycles, and financial meltdowns are critical junctures that produce a multitude of responses from national elites. What is particularly striking is the diversity of responses in grafting strategies of crisis management across the developed and developing countries. Whilst we are witnessing the resurgence of ‘state capitalism’ and emerging of new forms of ‘nationalisms’ in Latin America, the Eurozone crisis is generating a backlash against the failure of social democratic models.

This is key to understand why from the perspective of Latin American nations, and South American in particular, the key to successful integration lies not in the delegation of sovereignty to supranational bodies but in the creation of solidarity through increasing trans-governmental relations, a presidential diplomacy conveyed by the New Leftist governments seeking to define regionalism as an opportunity for political economic autonomy and social development. This transpires from recent inter-governmental events such as the Union of South American Nations (UNASUR) conference on natural resources (Venezuela, June 2013), and the conference on social determinant of health (Rio de Janeiro, May 2013), where government-led deliberations and actions are attempting to ‘build (regional) sovereignty’ in three strategic geo-political areas: natural resources, defence and health. In support of this goal, UNASUR established two regional think tanks– the South American Institute of Health Governance (ISAGS) and the Centre of Strategic Studies on Defence (CEED). Last week, in the context of the UNASUR conference on natural resources it was agreed the establishment of a third regional think-tank to map natural resources, support research on biotechnology, and production of medicines. South America has almost 96% of the lithium reserves, 98% of niobium, 46% of copper, important reserves of zinc, bauxite and fossil mineral like gas and oil. It represents the biggest concentration of biodiversity and almost 30% of the fresh water reservoirs of the planet, not to mention its potential for clean energy production and the vast collection of medicinal plants and biodiversity.

The problem according to the Economic Commission for the Latin America (CEPAL) is that while export of raw materials grew from 38% to almost 70% between 1995 to 2008, these exports were mainly directed to China and lack of added value, indicating a process of re-primarisation of exports. Given the material and knowledge capacity, the institutional commitment, and the political confidence that South America gained in the last decade, a strategic courses of action to leveraging natural resources should include value added industrialisation; developing scientific and technological management towards innovation, environmental preservation, and for a more coordinated and longer term approach to alternative economic and social development.

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