Social Conflict, Economic Development and Extractive Industry

Evidence from South America

Anthony Bebbington

• Publisher: Routledge
• Year: 2011
• eBook ISBN: 9781136620218
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

The extraction of minerals, oil and gas has a long and ambiguous history in development processes – in North America, Europe, Latin America and Australasia. Extraction has yielded wealth, regional identities and in some cases capital for industrialization. In other cases its main heritages have been social conflict, environmental damage and underperforming national economies. As the extractive economy has entered another boom period over the last decade, not least in Latin America, the countries in which this boom is occurring are challenged to interpret this ambiguity. Will the extractive industry yield, for them, economic development, or will its main gifts be ones of conflict, degradation and unequal forms of growth.

This book speaks directly to this question and to the different ways in which Latin American countries are responding to the challenge of extractive industry. The contributors are a mixture of geographers, economists, political scientists, development experts and anthropologists, who all draw on sustained field work in the region. By digging deep into both national and local experiences with extractive industry they demonstrate the ways in which it transforms economies, societies, polities and environments. They pay particular attention to the social conflict that extraction consistently produces, and they ask how far this conflict might usher in political and institutional changes that could lead to a more productive relationship between extraction and development. They also ask whether the existence of left-of-centre governments in the region changes the relationships between extractive industry and development.

The book makes clear the immense difficulties that countries and regional societies face in harnessing extractive industry for the collective good. For the most part the findings question the wisdom of the development model that many countries in the region have taken up and which emphasises the productive roles of mining and hydrocarbon industries. The book should be of interest to students and researchers of Development Studies, Geography, Politics and Political Economy, as well as Anthropology.

Part 1

Political Economies of Extraction

1 Extractive Industries, Socio-Environmental Conflicts and Political Economic Transformations in Andean America

Anthony Bebbington

Mining and the extraction of oil and gas are central to the historical and contemporary political economy of much of Latin America: the Chilean ‘miracle’ would not have occurred without its copper industry; the experiments with post-neoliberal government in contemporary Bolivia and Ecuador are only possible because of oil and gas; Venezuela’s geo-political role in the region hinges around oil; the cumulative environmental ‘debt’ in much of the Andes is one bequeathed by mining; by far the majority of the ever-escalating social conflicts in Peru are related to mining. Contemporary landscapes in regions as socially and ecologically significant as Madre de Dios, Pasco and Cajamarca in Peru, as Potosí and the Gran Chaco in Bolivia, or as the northern Amazon of Ecuador and the Magdalena Medio in Colombia have all been produced by political economic processes that hinge around extraction of natural resources.

And yet, despite this importance, the literature on mines, oil and gas in Latin America is remarkably sparse. Of course, analyses of extraction have produced modern classics – June Nash’s (1979/1993) The Mines Eat Us and We Eat the Mines, and Eduardo Galeano’s (1971) Open Veins of Latin America are perhaps the most obvious candidates – but generally, the literature hardly reflects the relative extent of the political economic and environmental transformations that have been the fruit of the extractive economy.¹ This leads to readings of the region that short-change the explanatory significance of the political economy of subsurface natural resources, producing ways of seeing Latin America that have not been well-positioned to respond quickly and analytically to the surge of investment in mining and hydrocarbon extraction that has spread through the region since the mid 1990s.

By focusing attention on the Andes–Amazon region, this collective project steps into this gap in a way that we hope will be constructive both for research and teaching Latin American development. First, the book explores ways in which mining and the extraction of oil and gas (a set of activities we refer to as extractive industry) have affected both the national and subnational contours of economic and political development in the region. We argue that both historical and contemporary political economy cannot be understood separately from extractive industry (nor vice versa) and therefore, by implication, that in the Andean region at least, development cannot be theorized separately from the subsoil. Second, we explore the conflicts that increasingly surround extractive industries and argue that these conflicts have generative consequences, producing effects that themselves have great significance for national and subnational political economic change. We argue that these conflicts leave important footprints whose traces are not easily erased by the ebb and flow of development projects and public policy. These footprints have a structuring effect in Andean and Amazonian society: they create patterns of distrust that are not easily overturned, they leave memories that are then drawn on in future forms of collective action (cf. Stern 1987), they elicit institutional forms and behaviours that create path dependencies and at certain times they have been implicated in political changes that mark new trajectories in the region (cf. Perreault 2006). Third, we aim to understand – in terms of the very same dynamics of extraction – why and how these conflicts occur in the ways, places and times that they do. In these more nuanced, disaggregated and case-based analyses, we explore the differing ways in which mining, oil and gas are experienced and argue that these experiences are important to understanding the emergence of conflicts over extractive industry, how these interact with the broad political economy of natural resource extraction and how these processes produce national and local forms of development.

Fourth, on the basis of these analytical contributions, the book also has a normative orientation. We do not share a single position on whether extractive industry can produce forms of development that are more equitable, more effective in reducing poverty and more respectful of the environment than those that dominate contemporary Latin America. However, the chapters all share a concern for understanding the conditions under which extractive industries might be regulated so that the forms of development that accompany them in the future might at least be better than what has gone in the past. As will become clear, we believe that conflict can play an important role in making better regulation possible, but that there is an ever-present threat that this same conflict can descend into a vicious circle in which it merely produces more conflict or, more ironically still, can create conditions that facilitate new rounds and forms of unregulated resource extraction that then drive yet more conflict.² Thus another set of conditions for good regulation has to do with mechanisms through which social conflict can be transformed into institutional innovation – for this transformation does not happen in and of itself.

Having stated our purpose, the remainder of this chapter does the following. First, it develops an argument regarding the significance of extraction in the forms that Latin American development has taken. Second, it maps out the contemporary political and economic context of extraction in the region, describing and interpreting the ways in which policy commitments of governments both neoliberal and post-neoliberal hinge around the extraction of natural resources. Third, it traces out some of the actual and potential territorial effects of these national policy commitments. Fourth, it lays out the book’s collective argument and hypotheses and describes its structure.

Extraction and Latin American DSevelopment

The Devil and Natural Resource-Led Development in The Andes

Following two months of protest across the Peruvian Amazon, by June 2009 several thousand indigenous and non-indigenous people had assembled in the town of Bagua in the department of Amazonas. Blocking a section of highway called La Curva del Diablo (the Devil’s Curve),³ they demanded the derogation of a series of Executive Decrees on which they had not been consulted and which, they felt, favoured the expansion of extractive industry on their territories. Also gathered were police forces, sent in by the central government to reopen the highway. On the morning of 5 June, shooting began and by the end of the day, five Awajun-Wampis indigenous people, five mestizo townspeople and 23 policemen were confirmed dead. Eleven of the policemen had been among hostages held for several days by protestors and were killed by their indigenous captors in retaliation for the violence on the Curva del Diablo. One hundred and sixty-nine indigenous and mestizo people and 31 police were confirmed injured, and one police officer remained missing. Among the seriously injured was the indigenous Awajun leader Santiago Manuin, some of whose concerns and views are discussed in Chapter 5 by Javier Arellano-Yanguas.

There is a sad irony that this tragedy should have occurred on the Devil’s Curve for there is a long-standing popular association between the devil, extraction and capitalism in the Andes. In her classic study of ‘domination and dependence’ in Bolivian tin mines in the 1960s and 1970s, June Nash (1979/1993) described the ways in which, while underground, miners relate to the devil figure El Tío, giving him offerings to protect their safety and ensure their productivity. Combining Nash’s observations with his own in Colombia, Michael Taussig (1980) later suggested that this idiom not only reflected a belief that some workers had entered into pacts with the devil, trading wages on earth for an early death, but also, and more significantly, a recognition among miners and cane cutters that while capitalism might appear to produce value, in reality it consumes life and environment and produces poverty.

Although they are four decades old, these observations remain relevant for contemporary discussions of extraction. They highlight how extractive industry produces both incredible wealth and destruction at one and the same time. They also emphasize the way in which the rise of extractive industry visits tremendous change and dislocation in the territories and countries within which it occurs. Extraction’s association with such unprecedented transformations of landscape, labour and social relations should make it unsurprising that it also comes associated with cultural idioms that seek to make sense of such transformations in terms of hidden bargains and pacts with higher powers. Indeed, beliefs and suspicions about such pacts, be they with devils or presidents, are common in areas affected by extraction and can have both political consequences and cultural significances that become part of everyday language and meaning making.

This popular association of extraction with the devil is paralleled by a more academic association between extraction and a curse. The thesis of the ‘resource curse’ gained momentum in the early 1990s in an attempt to explain two decades of poor economic performance in mineral-rich countries (Auty 1993, 2001; Sachs and Warner 1995). Proponents of this thesis, or variants of it, suggest that natural resource abundance generates a series of economic and political distortions that ultimately undermine the contributions of extractive industry to development. Even authors who do not claim the existence of such a curse nonetheless argue that Latin America’s relationship with resource extraction has demonstrated a ‘particularly virulent strain of dependency’ (Lederman and Maloney 2007: 141) and that, even if the resource curse is not a generalized phenomenon, it is the case that the ‘twentieth century offered many opportunities for natural resource-based growth that Latin America systematically missed’ (Lederman and Maloney 2007: 141). For those who do believe in the resource curse, it is deemed to operate via several mechanisms: the overvaluation of exchange rates that reduce the competitiveness of other sectors of the economy; an increasing narrowing of the national economy and hence vulnerability to price swings; the enclave characteristics of an extractive sector that generates few multiplier effects; the generation of vast rents that induce political behaviour oriented towards capturing those rents rather than governing well; the growth of violent conflict driven by the desire to capture rents; and the emergence of states whose primary pacts are with extractive companies rather than their citizenries (Auty 1993; Bebbington et al. 2008a; Humphreys et al. 2007; Karl 1997; Weber-Fahr 2002). In Latin America, Mahoney argues that governments have consistently failed to innovate in how they manage the extractive sector and convert its wealth into innovation (Mahoney 2007). A parallel and related literature has drawn attention to environmental and local curses that accompany mineral expansion.⁴ While these literatures have not gone uncontested by those who question the existence of a resource curse (Brunnschweiler and Bulte 2008; Davis 1995; Davis and Tilton 2002), the thesis has remained pretty resilient through to the present.⁵

Given these potential pathologies, any decision to tie national or regional development to extractive industry would seem to imply taking risks that compare with Faust’s own pact with the devil. The argument for accepting such risks is the hope espoused by the industry (ICMM 2006), international financial institutions (World Bank 2005) and presidents in Latin America (Correa 2008; García Pérez 2007a, 2007b; Morales 2009) that such a strategy will deliver wealth and national self-realization similar to the gains and knowledge for which Faust had hoped. The belief that countries can escape from the resource curse (Humphreys et al. 2007) is akin to hoping that the real ending to the story is that scripted by Goethe who, in the final instance, has angels sweep down from on high to save Faust from the devil.⁶ The problem, of course, is that the ending to the Faust story depended on who was telling it and not all dénouements were quite as positive. Indeed, how one interprets the relationship between development and natural resource extraction in Latin America depends on who one is and where one looks. Critics of the extractive model (those who would see the loss of life and soul as the ultimate fruits of Faust’s pact with Mephistopheles) point to Bolivia’s continuing and chronic poverty after five centuries of extraction, to Peru’s also still disappointing performance over the same period, to the mining and metallurgical complex of La Oroya in Peru (twice listed among the world’s ten most polluted places) (Blacksmith Institute 2007; Scurrah 2008a), to the poverty and environmental destruction of Ecuador’s North-Eastern Amazon after four decades of oil drilling (Kimerling 1990; Valdivia 2008) and to historical examples such as the Mexican Huasteca equally damaged by early-twentieth-century oil (Santiago 2006). As more prosaic indicators of the costs involved, they might also point to the burning wells that kept the Huasteca skies in daylight for three months in 1915 or to the much more recent well fires at Madrejones that during 1999 to 2000 lit up the night skies of Yacuiba, Bolivia, for three months. For their part, proponents of the extractive model point to Peru’s growth and aggregate poverty reduction over the last decade or to the wealth that copper mining has bequeathed to Chile, financing its miracle and allowing it to engage in a massive counter-cyclical spending spree during the 2008–9 financial crisis. They might also draw attention to local poverty reduction in the mine-dependent territory around El Escondido in Northern Chile (Lardé et al. 2008) or to the last three years of gas-funded growth, poverty reduction and decreased inequality in Bolivia (Otra Mirada 2010).

Finally, those who believe (albeit with different degrees of certainty) that Faust can be saved by the angels, insist over and over on the centrality of institutions. Writing from the World Bank, Weber-Fahr (2002: 14) concludes that those countries that ‘get it right’ display competent economic, sectoral and revenue management, and that the challenge of building such institutional capacity is ‘more urgent … where the mining sector dominates an economy’. Meanwhile, for its part, the Extractive Industries Transparency Initiative (EITI) argues that institutionalizing mechanisms to increase public monitoring and knowledge of the taxes that companies pay and how these are spent can constitute a vehicle for offsetting the corruption, inefficiencies and other perverse political consequences that so often derive from the extractive economy.

Such institutional innovations do not come easily, however. Indeed, Terry Karl (2007: 256) insists that ‘the “resource curse” is primarily a political not an economic phenomenon’, and that it is precisely for this reason that the institutional distortions that emerge in mineral-dependent economies ‘cannot be undone without a huge coordinated effort by all the stakeholders involved’ (Karl 2007: 258).⁷ These distortions can include: taxation systems that hinge around the extractive sector rather than the sort of broad-based taxation that many authors insist are central to creating states that respond to citizenries (Bräutigam et al. 2008); educational systems that under-invest in broad-based human capital formation because the extractive model of development does not need this form...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright
• Dedication
• Contents
• List of figures, maps and tables
• List of contributors
• Preface and acknowledgements
• List of abbreviations
• Part I: Political economies of extraction
• Part II: Conflicts, transformations and institutional change
• Part III: Conclusions and comparisons
• Bibliography
• Index