During Latin America’s China-led commodity boom, a blind eye was turned from the inherent flaws in the region’s economic policy. Now that the boom is ebbing, those flaws have become glaring once again. High on the list of shortcomings is that Latin American governments—and Chinese investors largely fell short of mitigating the social and environmental impacts of commodity-led growth.
A new study, China in Latin America: Lessons for South-South Cooperation and Sustainable Development, documents the social and environmental impacts of the China-led commodity boom in the region. Primary commodity exploitation—such as petroleum, copper, iron ore, tin, soybeans and the like are endemic to environmental degradation. The recent China-boom thus put increased pressure on the region’s waterways, forests, and other areas that accentuated threats to human health, biodiversity, global climate change, and local livelihoods.
According to the report Latin American exports to China–the fastest growing export destination over the past decade–were close to twice as greenhouse gas intensive and three times as water intensive than overall economic activity in the region.
With respect to greenhouse gas emissions, such figures go beyond emissions from power plants. In fact, the majority of China-related emissions are land use changes such in Brazil from the clearing of forests and savannah to export soybeans.
In Argentina, exports to China are not responsible for deforestation, but are over twice as water intensive as Argentina’s exports to the rest of the world—accentuating longstanding conflicts over water scarcity and rights in that country.
Not only did exports further degrade Latin American environments. As the region boomed, companies from China and across the world came to get in on the windfall profits. Chinese firms, with relatively less experience abroad than their counterparts, found themselves particularly challenged by unions, local communities, indigenous groups, and global civil society networks.
In Peru, a Chinese iron ore company learned the hard way that bringing in their own workers and suppressing local unions may cause more trouble than its worth.
In Colombia, Chinese oil companies have struggled to adhere to Colombia’s environmental regulations, especially as civil society have pressed Chinese investors to comply with domestic law.
On the other hand, the study found some cases where Chinese firms meet or beat domestic standards and perform better than their Western counterparts.
In Ecuador, Chinese oil companies have had better relations with local communities and have had fewer violations on environmental grounds than the more egregious and infamous cases in the same area attributed to Chevron-Texaco.
In Peru, Chinese companies in that country are the first Chinese firms to embrace the principles of the Extractive Industries Transparency Initiative. This opens the books of these firms to both governments and civil who can hold firms more accountable.
On the whole however, both Latin American governments and Chinese firms largely fell short of mitigating the negative impacts of trade and investment during the recent boom.
What is worse, as the region has begun to experience an economic slowdown there is downward pressure on social and environmental safeguards in the name of expediting new investment projects to make up for shortfalls.
In Peru, government authorities have effectively stopped requiring consultation with indigenous communities for all new mining projects, and cut down on the amount of time allowed for environmental and social impact assessments.
In Brazil, the infamous ‘ruralistas’ that represent powerful agricultural interests significantly pushed back on Brazil’s recent efforts to limit deforestation.
Bolivia almost enacted a mining law would eliminated the environment ministry’s authority to take part in the approval of new mining projects but civil society organizations successfully resisted that effort.
It is imperative that Latin American governments put in place the necessary policies to ensure that economic activity in natural resource sectors is managed in an environmentally responsible and socially inclusive manner.
Perhaps more important, as the Bolivian case reveals, is the need to enable civil society to monitor both governments and foreign companies.
Chinese firms should also upgrade their sensitivities to social and environmental concerns in order to maintain the positive public image they have enjoyed in the region and to maintain the viability of their overseas investments.
Without the proper policies in place to make sustainable development part and parcel to economic decision-making, Latin America will continue to be plagued with commodity boom and bust cycles that accentuate social and environmental conflict, and that are ultimately detrimental to long run prosperity.
Rebecca Ray and Kevin P. Gallagher are with the Global Economic Governance Initiative at Boston University’s Pardee School for Global Studies. They are co-coordinators of a multi-university based report titled China in Latin America: Lessons for South-South Cooperation and Sustainable Development, that is available at www.bu.edu/gegi.