#Caracas is about to promote the drilling of 10,500 oil well, aside from the construction of 2 #refineries and a new export terminal
Approximately 20 percent of the world’s hydrocarbon reserves rest in Latin America. They are a fascinating subject for study, due to their jagged and original continental dislocation, from the warm Gulf of Mexico to the cold waters of Patagonian Argentina, Chile and the South Pole, on to the Andean Cordillera. Overall they are a source of continuing geological and seismic surprises. And since the 1930s, they have played a fundamental geostrategic role. South America continues to be a land of adventures and disorderly, harsh and intense politics. At stake is control over energy sources in nations that are still immersed in the great oil nationalism cycle, as I defined this historical era in my studies some thirty years ago.
It all started in 1938, with Cardenas in Mexico
This historic and geopolitical cycle was started by President Lazaro Cardenas in Mexico in 1938, the threshold of World War II, when Axis powers sought South American resources to supply wartime needs in both the Pacific and Europe. This is a historic cycle that has never ended. Not even the collapse of the U.S.S.R. eliminated history and geography from the face of the earth, despite the stupid things that have been said during the last thirty years. This cycle, a historic era, continues to this day, with the eruption, on the international scene of the second post-war nationalization in Brazil, Bolivia, Ecuador and Venezuela. The cycle also includes thirty years of glorious growth during the second post-war period and the transformation of laissez-faire globalization into an unfolded market. Such globalization is engaged in power games over the industry of instrumental goods, which are dominating once again, and the nation is now outgrowing the economy.
An economic and political power game
These are phenomena that do not belong to the mixed economy cycle as we have historically understood the Keynesian paradigms. Here, the game is all about political and military power, and economic theories have to be silenced. Everything in South America is out of touch with North American and European growth models, a reality we have been taught by the now forgotten Albert Hirschmann. The nations named above are human settlements with a remarkable degree of state building, according to the typical South American model that was well described by Luigi Filippi: the state is built first, then the nation. These are also nations that begin the essential cycle of import substitution, but with very different historical times when considered within the context of the international labor division. This is the case because the decline in North America’s power to export security and economic models has accompanied the globalization of unregulated and deployed finance. The South American countries with hydrocarbon reserves have faced globalization in very different ways from those that characterized European and Asian experiences. The role played by Cuba, an undisputed stronghold of a military revolution supported by the U.S.S.R. and then by Russia with impressive continuity, must still be carefully studied despite its ideological deformities. The struggle against the U.S. has never ended and continues to be potent for those who study South American history in depth.
Cuba's fundamental presence
My thesis is that Cuba’s presence has continuously fueled anti-capitalist veins that sink their roots into South America’s complicated history, a history in which the nationalization of mineral resources has always played a powerful role in political aggregation. It is a role that we have forgotten for all these years, as the majority of analysts have been bewildered by economicism or even a damaging anti-politics from a hermeneutic perspective. If we examine essential and more strictly economic facts in this light, we can understand the general historic significance that brings us closer to fully understanding the South American experience in terms of mineral resources. What is impressive is that in the last twenty years, all these nations have embarked upon formidable development processes in the exploration and exploitation of new large oil and gas fields.
Venezuela and Brazil, the creators of change
Venezuela and Brazil are the key players in this transformation that is still under way, players that will continue to follow the unprecedented cycles that globalization has assumed. Venezuela especially is planning massive projects related to the extraction and processing of crude oil. Caracas is about to promote the drilling of 10,500 wells as well as the construction of two refineries and a new export terminal. Venezuelan oil production would then amount to a potential 4.5 million barrels per day, while refining would amount to 3.6 million barrels, this despite the imminent disaster of Maduro’s policy and the current crisis. To increase its export capacity, PDVSA, the state-owned company, has acquired 60 percent of a transport company that owns approximately 300 barges on the Paraná River, which runs through Brazil, Paraguay and Argentina. Oil production continues in association with Petroecuador, the gas company, along with the Bolivian state-owned company, and exploration activities continue in Argentina and Uruguay. PDVSA is also involved in two major projects for the construction of refineries in the region: in Manabí (Ecuador), which will refine 300,000 barrels per day, and in Pernambuco (Brazil), with a capacity of 230,000 barrels per day. At the same time, the company is reducing its investments in refineries in Europe as they have been considered unnecessary. It has just sold two refineries in Germany (in Gelsenkirchen and Karlsruhe) to Russian giant Gazprom. The aim of the Venezuelan government is threefold: to establish new partnerships, to access new markets and to strengthen OPEC’s geopolitical role. Above all, the latter provides the country with a substantial and profound strategy. Therefore, Venezuelan President Hugo Chavez has repeatedly attempted to influence oil production through a regulation that increases the influence of producing countries. It is an aggressive policy that has long been confronted on the domestic front by the oil workers themselves. However, in 2002 when approximately twenty thousand employees went on strike, PDVSA was nationalized. It is no coincidence that Argentina is the only country that is completely absent from the transformation of the mining sector. With the privatizations of the 1970s, Argentina has essentially ended the expansive cycle, not only of hydrocarbons, but also of its entire economy.
The emblematic case of Bolivia
Evo Morales, the first Amerindian president in Bolivia’s troubled and fascinating history, having just come into power in January 2006, announced the nationalization of oil and gas with a sort of coup that saw, in an unprecedented form, the strong role of the armed forces. They presided over the wells and plants of the nationalized companies with soldiers of the “Batallon de Ingenieria,” a force which occupied the town of Caraparì in the heart of Bolivia’s historic oil region. This action was similar to that of the Peruvian government from 1968 to 1975 led by General Juan Velasco Alvarado, who nationalized all oil companies and distributed the land to peasants with resultant violent clashes in the countryside. At the same time Chile was afflicted by a coup that ended Allende’s life, and one cause of that event was the Peruvian situation, this despite the nationalist conflict between the two countries. Affecting the fall of Alvarado were militants loyal to Washington: on August 30, 1975, General Francisco Morales Bermúdez, then President of the Council of Ministers, led a coup that deposed Alvarado. Major Argentine cities from Buenos Aires to Cordoba, as well as most of the industrial regions of southern Brazil and at least half of the homes in the megalopolis of San Paolo were heated with Bolivian gas. It is no coincidence that Morales’ most trusted ally has ever since been Cuba. These were the years under Chavez’s Venezuela in which the ALBA (Bolivarian Alliance for the Americas) was founded, an anti-ALCA (Free Trade Area of the Americas) customs agreement. The nationalization of hydrocarbons was the slogan of protests held by the vast majority of the Quechua and Aymara of the Andean regions and the farmers of the Cochabamba Tropic, who, in the midst of deployed globalization, washed their children with Coca Cola because it was much cheaper than privatized water from the Bolivian Andes. The interesting question is whether the mediation that the major companies and the U.S. reached with Morales and those following him was related to the successes of Brazil’s Lula Da Silva as his left-wing government in 2003 was a political explosion of great importance. Bolivia would never have been able to set up its energy infrastructure after nationalization without international cooperation. South America experienced a historic energy compromise until Brazil’s current crisis.
The South American countries with hydrocarbon reserves have faced globalization in very different ways from those that characterized European and Asian experiences
Of great importance is Cuba’s presence in the geopolitical horizon. That presence is no longer revolutionary in a Guevarist sense, but is specifically geostrategic. A military attack against Cuba is now unthinkable due to the change of a force that, on an international scale, has been consolidated through the presence of China and the creation of South American nations that are no longer prepared, as they were in the past, to follow U.S. guidelines as they have possible alternatives on the international level. China now stands for a new and unprecedented imperial role as does a Russia which, with the rise to power of Evgenij Maksimovič Primakov and, following him, his apprentice, Putin, resumed the great imperial tradition of pre-revolutionary Russian Tsarist diplomacy. Currently, the collapse of the “nationalist” left-wing South American governments can only take place via the uprising of the social forces that oppose them from within, as evidenced by the cases of Brazil and Venezuela. The U.S. will certainly support these uprisings, but the strategic axis of the international power relationship has been completely overthrown and “reduced to its national dimensions.” The role of this new balance of power is so impressive that it allows an economic and military dictatorship, before a political one, such as Venezuela’s from Chavez to Maduro to remain in power, with incredible suffering of the people and very strong social divisions. It is no coincidence that, in this context, the issue of North American sanctions against Russia and Iran in the power game take on great importance. The two countries are focused on actions that could weaken the role of the U.S. and increase their strength in relation to the continent, this demonstrated by the very close link between the construction of the Shiite Crescent from Tehran to Beirut and the international energy debate, starting with natural gas and its liquefaction. South America sees two ways, in the case of mining. One is the classical route of German-origin laissez-faire socialism, which aroused, in the Critique of the Gotha Program, Marx’s anger due to the presence of that state that he could only consider deadly. That critique has guided the Cuban, Bolivian and Venezuelan experiences and is a direct Soviet derivation. In South America, however, there exists a more socialist-Marxist path, one based on the prevalence of civil society and the social self-organization of collective movements which find in the state only the final point of the collective in a social struggle that never sees the military in action, and this is the case in Ecuador and Brazil.
The Ecuadorian case
President Rafael Correa was elected in 2006 and only recently was replaced by one of his top advisers, Lenin Moreno, who will certainly continue his work. Correa remains one of the most original and incisive leaders in South America. His international preparation and knowledge of global economic mechanisms have allowed him through a close relationship with the International Monetary Fund to reach a default and non-recognition of debt along with a successful policy on reducing poverty and increasing income. Direct foreign investments, which Ecuador has benefited from in recent years, have been exceptional. Mining and energy policies are a clear example of the geopolitical shift in power in South America. In 2013, the Ecuadorian government received investments amounting to approximately 703 million dollars (up 20 percent from 2012), a third of which was allocated to mining projects under the “Refinería del Pacifico [Pacific Refinery]” project. This project plans the construction of an oil refinery and additional related works in the province of Manabi to be carried out by PetroEcuador with the financial support of the Chinese Industrial and Commercial Bank. At the same time, and based on indigenous concerns, Correa attacked the presence of U.S. majors in Ecuador. The increase in taxation on oil revenues and profits gained from the majors has become increasingly essential for the survival of the government itself. The classic subject of price fluctuations is too well known to be mentioned here: it exists and has notorious consequences. Despite the historic victory gained to the detriment of the Chevron-Texaco oil company—which was guilty of environmental damage in the Amazon—it is necessary, for instance, to auction approximately 3 million hectares of forest. The state risks collapsing by 2020 in the absence of new oil discoveries and their more effective exploitation. China is very active in Ecuador and is regarded as the preferred investor in the Amazon region. This is a key issue.
The issue of Yasuni National Park
Indigenous organizations are increasing their appeals to the international community, hoping to stop this economic penetration that jeopardizes the survival of indigenous cultures. One of the most controversial issues concerns Yasuni National Park. Located in the heart of the Ecuadorian Amazon, the Yasuni reserve is home to various indigenous populations, including the Huaedian, Tagayan and Taromenan ethnicities. The surface area of the region is divided into blocks corresponding to oil exploitation concessions. Specifically, in the ITT (Ishpingo-Tambococha-Tiputini) block, huge oil field discoveries, an estimated total of 900 million barrels, have led to over a decade of massive exploitation projects carried out first by PetroEcuador and subsequently by Petrobras. The Ecuadorian case is interesting from an anthropological perspective and also provices insight into the challenges that such an economic undertaking poses to the world’s mining and energy decisions.
The aim of the Venezuelan government is threefold: to establish new partnerships, to access new markets and to strengthen OPEC's geopolitical role. Above all, the latter provides the country with a substantial and profound strategy. Therefore, Venezuelan President Hugo Chavez has repeatedly attempted to influence oil production through a regulation that increases the influence of producing countries.
The Brazilian case
However, from the point of view of purely political, social, and energy implications, the Brazilian case is the most interesting. The creation of a huge major such as Petrobas was only possible with a large financial stake extracted through the tax system from the Brazilian state, a public investment aimed at creating a state-owned company according to the most comprehensive rules of the Montemartinian-inspired public enterprise theory. Along with this, the tax base was created by a huge increase in income and aggregate domestic demand, changes caused by the largest land reform ever made in South America and in the world. The Brazilian route to oil nationalism combines the power of Petrobas with the collective movement of millions of landless, poverty-stricken people, by unionists and PT activists. According to my thesis, it is this unusual neo-statist and civil route towards endogenous growth that is now subjected, in Brazil and throughout South America, to the attack of non-social and political forces, essentially external, but primarily national of the land owners, the social classes associated with the financialization of the economy and the “Bourgeoisie comprador.” Even the production sectors themselves, not tied to income but to production, are under judicial and political attack. It suffices to think of what is happening in Brazil in the “Lava Jato,” which sees industry leaders sentenced to nineteen years in prison for administrative corruption! The land and capitalist oligarchies used the weapon of corruption that has led to the impeachment of Dilma Vana Rousseff Linhares, President of Brazil since 2011, following the two terms of President Lula Da Siva, and imposed a government comprised only of white men. In turn, President Temer, who replaced Rousseff, is under investigation and, with him, a large portion of Brazil’s political class. The investigation for corruption, which should center on Petrobas’ continental contracts, has already involved Colombia’s Nobel prize-winning President, Juan Manuel Santos, and much of the pinnacle of the South American political and economic class under the guidance of magistrates who studied in the U.S. and who have used Italian magistrates as consultants. The goal is the privatization of Petrobas and the limitation of Russian and Chinese penetration in South America. The internal goals of the ruling classes that have always hindered the programs of the PT and of its leader, Lula, are shared with that sector of South American geopolitical power that cannot support, besides the presence of Cuba, a growth in Russian and Chinese influence on the continent.
Mexico, the other major protagonist in the South American energy scene, has different institutional and political paths and does not fall within the very delicate faults of the region’s geopolitical power. Others are still obsessed with internal issues, such as the conflict between Peru, Bolivia and Chile, a never-ending conflict that continues to remind us of the fascinating history of one of the most interesting continents in world history. It is worth pointing out once again the essential point of view of this modest essay. The geopolitical and geostrategic issues of South American mining and energy cannot be fully understood unless reference is made to the extraordinary political and social transformations that have affected the continent in the last thirty years. South America’s inclusion in globalization has not been passive, since, especially in the countries referred to herein as being essential for potential energy equity, anti-liberal and non-populist forces have assumed power. They did not have the anti-elitist support of the disorganized and unmanaged masses. Lula Da Silva’s Workers’ Party is a classic socialist party that has had to face a very high parliamentary dispersal and crushing of the political classes, a development what would be unthinkable in Europe. Brazil’s problems have been fueled by the federal state structure and the huge growth of urbanization in the last twenty years. The same can be said of Ecuador, where the keywords of Correa’s movement are very different from those of Peronism or Vargism, those classic populist parties. They are rather united to the great Peruvian tradition of Haja De La Torre and his APRA, a party that no longer exists, following the governments of Alan Garcia and the arrival in Peru of liberal politics.
The exception of Colombia
The case of Colombia, the fourth country in terms of energy reserves, is different, having had its face transformed by more than oil and gas. This transformation must also be related to the complicated and extremely difficult negotiated peace between the FARC guerrilla and the state, an agreement reached by President Santos after two referendum attempts. This peace and the transformation of the guerrillas into campesinos and political cadres is the real danger that the land and mining oligarchies now see rising before them, due to the social consequences that will inevitably arise. It is no coincidence that a Nobel Peace Prize-winner like Colombia’s President Santos, has been heavily denounced due to his alleged involvement in what has been presented to the mass media as a continental bribery network created in the wake of the Petrobas case. This case has come to light at the hands of the North American justice system that intervenes whenever elites of local power feel that they have to stop those social change processes that were so dangerously unstoppable in the past. The abstractly sacrosanct fight against corruption lends itself easily to the dismantling of all elites—both political and economic—that such changes have encouraged. The ongoing division in the South American ruling class is evident. The case of the Obredecht family, whose historic leader was sentenced to 19 years in prison and that of the Lebanese Jewish Safra family, forced into exile, are exemplary in proving my thesis. What does remain stable and solid is the energy and mining heritage of a continent as extraordinary as South America.