FALL 2015

HARVARD REVIEW OF LATIN AMERICA

ENERGY OIL, GAS AND BEYOND

ENERGY EDITOR’S LETTER BY JUNE CAROLYN ERLICK

Zocalo Hed 26 pt

Zocalo deck 14 point one line BY HARVARD REVIEW OF LATIN AMERICA

FALL 2015 VOLUME XV NO. 1

Oil, Gas and Beyond Published by the David Rockefeller Center for Latin American Studies I was waiting for the ship to come in. In fact, so was everyone else in Nicaragua. Gas lines VOLUME XV NO. 1 Harvard University stretched around the block. The supermarket shelves were nearly bare. Lights went out again David Rockefeller Center for Latin American Studies and again, plunging the country into frequent darkness. Telex machines couldn’t work, and we reporters had to depend on the few places with generators to file our stories (for younger Director Brian Farrell readers, this was pre-computer and smart phones). U.S. President Ronald Reagan had imposed a trade blockade on Nicaragua in May 1985. The Soviets were sending oil, dodging Executive Director ENERGY Ned Strong the blockade. ReVista OIL, GAS AND BEYOND We reporters did what we always do: we reported on the ship’s arrival. But we also Editor-in-Chief breathed a collective sigh of relief. The arrival of the Soviet ship meant hot showers and light June Carolyn Erlick to read by. Copy Editor Energy is intensely political. It shapes nations and trade and fuels wars and blockades. FIRST TAKE Anita Safran Energy, I discovered then, is also intensely personal. It shapes our lives on a daily basis. It’s not Latin America’s Oil and Gas by Francisco J. Monaldi 2 Publication Interns only a matter of how we get around or whether we have enough food to eat; energy produc- Isabel Espinosa tion affects the communities that receive it and those that produce it. It shapes attitudes Gabriela Farrell THE POLITICS OF OIL IN EVERY ISSUE toward gender and race and nationalism and identity. It pollutes the air and the rivers. It offers Diego Lasarte Brazil’s Oil Scandal by Simon Romero 8 immense economic opportunities. Or it does both. Design Energy and Politics in Brazil by Lisa Viscidi 13 You might not think of Latin America and the Caribbean right away as a big energy Jane Simon Design Mexico’s Energy Reform by Myrna Santiago 16 BOOK TALK producer or consumer. But Venezuela stands ninth in global oil production with gas reserves Printer China in Latin America by Rebecca Ray 20 Transforming U.S.-Latin American Relations almost triple those of Canada. Three countries—Venezuela, Brazil, and Mexico—account for P+R Publications by Michael Shifter 78 about 90 percent of the region’s oil production. And Latin America and the Caribbean also Contact Us THE ECONOMICS OF ENERGY Human Rights, Human Woes have the capability to provide abundant alternative and renewable energy sources: wind, solar, 1730 Cambridge Street What Powers Latin America by Ramón Espinasa and Carlos G. Sucre 24 by Daniel Gonzalez 80 geothermal and biomass, among others. Cambridge, MA 02138 The Impact of Falling Gas Prices by Luisa Palacios 28 Musical Creation and Hardship Perhaps because of my experience in Nicaragua, I started to conceive this issue in terms of Telephone: 617-495-5428 Peruvian Oil Production by Eleodoro Mayorga Alba 32 by Pedro Reina-Pérez 82 meta-politics. And there is certainly a lot of politics related to energy in the region: the politi- Subscriptions, Back Copies and Comments cal upheaval of Brazil as a result of corruption scandals in the national oil company; the turmoil [email protected] ALTERNATIVE ENERGY BUILDING BRIDGES in oil-rich Venezuela; the impact of the semi-privatization of Mexico’s oil industry; the targeting Website Wind Energy in Latin America by Carlos Rufín 36 Building Bridges with Cuban Libraries of Colombia’s energy installations by guerrilla forces in a show of strength in the context of the revista.drclas.harvard.edu The Power of the Brazilian Wind by Mauricio B. C. Salles 38 by Lynn M. Shirey 84 ongoing peace process. Facebook Solar Energy in Chile by Claudio A. Agostini ReVista, the Harvard Review of Latin America 40 But then I thought back on how the arrival of oil had been experienced on a very local and Carlos Silva and Shahriyar Nasirov personal level. I began to hear stories about the production of energy: what it felt like to grow Copyright © 2015 by the President and Geothermal Energy in Central America by Jacques E. C. Hymans 42 ONLINE up in an oil camp, how energy production affects indigenous women in one particular region, Fellows of Harvard College. Look for more content online at ISSN 1541—1443 how local communities involve themselves in deciding what is done with oil. LIVING WITH OIL revista.drclas.harvard.edu ReVista is printed on recycled stock. And just recently Alvaro Jiménez, Nieman Affiliate at Harvard ‘09, happened to mention to Life in a Venezuelan Oil Camp by Miguel Tinker Salas 46 me that he was starting a website “Crudo Transparente,” a site that monitors the Colombian Behind the Corporate Veil by Kody Jackson 50 oil industry. Out of curiosity—and as a quick break from proofreading this issue—I took a peek. Añelo and Vaca Muerta by Mariana Barrera 52 The site focuses on five areas: local economy, contracts and royalties, environment, security This issue of ReVista is made possible and human rights and ethnic conflicts. I was pleased to see how much overlap there was with through generous support of FOCUS ON THE AMAZONS ON THE COVER the themes I had chosen for this issue of ReVista. Santander Universities Global Division. Beyond Dinosaurs and Oil Spills by Theodore Macdonald 56 Petrobras Oil Platform

Although the website deals with only one country—Colombia—it felt like an affirmation Forests for Energy? by Juan Luis Dammert B. 62 Photo By Ricardo Stuckert/PR of the focus I had chosen for this wide-ranging topic. Energy is political. Energy is personal. Oil and Indigenous Communities by Barbara Fraser 66 (Agência Brasil [1]) [CC BY 3.0 Energy matters. In the Shadows of the Extractive Industry by Nelly Luna Amancio 70 br (http://creativecommons. org/licenses/by/3.0/br/deed. PREVIOUS REVISTA ARTICLES ON ENERGY 7 7 en)], via Wikimedia Commons

2 ReVista FALL 2015 REVISTA.DRCLAS.HARVARD.EDU ReVista 1 FIRST TAKE 1 2

Latin America’s Oil and Gas

After the Boom, a New Liberalization Cycle? BY FRANCISCO MONALDI

MEXICO HAS RECENTLY OPENED UP ITS OIL IN- foreign investment in oil and gas—Ven- two years after completion of the nation- dustry, which had been under exclu- ezuela, Bolivia, Ecuador and Argentina— alization process, initiated in 2005. sive state control for the past 75 years, decided to nationalize their resources in During the last five years, PDVSA, the to private investment: a move that will this period; Mexico, until recently the Venezuelan national oil company, has very likely reconfigure the Latin Ameri- largest oil producer in the region, main- signed seven major extra-heavy oil joint- can oil industry in the decades to come. tained the oil industry as a state monop- ventures projects with foreign partners, Other Latin American governments of all oly until 2013. including Chevron, CNPC, ENI, Rep- political tendencies are now enthusiasti- As recently as 2012, the Argentine sol, and Rosneft. These projects would cally courting foreign investment in oil. government re-nationalized YPF, the require more than US$100 billion in This all would seem to proclaim a new formerly privatized national oil com- investment. When completed, they could liberalization cycle in the industry. Al- pany, culminating a decade of eroding yield more than 1.5 million barrels a day though this trend started before the oil conditions for oil investors in the region. in production. PDVSA also pursued other price collapse, it has been strengthened There were some exceptions. Brazil and smaller partnerships with foreign com- by plunging prices. However, if history Colombia, for instance, did not follow panies in conventional oil production, is any guide, resource nationalism is un- the same expropriation pattern. Still, and a major offshore natural gas project likely to go away. Latin America was the leading example with Repsol and ENI. In fact, despite the To understand this phenomenon, let’s of a global phenomenon of increased radical leftist discourse of the Venezuelan take a look at history. The first decade of state intervention and nationalization. government, it has been actively courting this century witnessed one of the largest resource windfalls for commodity export- ers. Latin American countries benefited tremendously from the large and persis- Undoubtedly, the most important new development in tent increase in commodity prices. The the region’s oil industry is the opening of the Mexican 3 4 price of oil rose from a low of $10 in 1998 to more than $100 per barrel ten years hydrocarbon sector to foreign investment. later, generating a revenue boom for the 1 2 3 4 regions’ net exporters of hydrocarbons: Outside the region, Russia was the most foreign investors. In the last two years, 46°37’38.01”S | 38°10’9.89”S | 68°7’40.52”O 22° 9’54.06”S | 45°47’13.47”S | 68° Venezuela, Mexico, Ecuador, Colombia, notable example, but many others could the trend to liberalize the sector is unmis- 67°55’35.03”O | 9 Mar 2009 | 28 Sep 2006 | Printed on 63°36’29.45”O | 1 Sep 2011 | 3’45.55”O | 30 dic 2005 | Bolivia, and even Argentina, a declining be found throughout the world. The gov- takable, with the government offering all The| Printed map shows on Cason the four-country regionCanson and the River Plate basin (in blue) withinPrinted which on theCanson Guarani Territory extends.Printed The on red Canson areas mark the Baryta | Print max size: Baryta | Print max size: Baryta | Print max size: Baryta | Print max size: net exporter on the way to become a net ernmental share of profits increased in sorts of sweeteners to make investment location of the thirty Jesuit Missions. 270 by 250 cm. 170 by 195 cm. 225 by 154 cm. 105 by 135 cm. importer. It also significantly benefited most oil exporting countries. In fact, even more attractive. Brazil’s oil industry, the third largest pro- Brazil, a model of long-term energy poli- Undoubtedly, the most important new ducer, but still a net importer. cy in the region, showed clear symptoms development in the region’s oil industry is Land is a photographic project that aims to show maps of oil and its waste, revealing the historical evolution of As in the 1970s, the oil boom was of resource nationalism. the opening of the Mexican hydrocarbon accompanied by a wave of resource In contrast, during the last few years sector to foreign investment. After more the landscape, the political division of territory and our geopolitical identity. The images that make up the proj- nationalism—government encroachment we have witnessed a strong countercur- than seven decades of state monopoly, ect were put together with maps taken from Google Earth and printed in large scale and high definition. on the property rights of foreign inves- rent of government efforts to attract for- the administration of President Enrique They are satellite maps that reveal the topography of Argentine oil fields. tors and an increase in state ownership eign oil investment to the region. Ven- Peña Nieto—leader of the PRI, the party I am interested in seeing how utopias of modernity convert into a dystopian outcome. These maps seem to and control. In the period 2002-2012, ezuela, the leader of the nationalizing that nationalized the sector in 1938— confront us with this otherness: social and economic distortion, environmental disaster, misplaced territorial taxes were significantly increased, con- movement, announced in 2009 that it promoted a path-breaking constitutional boundaries and the uncertain future of our continent. tracts forcefully renegotiated, and foreign would auction new areas for joint ven- reform to make this opening possible. —Marcela Magno investors outright nationalized. Four out tures with foreign companies in extra- Thus, the last stronghold of state owner- of the five hydrocarbon exporters with heavy oil projects. This took place only ship in the region moved to allow the pri-

2 ReVista FALL 2015 ARTWORK BY MARCELA MAGNO REVISTA.DRCLAS.HARVARD.EDU ReVista 3 TERRITORY GUARANI

FIRST TAKE

increase investment and production. Thus foreign investors were victims of the price boom and their own success in increasing production and reserves. The cycle of investment and expropriation in Venezuela is similar to what happened in Argentina, Bolivia, and Ecuador. In all four countries, an oil opening produced a large increase in privately operated pro- duction and reserves, followed by expro- Captiongoes here Captiongoes here Captiongoes here Captiongoes here Captiongoes here priation when conditions were ripe.

MEXICO: THE COLLAPSE OF A GIANT AND ITS CONSEQUENCES Mexico was an exception to the lib- eralizing trend in the 1990s. Historical and ideological reasons can help explain ically increases. Given the amounts of the Venezuela opened the oil sector to pri- this exceptionalism, but the major factor oil rents, which can be as high as 90% vate investment in the more risky and behind the lack of reform is that Mexico’s of revenues, the calculation of the fiscal less profitable projects. This was a major production kept increasing without sig- benefits can be politically irresistible. departure from the nationalization in nificant new investments. The giant oil Most relevant petroleum exporters are 1975, which had made state-owned PDV- field of Cantarell, which produced more fiscally reliant on oil: oil revenues rep- SA the monopoly producer. The open- than two million barrels a day at its peak resent more than 30% of total govern- ing attracted significant investments by (or close to two thirds of the country’s ment revenue. Generally in oil projects, major international players, including production), allowed the government to Above: the community around the Zumaque oil well in Venezuela; opposite page: Harvard and Brazilian students tour a Petrobras facility. companies have to invest a lot of money Exxon, Shell, BP, Chevron and Total, over-tax and conceal the significant inef- in exploratory wells and field develop- leading to a substantial increase in pro- ficiencies of the national oil monopoly, vate sector to play a significant role in the and Guatemala keep regularly auction- in the opposite direction—such as Brazil, ment infrastructure, and it takes a long duction of more than one million barrels Pemex. The future costs of the lack of exploitation of oil and gas resources. In ing oil blocks for exploration. In fact, this Colombia, and Peru, or more recently time to recuperate these costs, while the per day (equivalent to more than a third investment were not perceived by the the summer of 2015, the first exploration is arguably one of the most liberal peri- Mexico—have had either moderate left costs of operation are a minor part of the of current production levels). political leadership and even less by the and production blocks were awarded to ods in the history of the oil industry in or center-right governments in power. investment. Thus, in this so-called high- When Chávez was elected in 1998, general public, so there was no rush for private operators. the region, particularly measured by the However, to understand the dynamic of sunk-cost sector, the effects of a decline oil prices bottomed out, but he did not reform. Even Argentina, after it renational- amount of reserves accessible to foreign resource nationalism it is important to in investment can take years to lead to change the existing oil deals until 2005, Once Cantarell’s production started ized in 2012, quickly announced that operators. So, is resource nationalism focus on the deeper determinants of the the consequent decline in production. after all major investments had been to collapse in 2005, the need for reform it wanted to attract foreign investors fading? It is important to understand the historical cycles of private opening and Therefore government leaders with a made and prices had swung up signifi- became clearer, but high oil prices made to develop its recently discovered non- structural causes of the phenomenon to expropriation. These are the incentives short-term horizon may be tempted to cantly. The protracted and confronta- it initially less urgent. However, as conventional shale resources in the properly answer this question. faced by political leaders under different obtain high current benefits while defer- tional expropriation process that ensued Pemex capital expenditures dramatically Vaca Muerta basin. The country signed scenarios of international prices, stag- ring costs, leaving future leaders to bear significantly increased the government increased but only barely slowed declin- a joint-venture agreement with Chev- THE ORIGINS OF THE es of the investment cycle, production the political consequences of declining share of revenues. It also affected Ven- ing output, the case for reform became ron to develop these sites and reached INVESTMENT, EXPROPRIATION and reserve tendencies, and size of net production and revenues. To illustrate ezuela’s reputation, delaying all major much stronger. Cantarell’s production a settlement with Repsol, the expropri- AND REOPENING CYCLES exports (imports). the dynamic of incentives, we focus on new investments and creating very high has declined more than 80% from its ated shareholder of YPF. Argentina also One might be tempted to attribute Expropriation in its different forms the three leading producers and reserve opportunity costs in terms of foregone peak. With Peña Nieto’s election, insti- passed a new, much more liberal oil the previous wave of resource national- tends to occur when prices rise substan- holders in the region: Venezuela, Mexico future production. Lately, as production tutional gridlock eased and reform was and gas law in 2014. Similarly, after the ism largely to the more general phenom- tially, that is, when its benefits increase and Brazil. faltered and the high-spending regime finally passed. Mexico, like Venezuela in expropriation of oil contracts, Ecuador enon of the resurgence of left in Latin significantly for the government. This has became desperate for more revenues, the past, is opening the riskier, less prof- has signed important new deals with America. After all, the nationalizers— been the tendency throughout the devel- VENEZUELA realism led the government to offer itable projects that require large invest- CNPC, the Chinese national oil company, Hugo Chávez of Venezuela, Evo Morales oping world. Expropriation is also more In Venezuela, a successful operation investors better terms and guarantees. ments and complex technology. In con- now a key player in the production and of Bolivia, Rafael Correa of Ecuador likely to occur in an environment of high of private companies in the oil industry Although investors have continued to trast to Venezuela, it is building a much especially the marketing of Ecuadoran and Cristina Fernández de Kirchner of and increasing reserves and production, led to nationalization, while the stagna- be cautious, the change in the Venezu- more robust institutional framework to oil. Bolivia has also announced new ini- Argentina—were leaders of the more and when the country becomes a large tion of that industry in turn led to prag- elan government’s attitude is palpable. support reform. This might provide a tiatives in the last few years to attract radical variety of the leftwing move- net exporter. Thus, after a cycle of signif- matism in dealing with the problem. In This pragmatism—or desperation—has longer life to the investment cycle. How- foreign partners in natural gas exploita- ment in the region. In contrast, coun- icant and successful private investment, the 1990s, facing low oil prices, fiscal become more obvious after the price ever, if the incentives for expropriation tion. Meanwhile, Brazil, Colombia, Peru tries that did not expropriate or moved the probability of expropriation paradox- crises, and significant investment needs, collapse because of the urgent need to appear in the future, one cannot dis-

4 ReVista FALL 2015 ABOVE: PHOTO BY MEREDITH KOHUT ABOVE: COLLABORATIVE HARVARD-BRAZIL ENGINEERING FIELD COURSE PARTICIPANT, 2011, COURTESY OF JASON DYETT REVISTA.DRCLAS.HARVARD.EDU ReVista 5 ENERGY THE POLITICS card the possibility of a partial reversion lack of investors’ interest in the last off- pressed to be more open. of reform, especially given the endur- shore auction and given the recent oil From the countries’ perspective, ing strength of nationalistic ideology in price collapse. resource nationalism is a problem only OF OIL Mexico. The case of Colombia has some simi- if it hinders the development of the oil larities. When facing a collapse in pro- sector and has negative long-term wel- BRAZIL: PETROESTADO NOVO? duction, Colombia copied the Brazilian fare implications. A pragmatic version Even though Brazil is still a net liberalization model and achieved high of nationalism, one that maximizes importer of oil, it has increased its pro- production growth, but not as yet geo- enduring benefits for the nation with- duction more than fourfold over the last logical luck in finding new reserves. In out volatile policy cycles, is highly desir- two decades, catching up to the produc- contrast to Brazil, this situation provid- able, if all too rare in Latin America. tion levels of Mexico and Venezuela. ed strong incentives for the government Understanding the challenges explored That success is in large part the result of to keep providing attractive conditions here and creating institutions to miti- the liberalization of the oil industry in for investment. In fact, to offset the con- gate them should be one of the main the 1990s, when Petrobras, the national tinued depletion of reserves in the low long-term goals of policy reform in the oil company, was partially privatized price environment, the Colombian gov- region. and the petroleum sector opened to ernment recently announced that terms foreign investment. As a net importer, would be further improved. Francisco Monaldi is Baker Institute the country was eager to maximize its Fellow in Latin American Energy and production and, until recently, did not IMPLICATIONS FOR THE FUTURE Adjunct Professor at Rice University. focus on extracting fiscal rents. How- OF THE LATIN AMERICAN OIL He is the Founding Director of the Cen- ever, the discovery of massive deep INDUSTRY ter on Energy and the Environment at offshore reserves began to change gov- The incentives provided by price IESA in Venezuela and a Faculty Asso- ernmental incentives. In contrast to its cycles, investment cycles, endowments ciate at ITESM in Mexico. He was Vis- South American counterparts, Brazil and institutions, are key to understand- iting Professor of Energy Policy at the did not nationalize or force contract ing the waves of resource nationalism Harvard Kennedy School in 2012-2015. renegotiations. However, it did increase and liberalization. The region has been the government take for future offshore more prone to this type of policy volatil- projects. It required Petrobras to be ity than other regions in the world, pos- • Marcela Magno, an Argentine art- the operator, established an ambitious sibly due to the combination of factional ist, photographer and freelance graphic policy of increasing the local content democracies, weak rule of law and ram- designer, has exhibited her photographs of investments, and increasingly sub- pant high inequality. in Argentina, Chile, Brazil, the United sidized the domestic gasoline market. Given propitious circumstances, States and Italy. In 2014, she received an Moreover, the participation of private resource nationalistic ideologies could honorable mention for her series “Land” shareholders of Petrobras was diluted flourish again. After a cycle of significant in the Salón Nacional de Artes Visuales, when the government exchanged oil investment that adds substantial pro- in Buenos Aires, as well as a prize in the reserves for equity in the company, in a duction and reserves, changing the rules IV Argentine Contemporary Photogra- move that many analysts considered a may becoming tempting again. Institu- phy Award, Caraffa Museum, Córdoba, form of expropriation. tions that encourage governments to Argentina. The Government of the Prov- Thus, even though Brazil had been take longer-term approaches that limit ince of Santa Cruz, Patagonia, Argentina, considered a model of oil regulatory their ability to opportunistically renege awarded her first prize in Santa Cruz policy, the effects of its success and the on deals could moderate the effects of province’s Cultural Heritage Contest in prospect of becoming a net oil export- such volatile incentives. Independent 2007. er also induced a milder version of regulatory agencies, as well as progres- • Ronald Morán, a Salvadoran art- resource nationalism. This has already sive and effective fiscal and contractual ist, created this image of “Crudo Blanco,” had negative implications on invest- regimes that properly tax the windfall shown on the opposite page. Through his ment and production, which have not profits, would be helpful. works, Morán performs critical interpre- SIMON ROMERO 8 LISA VISCIDI 13 MYRNA SANTIAGO 16 REBECCA RAY 20 reached their targets during the last Conversely, changing incentives, like tations of relationships and everyday Brazil’s Oil Scandal Energy and Politics Mexico’s Energy Reform China in Latin America in Brazil few years. The recent corruption scan- those prompted by a prolonged period environments, using a fine sense of irony Simon Romero is the Brazil Myrna Santiago is professor of Rebecca Ray is a pre-doctoral dal involving Petrobras dealings with its of low oil prices, could induce further and highly intuitive, metaphorical use of bureau chief for The New Lisa Viscidi is director history at Saint Mary’s College research fellow at Boston contractors has been a big blow for the pragmatism and liberalization. Net images. He is particularly interested in York Times and a 2015 Maria of the Energy, Climate of California. Her book, The University’s Global Economic Moors Cabot Prize winner. He Change and Extractive Ecology of Oil: Environment, Governance Initiative and a company. There are some signs that the importers or countries that have both exploring political and economic violence was the Times Andean bureau Industries Program Labor and the Mexican Ph.D. student in economics government is moving back to a more declining production or reserves and a and its influence on the family and within chief from 2006 to 2011, based at the Inter-American Revolution, 1900-1938, won two at the University of pragmatic stance, particularly after the portfolio of high-risk projects would be the society as a whole. in Caracas, Venezuela. Dialogue. prizes. Massachusetts-Amherst.

6 ReVista FALL 2015 OPPOSITE PAGE: ART BY RONALD MORÁN REVISTA.DRCLAS.HARVARD.EDU ReVista 7 ENERGY THE POLITICS OF OIL

Brazil’s Oil Scandal

Public Malaise, Institutional Resilience BY SIMON ROMERO

“BRAZIL HAS CHANGED.” fomenting a nationalist aura in the pro- Jardim Botânico district. He added, “You When I moved to Brazil in the giddy cess. have to start thinking out of the box.” days of 2011, many people were voic- In yet another sign that Brazil’s As if awakening to bad hangover, Bra- ing that phrase. After all, the economy moment on the world stage had arrived, zilians are now finding that the excesses seemed to be sizzling after posting 7.5 just a year earlier, in 2010, a Brazilian of the country’s recent oil boom—the percent growth in 2010. So many profes- oilman named Eike Batista went on the hubris, the spending on grandiose devel- sionals were moving to Rio de Janeiro Charlie Rose television show and pro- opment projects and the massive bribery and São Paulo, including highly-skilled claimed, “We believe that in five years scheme at Petrobras unearthed over the Brazilians returning home from abroad Brazil will be the fifth-largest economy past year by dogged prosecutors—were and Americans and Europeans fleeing in the world,” while citing the crucial in a league of their own, revealing fis- stagnation in their own countries, that importance of Brazil’s coveted offshore sures in a model of state capitalism in finding an apartment in those cities was oil fields in achieving this ambition. which vast powers are granted to bureau- an ordeal involving visits to dozens of Epitomizing the sense of confidence crats placed at the top of a maze of state- run-down properties, negotiations of that imbued Brazil’s business estab- controlled banks and energy companies. astronomic sums and pleas with sadistic lishment at the time, Batista also had As Brazil struggles with a multiyear landlords. Brazil’s currency was so strong some advice to offer the United States. slowdown—the economy is expected to that Latin America’s largest country was “You need to be a little bit more Spar- contract almost a quarter this year in emerging as one of the United States’ tan,” said the tycoon, who used to keep dollar terms, making the goal of ascend- largest creditors. Brazilian authorities a Mercedes-Benz SLR McLaren valued ing into the elite club of the world’s five built up massive holdings of U.S. Trea- at about $500,000 parked in the living largest economies more elusive—some sury securities in an attempt to prevent room of his mansion in Rio’s exclusive are seeking explanations for the malaise the real—the country’s currency— from gripping the country. strengthening further and eroding the A research survey released in May by competitiveness of Brazil’s exports. Ibope, the prominent Brazilian polling Change was also palpable on the company, found that the number of Bra- street level in Rio, where so-called “paci- zilians expressing optimism about Bra- fication” security forces were expand- zil’s future had fallen to 21 percent, the Petrobras facilities: the oil boom led to the resurgence of entire sectors like shipbuilding and the construction of a colossal refinery complex. ing their sway in favelas that had long lowest level in 22 years and a stunning been under the control of drug gangs. turnaround for a country which, anec- Of course, Brazil is much more than the bullishness of Eike Batista and oth- another oil boom, in Venezuela under Construction crews were overhauling dotally at least, has consistently ranked a developing-world oil producer, boast- er establishment figures when Brazil’s the late President Hugo Chávez (more on neighborhood after neighborhood as among the most optimistic I have cov- ing a diversified industrial base, includ- economy appeared to be soaring in this that below.) officials prepared the city to host a series ered. Since the end of the authoritarian ing world-class manufacturers like the century’s first decade. But the phrase was Even now, 43 years after it first of megaevents, including the United rule in the 1980s, Brazil boasts achieve- aviation giant Embraer, and exploiting not uttered in 2010; it was actually from appeared, the article offers insight into Nations’ Rio+20 Conference on Sustain- ments such as the lifting of millions out many other coveted resources including the opening of a front page article in the Brazil’s emergence as a major industrial able Development, the 2014 World Cup of extreme poverty; the democratic elec- soybeans, iron ore, rare earths, sugar, Wall Street Journal on April 14, 1972. power—although one that operates in and the upcoming 2016 Summer Olym- tion of presidents like Fernando Hen- huge cattle herds and orange juice. While Coming after four years in which Bra- an environment of acute social inequal- pics. Meanwhile, the resurgence of entire rique Cardoso, Luiz Inácio Lula da Silva exploring the underpinnings of Brazil’s zil’s economy had expanded on average ity. In the 1960s, just one commodity, sectors like shipbuilding and the con- and Dilma Rousseff, all of whom suffered latest boom, both in oil and other cov- almost 10 percent a year, a time of excep- coffee, had accounted for about 70 per- struction of a colossal refinery complex under the dictatorship; and the robust eted resources, and the challenges it pro- tional growth that came to be known cent of exports; by 1972 coffee accounted near the city were winning plaudits for expansion of its tropical agricultural duced, I rediscovered a gem of an article as the “Brazilian miracle,” this was the for less than a third. The giddiness that Petrobras, the national petroleum com- prowess, a development helping to feed describing an earlier time of exuberance assessment of a Brazilian banker inter- I encountered upon moving to Brazil pany. The oil giant, based in a brutalist- the world. But despite such feats, Bra- in Brazil. It began prophetically with a viewed by Everett G. Martin, an award- in 2011 also seemed to be the prevail- style headquarters in the old center, was zilians feel less confident now about the quote from a Brazilian business leader: winning correspondent for the Journal. ing mood in the business establishment Petrobras, the Brazilian national oil giant, bolstering its role as the linchpin of a was a linchpin of a development policy future than in the years before Petrobras “In 10 years, Brazil will be one of the I had dug up the piece years ago while I back in 1972, reflected in spirited state- development policy aimed at reviving aimed at reviving old industries and devel- began making its major offshore oil dis- great powers of the world.” was based in Caracas for The New York ments by automotive and paper execu- old industries, developing new ones and oping new ones. coveries about a decade ago. In an eerie way, those words echoed Times and researching the origins of tives. While the article acknowledged

8 ReVista FALL 2015 PHOTOS, ABOVE AND OPPOSITE PAGE: COLLABORATIVE HARVARD-BRAZIL ENGINEERING FIELD COURSE PARTICIPANT, 2011. COURTESY OF JASON DYETT. REVISTA.DRCLAS.HARVARD.EDU ReVista 9 ENERGY THE POLITICS OF OIL

They were convinced they could avoid emanating from the Petrobras scandal as economic slump eroding Rousseff’s pop- the usual pitfalls, from mismanagement individuals who have made plea bargain ularity. In one sign of shifting fortunes, to corruption and political infighting, deals describe a scheme in which execu- California, with a population about five that often plague other oil-rich countries tives at some of Brazil’s most prominent times smaller than Brazil’s, recently sur- in the developing world. Seeking to bol- construction and engineering firms paid passed the Latin American country as the ster the economy through job creation bribes to Petrobras officials, who then world’s seventh-largest economy. Even and assert greater sway over Petrobras enriched themselves while channeling a the sovereign wealth fund, conceived and other areas of Brazil’s oil industry, portion of the funds to Rousseff’s own as an underpinning of an effort to plan Rousseff, then the chairwoman of Petro- Workers’ Party and other political figures wisely during the boom, has fallen victim bras’s board and the chief of staff to Pres- in her coalition. (Curiously, this was hap- to the grimmer reality now prevailing in ident Lula, supported legislation which Brazil. In an effort to meet budget targets enhanced Petrobras’s control over new in 2012, officials raided the fund, leaving oil fields and required the company to it with just a fraction of its holdings. buy ships and drilling rigs from Brazilian Of course, Brazil has gone through suppliers. Drawing inspiration from oil- boom-and-bust cycles before. Histori- rich countries like Norway which squir- ans point out that the country is argu- rel away oil revenues for future genera- ably on stronger financial footing now tions, Brazil’s government also created than in the past. The central bank holds a sovereign wealth fund in 2008 to pre- $367 billion of foreign currency reserves, pare for lean times. Ebullient predictions dwarfing the assets at its disposal in ear- about Brazil’s rise as a developing-world lier periods of distress. Far from large powerhouse soon became fashionable. cities like São Paulo and Rio, agricultural “We used to say that Brazil was the coun- pioneers continue to thrive even as the try of the future, and I think the future prices of some commodities have soft- has arrived,” a former high-ranking exec- Prosecutors now say ened. Still, as Petrobras’s travails rico- utive at Petrobras told Forbes in 2010. that executives of the oil chet in the national economy, the mood “Our country is in a unique moment,” he swings in Brazil remind me of the pro- added. “We would have to make many giant were putting into phetic assessments about handling oil mistakes to not get it right.” motion a far-reaching and bounties by Juan Pablo Pérez Alfonso, a Fast forward to Brazil in 2015. Pros- once-towering figure in Latin American ecutors now say that executives of the labyrinthine graft and and global oil politics who regrettably Above: Harvard and Brazilian students tour Petrobras facilities; opposite page: oil rigs against a Brazilian sky. oil giant were putting into motion a kickback scheme, one of remains less remembered than he should far-reaching and labyrinthine graft and be. A Venezuelan lawyer and cabinet that Brazil’s military dictatorship since development of the country’s ethanol ning the global energy industry with its kickback scheme, one of the largest scan- the largest scandals in the minister educated partly in the Unit- 1964 “hadn’t created the ideal society,” industry. By the 1980s, Brazil was grap- technical capabilities and its success in dals in the history of Brazil: at the same history of Brazil: at the ed States, Pérez Alfonso helped create citing as obvious problems the torture pling with stagnation, hyperinflation finding oil in deep-sea fields. The rise time political leaders were proclaiming OPEC in 1960, contending that oil-pro- of political prisoners and the millions and a simmering debt crisis. The radi- in Petrobras’s fortunes marked a turn- that Petrobras’s oil discoveries were the same time political leaders ducing nations needed a cartel to exert who still lived in poverty, broad credit cal restructuring of the economy in the ing point for the company, which in the equivalent to a “winning lottery ticket.” were proclaiming that greater control over their oil resources. was bestowed on Antonio Delfim Neto, 1990s, which included the introduction 1950s had hired a U.S. oilman, Walter Critics of the government’s handling But over the years he grew increasingly the powerful finance minister during the of a new currency (the real) and the Link, the former chief geologist for Stan- of Petrobras argue that the legislation Petrobras’s oil discoveries disillusioned with OPEC and with Ven- dictatorship who helped orchestrate the privatization of an array of public com- dard Oil Company of New Jersey (now requiring the company to buy its equip- were the equivalent to a ezuela’s own triumphalism over its oil economic “miracle” with policies such panies, lured greater foreign investment. Exxon Mobil), to lead a quest to discover ment domestically had the effect of tur- bounty. He retreated into his walled as price controls, tax incentives to boost Petrobras, the oil giant founded in the Brazil’s oil reserves. The tepid results in bocharging corruption. At the same time, “winning lottery ticket.” hacienda in the district of Los Chor- export-oriented industries, the establish- 1950s during a time of growing resource those first years after Petrobras’s creation Petrobras faces a daunting test of its ros in Caracas, which he maintained as ment of factories in the poor Northeast nationalism, was a cornerstone of this forecast a drawn-out dependence on for- capacity to oversee an array of devilishly pening while another major scandal was a kind of oasis in the frenetic capital of and the regular adjustment of wages, shift. Authorities thoroughly exposed eign oil, a problem with which Brazil had complex exploration projects as a result coming under intense public scrutiny, the a country whose prospects in the 1960s pensions and rents to accompany rela- Petrobras to market forces, putting an grappled for decades. But the stars finally of the measures expanding its power in so-called mensalão vote-buying scheme and 1970s seemed just as promising as tively high inflation. end to the company’s monopoly on oil seemed to be aligning in Brazil’s favor Brazil’s energy industry. In June, Petro- involving top figures in the Workers Brazil’s did just a few years ago. Blasting This development model came under exploration in Brazil while maintain- when Petrobras began racking up one oil bras cut its global production target for Party. The trial of these politicians was authorities who prioritized pharaonic stress during the oil price shocks of the ing state control of the oil giant. Within discovery after another. 2020 to 3.7 million barrels a day of oil considered a rare breakthrough in politi- megaprojects made possible by petro- 1970s, exposing Brazil’s reliance on a few years, this strategy seemed to pay Brazilian authorities emphasized and natural gas equivalent from 5.3 mil- cal accountability in Brazil’s political leum wealth while neglecting essentials imported oil and ushering in attempts off as Petrobras competed nimbly with their belief that the country was pre- lion. Brazil’s political and business estab- system.) The revelations of corruption like education, he bluntly called oil “the to ease this dependence, including the oil companies around the world, stun- pared to harness the coming oil bonanza. lishments are still absorbing the shocks within Petrobras have coincided with an excrement of the devil.” “A wave of money

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can destroy as well as create,” he warned Ministry, a body of independent prosecu- the testimony of executives who reached its audited financials, dodging a tech- before his death in 1979 at age 75. tors, to dig deeply into the graft scheme plea bargain deals with investigators. Energy and Politics nical default that could have blocked it To be sure, Venezuela, a smaller at Petrobras. Going further, Brazil’s high- If history offers any lessons and Bra- from international capital markets. The country which emerged as the world’s est court has authorized investigations zil booms yet again a decade or two from in Brazil company reported a $16.8 billion write largest oil exporter in the 1920s, has a of some of the country’s most powerful now, business leaders might still be prone down, or reduction in the value of its much longer history of dealing with the political figures, including the leaders of to making wildly exuberant statements. A Retreat from Oil Nationalism BY LISA VISCIDI assets, including more than $2 billion blessings and curses of being an energy both houses of Congress, over claims that Oil, or other coveted natural resources, from corruption. Not surprisingly, Petro- power than Brazil, which has developed they benefited from the kickbacks. At the might play an even larger role in the next bras stock has taken a hit, falling from a far more diversified economy in recent same time, even as Rousseff faces calls boom than in the last one. But has Brazil $72 per share at its height in 2008 to decades and now wields considerable that she should be impeached over scan- really changed? Undeniably yes, but per- WITH BRAZIL’S STATE OIL COMPANY PETROBRAS culate its losses from the bribery scheme, around $5 per share in March, recover- economic clout in Venezuela. But in a dal, she has adopted a largely non-con- haps not in the way its enthusiasts pro- engulfed in a massive corruption scandal, preventing its auditor Price Waterhouse ing slightly after its financial statements sign, perhaps, of rising political polariza- frontational approach to those calling claimed back in the go-go days of 2010. the government looks poised to introduce Cooper from approving its financial were released. tion in Brazil, some Brazilians are draw- for her ouster, avoiding the poisonous The vital test which Brazil now faces sug- an energy sector overhaul that would statements, originally due in November. In a significant reversal of past poli- ing comparisons between the challenges tenor of some political leaders in neigh- gests that some of the demons from its reverse a trend of using state-run com- In late April, Petrobras finally released cies, Petrobras is now taking steps to faced by residents of both countries as boring countries. Strikingly, Petrobras, past may have been less tamed than once panies to drive economic development. disenchantment with Rousseff’s han- while dealing with an array of challenges thought. But the quiet transformation of While most of the details of the scheme dling of the economy escalates. Petro- stemming from the scandal producing Brazil’s institutions offers a glimpse into have only recently come to light—creat- bras remains under the cloud of scandal upheaval in its executive suites, remains the resilience that may allow the coun- ing a political crisis for the president just and the country follows the cautionary innovating on the cutting edge of deep- try to pick up the pieces and bolster its as the economy is faltering—the corrup- tale of Eike Batista, the oil tycoon whose sea exploration technology. In a mile- democratic experiment. tion scandal follows years of political in- vast empire has crumbled. Nevertheless, stone largely ignored as graft revelations terference in the management of Petro- the nurturing of independent institu- swirl around the oil giant, Petrobras dis- Simon Romero, the Brazil bureau chief bras and in energy policy more broadly. tions in Brazil suggests that the country’s closed that its petroleum output (exclud- for The New York Times, is a 2015 The bribery scandal first came to light problems occur in a different realm than ing natural gas) recently surpassed that Maria Moors Cabot Award winner. He in March 2014, when a senior execu- those in Venezuela, where dilemmas of Exxon Mobil. covers Brazil and several other countries tive, Paulo Roberto Costa, was arrested include soaring inflation, acute short- Brazil still faces huge challenges as it in Latin America, including Argentina, on charges of money-laundering. In a ages of basic products and a crackdown deals with the excesses which accompany Chile, Paraguay and Uruguay. He was plea bargain, he revealed a vast kickback on the government’s political opponents. oil wealth. Political figures under the oil previously the newspaper’s Andean scheme that involved inflating Petrobras In Brazil, a crucial streak of judicial inde- scandal’s cloud are reportedly maneuver- bureau chief from 2006 to 2011, based contracts and pocketing 3% of the value. pendence has allowed officials from the ing in an attempt to prevent the prosecu- in Caracas, Venezuela, and a national Many of the company’s top executives Federal Police, a respected institution tor general overseeing the inquiry into financial correspondent based in Hous- and senior government officials, includ- comparable to the F.B.I. in the United the graft scheme from securing a new ton, Texas, from 2003 to 2006, covering ing some from the ruling Workers Party, States, and counterparts in the Public term, and Rouseff has voiced doubts over the global energy industry. have been implicated. The scandal has reached the high- est levels at the company. Jose Sergio Gabrielli, Petrobras’ chief executive from 2005 to 2012, had his assets frozen by a court order in January. Although Gabri- elli’s successor appears to have had no involvement in or prior knowledge of the scheme, the appointee Maria das Graças Silva Foster—a close friend of Petrobras facilities contrast with a spectacular natural setting. President Rouseff—resigned under pres- sure on February 4, along with five other Petrobras executives. Several top execu- The company has banned 23 of Brazil’s largest tives have since received fines and prison terms. engineering and construction firms from future The scandal’s financial repercus- oil and gas exploration auctions because they were sions are particularly painful for the world’s most indebted company, with allegedly involved in the scandal, leaving few qualified some of the largest annual corporate suppliers in a country with particularly strict local investment plans globally. For several Construction of Petrobras oil exploration equipment in Angra dos Reis, Rio de Janeiro. months, Petrobras was unable to cal- content rules.

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Inacio Lula da Silva, also of the Work- Many of the company’s employees may Joaquim Levy, is charged with imposing policies. The president has given inves- ers Party, presented a bill to Congress also have known about the corruption for unpopular austerity measures to balance tigators unprecedented freedom to pros- that increased government control years although they were not involved. the budget and safeguard Brazil’s invest- ecute criminals on corruption charges, over Petrobras. The state oil company When I was a journalist covering Brazil’s ment grade status, such as cutting public proposed anti-corruption legislation to remained partially privatized, a legacy of oil industry, a senior Petrobras manager spending, reducing pension and unem- Congress and reshuffled her cabinet to reforms under his more market-oriented told me in 2013—before the scandal was ployment benefits and raising taxes. The realign her political ties and distance her- predecessor in the late 1990s, but the revealed—that inflated contracts were reduction in spending by Brazil’s largest self from alleged offenders. government increased its stake in the behind the ballooning budget for Petro- company will only further undermine In the oil and gas sector, an opposi- company and made Petrobras the exclu- bras’ Abreu e Lima refinery in north- economic growth. However, the corrup- tion congressman has already introduced sive operator with a minimum 30% stake eastern Brazil. The refinery project ulti- tion scandal’s effects on the construction a bill to reverse Petrobras’ obligations as in all pre-salt fields. mately cost $18 billion compared to an industry could be even more far-reaching sole operator with a minimum 30% in The new regulations put a tremen- initial estimate of $2.5 billion. Costa has for the economy. Many major Brazilian the pre-salt. Local content requirements, dous financial and operational burden on since admitted to inflating the contracts construction firms that were expected which the government has already loos- Petrobras and restricted international oil for Abreu e Lima as part of the kickback to execute the country’s ambitious infra- ened, will likely be further retracted. In companies’ participation in exploration scheme. structure plans have been shut out of both the hydrocarbons and electricity and production in Brazil. Other politi- It is unclear whether Petrobras will capital markets because of alleged cor- sectors, the government says it will raise cally motivated decisions, such as the gain more independence from the gov- ruption, or face potential bankruptcy as prices in order to cut subsidies, and some fuel price caps, strict requirements for ernment in strategic decision-making a result of reduced demand from the oil government officials are calling for allow- using Brazilian equipment and services, under its new CEO. Petrobras’ new lead- industry. ing Petrobras to set its own pricing policy. and the building of expensive refineries er, Aldemir Bendine, who was head of Public anger over the scandal has Amid all the turbulence, the future in the poor, less populated Northeast for Banco do Brasil, the largest public bank severely weakened the administration of may still be bright for Brazil’s energy economic development purposes, fur- in the country, has close personal ties President Dilma Rousseff, who kicked off giant. Petrobras maintains access to ther undermined Petrobras’ finances and to the president. The fact that he is an her second term in January. Although gigantic reserves and will eventually ability to manage its complex projects. outsider to the oil industry and thus safe the president herself was apparently not reach its production targets, even if not Petrobras headquarters: if the company’s weak cash position forces it to sell larger core as- Similarly, in the power sector, unsus- from any allegation of involvement in the aware of the scheme, it coincided with her as quickly as originally planned. The sets in the future, its long-term growth will be compromised. tainable price controls were implement- bribery scheme is certainly reassuring. tenure as president of Petrobras’ board company remains a leader in deepwater ed in the name of economic develop- But it remains unclear whether he and of directors. Already some opposition drilling capabilities, meaning it has the improve its balance sheet and restore June announced a steep reduction in its ment. In 2012, the government forced his new team will have sufficient freedom figures are calling for her impeachment technological ability to develop these investor confidence. It announced it will 2020 oil output target from 4.2 million power generation plants to cut their pric- to manage the company. and her approval ratings have dropped to complex projects. There have been delays not issue any new foreign debt this year, to 2.8 million barrels per day. The com- es in order to aid large industrial electric- around 10%. Hundreds of thousands of in starting production from new offshore and its latest 2015-2019 business plan, pany has banned 23 of Brazil’s largest ity consumers, weakening the finances of ECONOMIC AND POLITICAL protesters have taken to the streets across fields, but tremendous progress has been published in June, includes an aggres- engineering and construction firms from power companies. Last year, Brazil faced FALLOUT Brazil in various demonstrations over the made on the operational side since the sive 37% reduction in capital spending future oil and gas exploration auctions a major drought that reduced supplies of The state-led approach undertaken by last few months to voice their anger at the first major pre-salt discovery was made compared to the previous plan. Petrobras because they were allegedly involved in cheap hydroelectric power, forcing utili- both the Lula and Rousseff administra- president. eight years ago. Pre-salt production has also plans to divest some $15.1 billion the scandal, leaving few qualified suppli- ties to use more expensive natural gas. tions is not confined to the energy sector. But the political fallout from the scan- now surpassed 800,000 barrels per day, worth of assets. The decline in global oil ers in a country with particularly strict However, the government did not allow Over the last decade, Brazil’s economy has dal could drag on. As more people are and Petrobras’ total oil production in prices unexpectedly has a silver lining for local content rules. For now, its divest- companies to raise their rates but loaned been weighed down by increasing public brought up for charges of corruption and Brazil rose 5% to just over 2 million bar- Petrobras. While Brazil’s government- ment plan is targeting less important them money instead. Now, to shore up its spending, rising debt and protectionist offered plea bargains in exchange for rels per day in 2014. controlled fuel prices generated losses assets in refining and distribution, inter- finances, the government will have to cut trade policies, while needed investments information, the list of alleged offenders However, beyond the drilling success- for Petrobras in past years when interna- national holdings and marginal oil fields, subsidies and raise rates. in its failing infrastructure and weak edu- will likely grow. What’s worse, another es and the pending legislative reforms, tional oil prices were high, retail prices but if the company’s weak cash position At Petrobras, politically driven deci- cational system have not materialized. corruption scheme that may be even larg- the most important outcome of the scan- in Brazil are now above international forces it to sell larger core assets in the sions had frustrated the rank and file Now, these policies have become er in scale is emerging. In March, police dal will hopefully be a new culture of cor- import prices, yielding a profit for the future, its long-term growth will be com- long before the corruption scandal was unsustainable as the global economic and finance ministry officials revealed porate governance and transparency that company. promised. made public. One Petrobras project environment has turned hostile for Bra- that over the past decade the government has clearly been lacking at Petrobras. Belt-tightening at Petrobras, while manager told me last year that Lula had zil. Economic growth in China, Brazil’s had been robbed of between $1.8 billion necessary under the current circum- TROUBLES AT PETROBRAS “destroyed the company” and that most largest trading partner, has slowed, and and $6 billion in back taxes and fines Lisa Viscidi is director of the Energy, stances, could hurt the company in the While the corruption scandal has of his colleagues were unhappy with the prices for Brazilian oil, minerals and agri- from various firms. Climate Change and Extractive Indus- long run. Its oil production has been flat revealed a new depth to the troubles at top management. While they respected cultural products have declined. Mon- tries Program at the Inter-American over the past five years despite the dis- Petrobras, it comes on top of years of Foster, an engineer and industry veteran, etary tightening in the United States is REFORMS AHEAD? Dialogue. She writes about energy policy, covery of some of the largest oil reserves problems tied to political interference they had been skeptical of her predeces- expected to restrict the flow of dollars to As these problems come to a head, social and environmental impacts of in the world off Brazil’s shores, known as in strategic decision-making. Follow- sor Gabrielli, a political appointee and emerging markets. Brazil’s economy grew Brazil is moving toward implementing natural resources and the geopolitics of the “pre-salt.” It has repeatedly missed ing Petrobras’ discovery in 2007 of the co-founder of the Workers Party with only 0.1% in 2014 and is expected to con- reforms to root out corruption, stabi- energy, among other topics. Follow her production targets over the years and in pre-salt reserves, then-President Luiz little experience in the oil industry. tract this year. Its new finance minister, lize the economy and revise its energy on twitter @lviscidi.

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Mexico’s Energy Reform

National Coffers, Local ConsequencesBY MYRNA SANTIAGO

THE SMALL, WHITE-WASHED CLASSROOM AT children. She was from Minatitlán origi- I have been thinking about those sto- the University in Minatitlán, Veracruz, nally but left it for Xalapa not only seek- ries in light of the energy reforms enact- was packed with a couple dozen people ing better employment opportunities but ed by President Enrique Peña Nieto and who, although neighbors, had never met. also running away from the pollution implemented by the Mexican Congress Several members of a fishing coopera- that gave her children asthma and made in August 2014. The reforms amended tive, a pediatrician, a toxicologist from their skin break out in hives with every the Mexican Constitution in two ways. Petróleos Mexicanos (Pemex), a biologist bath. I then switched the focus of my First, they broke the monopoly that turned environmental activist, a couple investigation to the history of labor, envi- Pemex had on hydrocarbons (oil, natural of retired oil workers, a Pemex engineer, two medical students, neighbors of the local refinery, and community activists all turned out to discuss relations be- The Gulf of Mexico and the deserts of northern Mexico tween Pemex and surrounding commu- are sensitive ecosystems. The Gulf is an important nities. Invited by my colleague, the historian fishing ground for both the United States and Mexico. Christopher Sellers from Stony Brook University, to this unusual witness semi- ronment and oil in northern Veracruz. I gas, and petrochemicals). Second, they nar, participants squeezed around tables had never visited Minatitlán until now. allowed private investment, both foreign set up with tiny voice recorders. I had a Knowing the history of the place, I and domestic, to return to the industry. supporting role, helping to manage the expected no surprises from the accounts While there is no denying that Pemex meeting and translate if necessary. I of the seminar participants. The first generated great wealth for Mexico as was also thrilled to visit for the first time round of anecdotes was formal and a whole, the gains are not unequivocal Minatitlán and its twin down the road, guarded, as one could anticipate. But as for Pemex’s workers and neighbors. As the port of Coatzacoalcos, the hubs of the soon as the men and women felt com- Minatitlán-Coazacoalcos demonstrate, oil and petrochemical industry in south- fortable and before the temperature in ecological degradation followed the oil ern Veracruz and two of the most pol- the classroom reached sauna stage, the industry, eroding the local community’s luted cities in Mexico. tone changed. The mood became som- health in the process. As the Pemex The reason for my excitement had its ber. Everyone in the room was sick, toxicologist explained in the seminar, own history. Two decades earlier, as a had been sick, or knew someone in their the company, cognizant of the fact that fresh-faced graduate student in the his- families who was sick. Their ailments, the petroleum industry ranked among tory department at the University of Cal- as the mother of my son’s playmates had the most dangerous in the country, has ifornia, Berkeley, I had decided to write told me two decades before in Xalapa, made quantifiable strides in monitor- a dissertation about the history of the oil ranged from recurring skin rashes, to ing the health of its permanent workers workers of Minatitlán, the most impor- constant allergies, to asthma, to diges- and created a robust health system for tant refinery in southern Mexico before tive system discomfort, to leukemia. The union members. It never occurred to President Lázaro Cárdenas nationalized pediatrician himself had had leukemia him personally, however, that neighbors the industry in 1938. However, my proj- and when he realized that too many of the refineries and the petrochemical ect was soon derailed. Every jarocho (the of his patients also had the disease, he plants deserved similar attention since endearing term for Veracruz natives) I began asking questions. He wanted to they were exposed to the same toxins the spoke to told me that staying in Mina- know how many leukemia cases existed workers confronted on the job on a daily titlán or Coatzacoalcos for any extended in Coatzacoalcos-Minatitlán or whether basis. period of time was a terrible idea, even there were other cancers in the region. It Will the oil sector reforms bring more so as I had planned to bring my turned out that no such records existed: change for the better? The shift in ideo- four-year old for the six-month research no numbers, no statistics, no cancer reg- logical and economic policy direction trip. I was skeptical of this advice until I istry of any sort. No one kept track and was jarring for Mexicans, controversial met the friend of a professor with young no one encouraged him to do so either. and contentious. Weeks of demonstra-

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Jesús Álvarez Amaya and his “People’s Graphic Workshop”made prints to The oil industry poses challenges to the environment. An iguana enjoys its natural habitat, part of the sensitive ecosytem threatened by the oil industry. support the expropriation of Mexican oil decreed in the 1930s. tions, marches and protests framed the to private parties, but he added that the the government specifically wants two in 2014, a remarkable increase from 29 In northern Mexico, water is already in a November 12, 2014 article, the shale congressional debates and with good rea- nation could assign contracts to private technologies: “ultra deep” offshore drill- tremors in 2000. The difference in that at a premium. Industry analysts, in fact, fields “encroach on cartel turf” and could son. Mexico had decreed the first major companies directly or through Pemex. In ing and hydraulic fracturing. Although decade was 3,200 wastewater wells dug declared to the online trade journal be dangerous for workers. One anony- nationalization of petroleum in history, all cases, the contracts would declare that Pemex has been drilling off the coast of to bury the poisons brewed through “DrillingInfo” in December 2014 that the mous executive confessed that in the coming after three decades of conflict the hydrocarbons in the subsoil belong to Tabasco and Campeche since the 1970s, “fracking.” Industry analysts estimate a lack of water is an issue for the Sabinas undisclosed area where his company pro- among the workers, the state and the the nation. the crude that the companies are seek- potential 150 million barrels of shale oil and Burro-Picachos shale fields of Coa- vided services to Pemex, workers arrived foreign oil companies, following the first Thus Peña Nieto assured the Mexican ing now lies at 2,900 meters (9,500 feet) in northern Mexico, but Pemex has been huila. That area is rural, forcing ranchers by helicopter, escorted by the Mexican social revolution of the 20th century people that Pemex was not privatized. It below the surface (by comparison, the able to bring only one well into produc- and farmers to compete with oil compa- military. But despite the risk to workers’ (1910-1920). The decision to national- continues to exist as a state-owned com- British Petroleum-Deepwater Horizon tion. If the company acquires advanced nies for water. Moreover, as the New York lives, consultant Emil de Carvalho told ize the oil industry in 1938 catapulted pany, but it will collaborate and com- well that exploded in 2010 and dumped technologies through joint ventures or Times reported on April 11, 2015, the Rio the Financial Times that no company President Cárdenas to the pinnacle of the pete with private firms, both foreign and some nine million barrels of oil in the contracting, what will happen to local Grande is already strained by the drought would shy away. The firms would sim- pantheon of revolutionary heroes among domestic. Investors drilling on land and Gulf of Mexico was at 1,500 meters, or communities? affecting the U.S. Southwest. By the time ply adjust their budgets to include secu- Mexicans. He remains there to date offshore will not own the crude oil or nat- 5,000 feet). Mexico estimates that 50 The Gulf of Mexico and the deserts the river reaches the Gulf, it is but a trick- rity personnel. There is simply too much despite more critical reviews by histori- ural gas they find. Those products will billion barrels of oil are buried in Gulf of northern Mexico are sensitive ecosys- le. Research about the maquiladoras money to be made to be derailed by the ans and sundry academics. The public’s be owned by the nation, so Mexico’s oil waters ready for retrieval with cutting- tems. The Gulf is an important fishing (textile assembly plants) on the border prospect of violence against workers. If attachment to the principle of national riches continue to be nationalized. How- edge technology. ground for both the United States and also show that the Rio Grande is severely Nigeria is an example, Mexican and for- ownership of the oil industry, therefore, ever, private interests will gain access to “Unconventional” oil, specifically Mexico. As the 2010 British Petroleum polluted by industrial waste, compromis- eign oil workers’ safety will be secondary cannot be underestimated, no matter hydrocarbons through contracts signed shale oil extracted by using the method spill demonstrated, accidents in the Gulf ing the health of communities on both to extraction. how critical ordinary Mexicans are of with the government or Pemex. The known as hydraulic fracturing, is another are deadly for workers (eleven workers sides. Adding the burden of fracking to The reforms might achieve the ulti- Pemex, the oil workers’ union and the language of each contract therefore will priority for Mexico. The process involves died in the BP blast) and harmful for the Rio Grande and local aquifers will mate goal of filling the coffers of the Mex- government. determine if a private company keeps injecting water, sand and chemicals one coastal communities dependent on clean mean that those localities will have even ican treasury with oil profits, but as the Peña Nieto knew that a strong nation- a percentage of production, pays a set mile into the earth to crack the shale beaches and water for their livelihoods. less potable water and more toxic waste. Minatitlán witnesses revealed, the local alist flame burns within every Mexican, price per barrel of crude or cubic meter and release oil and gas. The technology In Tabasco and Veracruz, fishermen Under any standard, such conditions costs might be very high. so he promulgated the reforms in such of natural gas, pays extraction or export is water-intensive, using two barrels of affected by the 1979 Ixtoc 1 underwater spell hardship for local populations. a way that he could truthfully claim that taxes, etc. As critical journals like the water per barrel of oil captured. It also fracture that blew out the well saw stocks Lastly, there is violence to consider. Myrna Santiago is professor of his- he was not privatizing Pemex and that weekly Proceso and the daily La Jornada creates toxic waste that can contaminate recover after three years, although the The use of new technologies will open tory at Saint Mary’s College of Cali- he was not denationalizing oil. The lan- have noted, the contract is the undefined the water table when it is re-injected into fish they caught were not the same spe- new areas for extraction, expanding the fornia. Her book, The Ecology of Oil: guage of the constitutional amendments and crucial concept in the reforms—the the bedrock to protect the environment cies as those previous to the spill, accord- geographical potential for bloodshed. By Environment, Labor and the Mexican was careful and specific yet flexible. artifact that will contain the details that aboveground. And it provokes earth- ing to biologists from Mexico’s national most accounts, the Mexican drug cartels Revolution, 1900-1938, won two prizes. Arguing that he acted in Cárdenas’ spirit, could undo Pemex if it can’t compete quakes. For example, on April 4, 2015, university. The effects of the BP spill on that traffic along the Tamaulipas-Coahui- She is working on a history of the 1972 Peña Nieto drafted an amendment that against transnational oil companies. the New York Times reported that Okla- the Louisiana fishing fleet are still being la-U.S. border have diversified their crim- Managua earthquake and is looking reaffirmed the late president’s stipulation One goal of the reforms is to obtain homa had surpassed California as the fought over in court, five years after the inal activities to include fuel theft. As the for witnesses willing to tell their stories: that no concessions would be granted new technologies. Observers believe that shakiest state, experiencing 5,417 quakes accident. Financial Times of London pointed out [email protected].

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China in Latin America Chinese Investment Figure 1 (current and planned) Seeking a Path Toward Sustainable Development BY REBECCA RAY

ALL EYES WILL BE ON CHINA IN 2016, AS IT PRE- the region in May. dards. pares to host its first-ever G-20 sum- Chinese demand for raw commodi- Sinopec arrived in Colombia in 2010, mit. While the rest of the world dis- ties has been an independent driver of through its subsidiary New Grenada cusses this symbolic act of new global social and economic change in Latin Energy Colombia (NGEC). It has strug- prominence, Latin America knows that America, putting pressure on water- gled to meet national standards, but the China’s prominence is nothing new nor ways, forests, and traditional liveli- government is at least partly responsible merely symbolic. hoods. LAC exports to China have larger for these lapses. NGEC initially commit- In fact, for much of the last decade environmental impacts, and support ted to a half-million dollar land conser- China has driven Latin America’s trade fewer jobs, than other regional exports. vation project to safeguard local com- and investment. Unfortunately, dur- But our research also finds that Chinese munities’ water source. Three years later, ing this China-led commodity boom, investors are capable of living up to NGEC had not yet complied, resulting in policy makers overlooked the intrinsic local standards where Latin American a formal complaint by the local environ- dangers of commodity-led growth. Now governments enforce them consistently. mental group Mastranto. The Attorney that the boom is ebbing, those weak- Taken together, these results mean that General’s office ruled against NGEC, but nesses have become glaring. They are policy makers have the chance to set the also cited the National Environmental particularly visible in energy sectors terms of their relationships with China, Licensing Authority (ANLA) for a lack such as oil and coal, where issues of land but if they neglect this opportunity and of oversight. tenure and water and air contamina- fail to set and enforce high standards, Sinopec has also faced criticism tion have united environmentalist and they will have to reckon with serious of its hiring practices, but this is due Chinese investment, biodiversity and indigenous territories indigenous resistance. These are the social and environmental consequences. mostly to the national government’s findings developed in the recent report inability to overcome local power struc- has a better employment record than conflict than any other major oil compa- standards. Nonetheless, when social by my colleagues and me at Boston Uni- CHINESE INVESTOR tures. Sinopec, like many other firms, in Colombia. Most of Sinopec’s Argen- nies in the country. and environmental standards are con- versity, Universidad del Pacífico (Lima) PERFORMANCE hires through local Community Action tina operations are in the province of Despite its good track record to date, sistently enforced, Chinese investors in and Centro de Investigaciones para la As the region boomed over the last Boards (CABs). CABs—and by associa- Santa Cruz, far away from the oversight Andes Petroleum has begun to face particular have shown themselves capa- Transformación (Buenos Aires): China decade, companies from China and tion, Sinopec—have come under fire for of Buenos Aires. However, oil contracts heavy resistance in Ecuador due to two ble of rising to the challenge. in Latin America: Lessons for South- across the world arrived to get in on the bargaining with job positions, offer- are negotiated at the provincial level, new concessions they have recently won South Cooperation and Sustainable opportunities. Chinese firms, with less ing them to well-connected families far giving Santa Cruz a better vantage point in the Amazon. Protests have sprung COMMODITIES, Development, which explores the role of experience abroad than their Western away instead of local applicants. The for enforcement. In terms of labor, up in Ecuador and internationally, and THE ENVIRONMENT Chinese trade and investment in Argen- counterparts, found themselves particu- national government has proposed a Santa Cruz requires oil companies to Pope Francis mentioned the situation AND EMPLOYMENT tina, Bolivia, Brazil, Chile, Colombia, larly challenged by unions, local com- new hiring structure, but unsurprisingly hire Santa Cruz residents, and Sinopec in his recent visit to the region, calling China’s demand for commodities is Ecuador, Mexico and Peru. China is now munities, indigenous groups, and global this has been met with fierce resistance has complied. This stands in contrast for protection of the Amazon and its often linked to environmental degrada- the top export destination for South civil society networks. However, our from the CABs themselves. with Colombia, where Sinopec has been inhabitants. These are the first new con- tion and conflict. In five of our eight case American goods—mostly petroleum, case studies show that Chinese investors In Argentina, Sinopec’s environ- denounced for hiring workers from oth- cessions in Ecuador under a new citi- studies—in Argentina, Bolivia, Colom- copper, iron and soy—and second only are flexible and able to adapt, often out- mental record has been better than in er areas of the country. zen participation law, but our fieldwork bia, Ecuador and Peru—we examine to the United States for exports from performing their domestic and Western Colombia, but belatedly so and only In Ecuador, Chinese oil state-owned shows that the government has fallen conflicts that have arisen between the entire Latin America and Caribbean counterparts. after coming under heavy public scru- enterprises Sinopec and China National short in implementing this new law and Chinese investors and local communi- (LAC) region. The China and Commu- Perhaps most tellingly, Sinopec (a tiny. Sinopec arrived in 2010, purchas- Petroleum Company (CNPC) formed failed to adequately consult affected ties. In each case, the same two trig- nity of Latin American and Caribbean large Chinese petroleum state-owned ing Occidental Petroleum’s holdings two joint ventures (Andes Petroleum indigenous populations before granting gers consistently explain most causes of States (CELAC) summit in December enterprise), which appears in three of and inheriting its commitments to build and PetroOriental) to purchase Occi- the concession. While Chinese investors conflicts: scarce job creation and com- 2014 generated projections of $250 bil- our eight case studies, shows different aqueducts to alleviate competition for dental’s Ecuadoran holdings in 2006. are the face of the new development, it petition for natural resources (water lion in new Chinese investments within levels of social and environmental per- water with local communities. Sinopec In doing so, they inherited a history of is the Ecuadoran government that has use, land tenure, and contamination of the next decade, including two new oil formance depending on different local eventually completed them in 2014— water and soil contamination dating set the stage for this conflict. water and soil). concessions in Ecuador, shale oil and standards. Overall, these case studies after a major drought struck the area, back to the infamous days of Chevron. Taken as a whole, our case studies These same trends emerge in our gas concessions in Argentina, and a show that Latin American governments creating pressure from the local press Since arriving, though, they have lived show that local governments and civil statistical analysis. We find that LAC transcontinental railway that Premier Li have the opportunity—and the respon- and community groups. up to modern Ecuadoran standards, society have a crucial role in ensuring exports to China have heavier environ- Keqiang discussed on his trip through sibility—to set and enforce high stan- Sinopec’s record in Argentina also and faced less environmental and social that foreign investors live up to local mental impacts, and support fewer jobs

20 ReVista FALL 2015 MAP BY REBECCA RAY REVISTA.DRCLAS.HARVARD.EDU ReVista 21 ENERGY THE ECONOMICS than other LAC exports. These two fac- much water per dollar as other exports highly biodiverse land. The southern tors combine to create a perfect storm on average, and ten times as much water route largely avoids these risks. Which for conflict, as oil wells, plantations and per dollar as overall regional economic route the governments of Peru, Bra- OF ENERGY mines for export to China outcompete output. This disparity is due mainly to zil and China pick will have enormous communities for natural resources, but large-scale agriculture. Among major consequences for its environmental and do not replace those livelihoods with LAC economies, Argentina shows the social impacts. new jobs. largest difference, mostly because of its From 2009 to 2013 (the last five soy exports, which make up more than HOLDING THE LINE AT THE END years of available data), we find that 70 percent of Argentine exports to Chi- OF THE COMMODITY BOOM LAC exports to China support about na but just 14 percent of overall exports. As China’s economy slows, its 20 percent fewer direct jobs than other LAC trade with China also has a dis- demand for commodities is cooling exports, per million real dollars, and proportionate climate impact. LAC-Chi- also. As a result, the region’s govern- fewer than half as many direct jobs as na exports create about 15 percent more ments are facing pressure to roll back overall economic activity. net greenhouse gas emissions per dollar their environmental and social safe- This jobs deficit is due to the outsized than other exports, and over twice as guards to streamline new projects. importance of extractive industries (oil, much as overall economic output. Peru has drastically weakened its gas, and mining) among the region’s These net emissions go beyond those enforcement of indigenous consulta- exports to China. Over the last five years, from power plants. In fact, many of the tion laws for new extractive projects. extractive products made up over half of China-related net emissions are due to It has essentially eliminated protec- LAC exports to China, but just one-third the destruction of natural carbon sinks, tion for tribes that were reclassified of the region’s exports overall. Mean- brought about by deforestation or the as “peasant” communities instead of while, extractive industries support only clearing of the Brazilian cerrado to pro- “Indian” communities decades ago, in about one-sixth as many jobs in LAC as duce soy exports. As the map of Chinese a move seen as dignifying at the time. manufacturing, per million dollars of investment in the Amazon basin shows, Bolivia’s new mining law was set to eliminate the Environment Ministry’s authority to take part in the approval of new mining projects, but civil society While Chinese investment is not creating new jobs, its successfully resisted that provision. thirst for natural resources is squeezing communities Latin American governments must maintain the policies needed to ensure pursuing traditional livelihoods. that economic activity in natural resource sectors is managed in an envi- output. So the export basket to China its sites are heavily concentrated on ronmentally responsible and socially is much less labor-intensive than the sensitive terrain. Chinese dams, mines, inclusive manner. Perhaps more impor- region’s traditional export basket. oil concessions and railways often inter- tant, as the Bolivian case reveals, is the Ecuador shows a striking example of sect important centers of biodiversity. need for civil society to monitor both this dearth of new jobs. From 2008 to The darkest green areas on the governments and foreign companies. 2012, extractive products made up 58 map—with extremely rich biodiver- China’s prominence is here to stay, percent of all Ecuadoran exports, but 70 sity—exist only in northern Peru and as its hosting of the G-20 and myriad percent of exports to China. Meanwhile, eastern Ecuador. The dark green areas new investment projects in LAC show. extraction supports just one direct job in Ecuador are nearly invisible due to Without the proper policies in place and 16 indirect jobs per million dollars the presence of Chinese oil concessions, to make sustainable development part of output, compared to 25 direct and 22 including two new blocks recently won and parcel of its relationship with indirect jobs for manufacturing. Overall, by Andes Petroleum, discussed above. China, Latin America will continue to exports to China support just 30 jobs per Also, a long-anticipated transcon- experience social and environmental million dollars, compared to 70 jobs per tinental railway may finally come to conflict, a burden ultimately detrimen- million dollars supported by Ecuadoran fruition after being a major focus of tal to long-run prosperity. RAMÓN ESPINASA LUISA PALACIOS 28 ELEODORO MAYORGA ALBA 32 exports overall. Premier Li Keqiang’s recent trip to AND CARLOS G. SUCRE 24 The Impact of Falling Oil Peruvian Oil Production While Chinese investment is not Latin America. The map shows two Rebecca Ray is a pre-doctoral research Prices creating new jobs, its thirst for natu- possible routes currently under discus- fellow at Boston University’s Global What Powers Latin America Eleodoro Mayorga Alba is the former Luisa Palacios is the head of Latin Peruvian Minister of Energy and Mines. He ral resources is squeezing communities sion, highlighted in red. The northern Economic Governance Initiative and a Ramón Espinasa is the lead oil and gas specialist at the Inter-American Development America macro and energy research is a petroleum engineer with a doctorate in pursuing traditional livelihoods. We find route cuts through indigenous territory Ph.D. student in economics at the Uni- Bank. Carlos G. Sucre is a consultant at the at Medley Global Advisers in New economy. that LAC exports to China use twice as in the interior of Peru, as well as over versity of Massachusetts-Amherst. Inter-American Development Bank. York.

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and electricity consumption is quantified where we have Costa Rica, El Salvador, energy consumption. Brazil is famous by gigawatt-hours. The disparity in units Guatemala, Honduras, Nicaragua and for its production of biofuels—started is only one part of the problem. Another Panama. Mexico is a geographical region as a security policy in the late 1970s and problem is definitions: industrial con- unto itself. The Caribbean includes Haiti, now a pillar of Brazilian policy—but it is sumption in one country may be defined Dominican Republic, Trinidad and Toba- also the third largest producer of oil and as commercial consumption in another, go, Jamaica, and the Eastern Caribbean. fourth producer of gas in Latin America. to name but one example. We will thus The Southern Cone consumes energy Brazil’s use of hydroelectric power is also rely on data from the International mostly for industrial purposes with 35% the highest in all of Latin America and Energy Agency that is homogenized and of the total and for transportation at it is one of only three countries in the therefore comparable across time, coun- 34%. This is a heterogeneous group as region that use nuclear power (Mexico tries, sources and sectors. Chile, Uruguay and Brazil have higher and Argentina being the other two). It industrial use than transportation but also leads the region—by some margin— THE LATIN AMERICAN ENERGY Argentina and Paraguay use slightly in the use of non-conventional renewable MATRIX more energy for transport than indus- energy sources like solar and wind. The transportation sector is the larg- In contrast to the heterogeneous est consumer of energy in Latin America south, the Andean countries are all simi- and the Caribbean (LAC) with 36% of its The ideal arrangement— larly blessed with plentiful energy wealth. total energy consumption. This is also Bolivia and Peru boast large reserves of true for the United States (42% of its borne out by experiences natural gas that began to be extracted total) but it is not the case in India, where in Brazil, Peru, and over the past two decades. Energy use in the largest consumers are residences of Bolivia is evenly split between industry all sorts with 36%, or in China, where Colombia—is to and transport, while Peru’s is more tilted industry consumes 44% of all energy. It is encourage private towards transport. a generally recognized pattern: as a coun- Colombia’s high-quality coal in the try develops, it moves from using most of investment under strong northeast and heavy crude oil in the its energy for cooking meals and heating regulatory agencies that south and southeast are plentiful and homes to powering factories to moving should serve the country well over the goods and people. open the sector to private next decade, though there is pressing The literature also clearly indicates capital under clear, need for investment in exploration. Due that the wealthier a country is, the more to its difficult geography and its income Transportation is the largest energy consumer in Latin America. “ EL TREN DESDE MI AZOTEA” by ADEMIR ESPIRITU/ OJOS PROPIOS, Lima. energy it consumes per capita, with most credible and fair rules. level, transport is the largest consumer of of that energy used for transportation. energy in Colombia. Indeed, Latin America’s largest consum- try. The patterns of consumption are not Ecuador’s energy matrix is almost ing sector changed in the early 1970s the only differences. Chile, for example, completely dominated by producing and What Powers Latin America? when industry replaced residential use as is a net importer—by a wide margin—of exporting crude oil. Buoyed in part by a the region began to leverage its natural fossil fuels. Indeed, domestic production subsidy scheme that is about 7% of GDP, wealth—particularly in hydrocarbons— is only 30% of energy supplied to the the transport sector is by far the largest Patterns and Challenges BY RAMÓN ESPINASA AND CARLOS G. SUCRE and many people migrated to cities from Chilean market—a pattern expected to consumer of energy in Ecuador with 50% the countryside. The second transition remain over the next decade. of the total. took place in the mid-1990s when the Uruguay is similarly reliant on inter- Venezuela’s certified oil reserves are BETWEEN THE RIO GRANDE AND THE STRAIT OF Andean nations are huge net exporters and India to bring to the forefront some industrial sector yielded its first place to national energy markets. It does not pro- the largest in the world, and it also has Magellan lie the world’s largest crude of crude oil, natural gas and coal. Some of the more salient issues for the region. transport as LAC began seeing higher duce oil or gas but imports both, along Latin America’s largest gas reserves and oil reserves, giant natural gas reservoirs, countries in Latin America are complete- The comparison with United States and levels of wealth per capita. with about half of the oil products it con- powerful, dammed rivers that provide plentiful mineral deposits, massive riv- ly exposed to market forces, while other China is important because these two However, a more in-depth analysis sumes, as it has one refinery that supplies hydroelectric power to its grid. The low- ers and even volcanic activity yielding countries offer generous subsidies. countries are the largest energy consum- reveals that this consumption pattern for the remaining share. Paraguay is at the est price of gasoline in the world explains geothermal power. However, knowing So how does the general picture look ers in the world, while India consumes Latin America does not hold true across opposite end of the spectrum, as it actu- why transport energy use is 35% of the that Latin America has plentiful energy and what is the way forward for Latin roughly the same amount of energy as the board because its regions are radically ally exports to Brazil and Argentina 80% total and three times larger than residen- wealth is a necessary but insufficient con- American energy markets over the next Latin America and the Caribbean. varied. We can split LAC into four parts: of the electricity it generates and imports tial usage, but it is industry that takes top dition to analyze its energy market. decade, in terms of new technologies, A caveat: comparing energy data is Southern Cone, which includes Argenti- about one third of the energy it consumes, billing with 49% of the total. Important cleavages exist within the reforms and regulatory changes? intrinsically difficult. Natural gas is mea- na, Brazil, Chile, Paraguay and Uruguay; which is mostly made up of firewood and Energetic homogeneity also exists region. Caribbean nations rely almost To put Latin America into context as sured in British thermal units while coal the Andean region, made up of Bolivia, other biomass products. in Central America but in the opposite entirely on imported oil products to an energy producer and consumer, we is measured in millions of tons. Crude Colombia, Ecuador, Peru and Venezu- The giant in the grouping is Brazil, sense. Central America imports a whop- power lights and transport people, while compare it to the United States, China oil is bought and sold as barrels per day ela; and the Central American isthmus, which accounts for 70% of Southern Cone ping 40% of the energy it consumes,

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while another 40% is made up of fire- electricity market. on a global scale, Latin America will design more tailored and efficient cost- wood and byproducts from sugar-cane Candidates to take market share from continue to be an important supplier of alleviation programs. production. It is no surprise that as the hydropower include a variety of sources. commodities and raw materials to the A third area with space for reform is poorest region by income in Latin Amer- In Central America, geothermal power global market. Its valuable resources give regional energy integration, particularly ica, most of Central America’s energy use has become an integral part of the elec- it a special comparative advantage over impactful in small markets. In Central is in the residential sector with 42% of tricity mix and will continue to grow. other regions. This does not mean that America, integration has proven to be the total, and transport a distant second Solar, wind, and other non-conventional it will simply be a mine and an orchard excellent policy by yielding economies with 30%. energy sources have grown tremendously to the world, however. Natural resource of scale required to introduce lower-cost Residential consumption is such a in Brazil, Mexico, and Chile since their extraction can foster the development of generation facilities that lead to fairer large share of Central America’s total introduction to LAC in 1992, though value-added industries, as in the case of pricing and better energy supply. energy use because its rural areas have today they only represent 0.7% of elec- Finland and Nokia or Sweden and Ikea, Latin America cannot simply rest on not been integrated to the electricity grid tricity generation. Nuclear power facili- two valuable companies born out of the its energy-rich laurels. It is lucky to have so residents burn firewood. Rural elec- ties exist in Brazil, Mexico, and Argentina timber industry. plentiful traditional and non-traditional trification programs have gone a long and though very tentative plans to intro- In order to continue to extract these energy at its disposal, but it must move way towards bringing modern energy to duce nuclear plants exist, the prospect for resources in the most competitive and without hesitation towards more nimble remote populations throughout Central this source is not good. cost-efficient manner, best practices and attractive institutional arrangements America and elsewhere in LAC in order Diesel and fuel oil plants have been from the Latin American experience if it is to derive gains that equally benefit to reduce the use of firewood, but much installed to meet growing demand have shown that private investment must the region’s poor and rich. work remains to be done. throughout LAC as they are accessible in accompany public funding, in a manner Official data and expert estimates The case of the Caribbean island terms of capital requirements and cheap that is open, transparent and competi- place the required investment to expand nations is similar and more dramatic to operate and maintain. These plants, tive. This is true for electricity genera- the region’s electricity generation in the than that of Central America. These however, have high environmental costs tion and fossil-fuel production, as these next decade at about US$300 billion. nations generally lack domestic sources and Latin America is well known for its sectors require massive, risky, long-term The monies needed to increase oil and of energy, with the notable exception low-carbon consumption: its CO2 emis- capital investments that the state gener- gas production reach above US$1 trillion. of Trinidad and Tobago, an important sions per unit of GDP are the lowest in the ally cannot finance alone. None of this investment will be possible producer of natural gas. Their reliance developing world and only slightly higher The ideal arrangement—borne out by without a strong partnership between the on imported diesel and fuel oil makes than those for the EU or the OECD. experiences in Brazil, Peru, and Colom- public and private sector. Our own expe- them uniquely vulnerable to market The more long-term, cost-effective, bia—is to encourage private investment rience shows that this understanding is ebbs and flows, but there is little alterna- and environmentally sustainable source under strong regulatory agencies that possible and beneficial. The challenge is tive. Domestic sources have been tapped for electricity generation in the face of open the sector to private capital under immense, but achievable. where available—small rivers in Jamaica, dwindling hydropower is natural gas. It clear, credible and fair rules. This is the Haiti and Dominican Republic have been is an energy efficient investment to refur- model that Mexico is following under its Ramón Espinasa is the lead oil and gas dammed, for example—but they will con- bish existing oil-powered plants to burn current reform process. The main bene- specialist at the Inter-American Develop- tinue to depend on external supplies of natural gas instead, and the installation fits from such a model are that it attracts ment Bank and an adjunct professor at energy. costs of natural gas facilities are lower capital, ensures competition and trans- the School of Foreign Service of George- than coal. The region’s reserves of gas parency, permits access to best practices town University. He holds a Ph.D. in THE ELECTRICITY MARKET make it a uniquely suited fuel as demand and state of the art technologies, exposes energy economics from the University The salient feature of Latin Ameri- continues to grow and rivers can no lon- the sector to market prices and limits of Cambridge and an industrial engi- can electricity is the widespread use of ger supply sufficient power to the grid. monopolistic behaviors. neering degree from Universidad Católi- hydraulic energy. Indeed, nearly 52% of A second reform need concerns subsi- ca Andres Bello. He can be reached at all electricity generated below the Rio INSTITUTIONS AND POLICY dies. Partly as a result of its resource base, [email protected] Grande is from hydropower. The region’s As the region embarks upon these many countries have implemented subsi- distant second source of electricity is infrastructure investments, we must dy programs aimed at lowering the costs Carlos G. Sucre is a consultant at the natural gas with 24%. This reality, how- remember that over the past century most of electricity and transportation fuels to Inter-American Development Bank and ever, is changing as most of the large riv- countries have wisely chosen to leverage the general public. However, research an adjunct professor at the School of For- ers with hydrogeneration potential have their comparative advantage of natural shows that there is a high correlation Top: the area around Venezuela’s Zumaque oil well; bottom: Venezuelan oil refinery eign Service of Georgetown University. been dammed. While there is some space resource endowments. The degree of suc- between income per capita and energy He holds a Master’s degree in interna- for growth still, particularly through cessful exploitation certainly varies in consumption, that is, the richer you are, lead to smuggling and widespread energy as efficient cooking stoves. In the trans- tional affairs from the Elliott School of refurbishing old facilities, developing the sense of the sustained developmental the more you energy you use. Therefore, waste, which results in environmental portation sector, subsidies can be ben- International Affairs of George Wash- virgin river basins and installing small impact of natural resource extraction. the better-off segments benefit more damage. eficial when aimed at fostering the use of ington University and an economics and hydropower stations, over the next ten Economic diversification is a wise from indiscriminate subsidies. Aside Clearly defined and targeted subsidies mass transport. The region would do well political science degree from the Uni- years hydraulic power will lose some of policy recommendation for the entire from the regressive nature of energy sub- can exist if they secure access to electrici- to continue to remove across-the-board versity of Chicago. He can be reached at its preponderance in the Latin American region, but it must be understood that sidies, the lack of exposure to prices can ty and cleaner-burning technologies such subsidy programs that still exist and to [email protected]

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ENERGY THE ECONOMICS OF ENERGY

energy policy seem difficult today with- The Impact of Falling Oil Prices out political change. Any effort at policy Oil Production: adjustment has been aborted. A devalu- Is Latin America Part of Global Oil Supply Adjustment? BY LUISA PALACIOS The Big Three in Latin America ation of the official exchange rate was (thousand barrels per day) needed to ease PDVSA’s—and the gov- ernment’s—fiscal situation, along with a major adjustment of gasoline prices. INTERNATIONAL OIL PRICES HAVE DECLINED BY million barrels a day increase it had pre- increase in time given Mexico’s aggres- At four cents per gallon, gasoline prices 40% recently. Some of the region’s oil viously forecast for 2020, sive plans to expand its pipeline infra- in Venezuela are the lowest in the world producers have been better than others However unwilling, Latin America is structure and the government has plans and do not even cover the cost of produc- at adjusting to this reality. In more mar- becoming part of the global oil supply to quadruple Mexico’s natural gas import tion, let alone the cost of importing the ket-oriented countries like Colombia and adjustment despite its very attractive oil capacity from the United States by 2018. 100-200 thousand barrels per day in oil Mexico Mexico, the collapse of oil prices has not and gas resources yet to be developed. For countries such as Venezuela and Venezuela products that the country is having to translated into a full-blown crisis thanks A big question is which oil industry in Ecuador, such an increase in energy Brazil import today. to the flexibility of their policy frame- which country will be able to come out imports would be catastrophic, in part But nothing has happened. In the works. In these countries, their floating of this oil price shock in better shape. because of large energy subsidies. But meantime, Venezuela’s production of foreign exchange rate regimes are doing Mexico’s shallow and deepwater resourc- Mexico no longer subsidizes energy conventional crude seems to be expe- the work of helping their economies deal es, Venezuela’s extra heavy Orinoco belt, prices. In fact, current gasoline prices in riencing declining rates of more than with the external and fiscal adjustment Brazil’s highly productive offshore pre- Mexico are above international prices. 5%. The national oil company PDVSA that such collapse in oil prices entails. salt play, and the vast shale gas and oil This price differential is effectively a tax SOURCE: BP STATISTICAL REVIEW OF WORLD ENERGY 2015 seems to believe that the only way to But in those countries like Venezuela resources of Argentina’s Vaca Muerta are on gasoline consumption, allowing the compensate for this is by bringing heavy that are unable or unwilling to adjust, all contenders. government to compensate somewhat VENEZUELA: NO EASY WAY OUT about $10 billion in financing this year, oil on stream from its vast Orinoco belt the oil price collapse is significantly de- for this year’s decline in oil fiscal rev- No country in the region is suffer- if Chinese financing is included. Vene- reserves. It currently has six different teriorating their dollar liquidity situation MEXICO: LIGHT AT THE END enues from exports. Between January ing the collapse in oil prices more than zuela also seems to have reduced its sub- joint ventures to do so with Chinese, and leading to a serious macroeconomic OF THE TUNNEL and April, gasoline taxes provided the Venezuela, where oil represents 96% of sidized sales of oil to Caribbean nations Russian and international oil companies crisis. The first casualty of the oil price government with an additional $5 billion total exports and more than 50% of fiscal with preferential payments through the like Chevron and Repsol. Most analysts first evaluate the oil adjustment was Mexico. The country in revenues. That meant that instead of revenues. The magnitude of the impact Petrocaribe oil alliance. Still, as every new barrel of oil com- price shock at the macroeconomic had already experienced a decline in pro- falling by 50% in dollar terms, govern- has significantly increased the risks that The reduction of subsidized oil ing from Orinoco is significantly heavier, level; however, at the industry level, duction of close to 100,000 barrels per ment oil revenues, which now include the national oil company PDVSA and the exports and the raising of financing have and given the limited capacity to upgrade national oil companies also are under day last year and has so far this year been gasoline taxes, fell by only 30% in the government will not be able to service not been sufficient to improve the coun- this crude, it requires mixing it with light financial stress. As a result, their capi- hit with a further decline of more than first four months of the year compared to their debt obligations. try’s dollar liquidity situation: interna- oil or diluents which Venezuela needs to tal investment plans are being slashed. 200,000 barrels per day in the January- the same period last year. While Venezuela is sitting on the larg- tional reserves have declined by almost import given declines in own light crude. The growth prospects of the countries April 15 period compared to the same Despite declining oil production, Mex- est oil reserves in the Western Hemi- $6 billion and by July 2015 were already This increases the marginal cost of oil where they operate are then negatively period last year, mostly because of the ico’s oil future is looking bright thus far sphere, increasing oil production as a below $16 billion, their lowest level since production, making the economics of a affected as the national oil companies sharp pace of decline in Cantarell, Mexi- because of a landmark energy reform way out of the country’s severe economic 2002. And this dollar liquidity situation 30% royalty—one of the highest on the are generally the largest single company co’s second largest field. A decade ago, it passed last year that opened the oil and and financial crisis does not seem to be is a concern because debt service to both planet—too costly in this price environ- in the country. And this creates a nega- produced two million barrels per day, but gas sector to private capital after eighty an easy option. The oil industry does not the Chinese and bond debt investors is in ment. tive loop since the oil production outlook has only averaged 250,000 barrels a day years of absolute government control. operate in a vacuum and is not immune the order of $15-20 billion annually. of the region also faces uncertainty and in the first half of 2015. The government is proceeding with its to the economic collapse in the country It will be very difficult for the Venezu- BRAZIL: WHEN IT RAINS, IT pressure because investment is the only While Mexico is an oil-exporting auctions of oil blocks this year and has with an inflation rate that is the high- elan oil industry to operate successfully POURS way to guarantee future production. As a country, the country feels the oil price so far announced tenders for about 50 est in the world (already at triple digits), under such financial and economic con- Brazil became Latin America’s sec- result, the macroeconomic impact of the decline not through its external accounts, blocks, with the first auction for 14 shal- widespread scarcity and a growth rate ditions. But addressing them requires ond-largest producer late last year, over- decline in oil prices gets magnified. but through its fiscal accounts. Last year, low water contracts slated to take place estimated by the International Monetary major changes to the current economic taking Mexico. But it is not necessarily Oil production is already being affect- oil income continued to represent about on July 15, followed by an additional five Fund (IMF) at -7% this year compared model, and this includes energy policy. oil prices that are clouding Brazil’s oil ed in Mexico and Venezuela; Colombia 30% of the government’s total revenues. contracts in September and 26 onshore to last. In the absence of reform, oil produc- outlook. Rather the national oil compa- also confronts downside risks. While Bra- At the same time, Mexico’s oil exports are marginal fields in December. Still expect- To cope with the situation, the govern- tion faces the risks of further declines. ny Petrobras is bogged down in a severe zil had become the region’s second most only 9% of total exports, with oil and gas ed to come are oil tenders for deepwater, ment has significantly reduced imports— Venezuela seems to be becoming a more corruption scandal that has left the com- important producer surpassing Mexico holding equal shares of total imports. As heavy oil and unconventional resources. effectively starving the private sector of costly oil producer and PDVSA’s cash pany highly indebted, provoking major last year, recently it massively revised its a result, Mexico’s energy trade balance Overall, Mexico plans to auction a total much needed dollars to continue opera- flow situation remains under duress with revisions in its 5-year capital investment very aggressive oil production goals: the is already negative given its increas- of 914 fields in the 2015-2019 period tions. PDVSA seems to have stabilized arrears to its oil service providers in the plan (see the other articles in this issue national oil company Petrobras now only ing dependence on U.S. natural gas and and that will allow Mexico to project production, after a decline of more than order of $20 billion. on Petrobras by Simon Romero and Lisa expects a 700,000 barrels a day increase gasoline imports for its own consump- oil production increases in the medium 100,000 barrels a day last year, and the The capacity and willingness to carry Viscidi.) in five years, a sharp drop from the three tion. In fact, this dependence will only term, despite current declines in output. government is believed to have raised out such a major change in economic and All of Brazil’s anticipated growth will

28 ReVista FALL 2015 OPPOSITE PAGE: CHART COURTESY OF FRANCISCO MONALDI REVISTA.DRCLAS.HARVARD.EDU ReVista 29 ENERGY THE ECONOMICS OF ENERGY

come from its pre-salt fields. Pre-salt ARGENTINA: COUNTER-CYCLICAL translates to an estimated 802 trillion shale revolution, which has been respon- MexicoMexico Energy Energy Trade Trade Balance Balance refers to the oil reservoirs found under ENERGY POLICY cubic feet of technically recoverable shale sible for the oil oversupply in global oil the thick layer of salt in Brazil’s deepwa- When the world oil price was more gas and 27 billion barrels of oil. markets. And this fact brings additional 25 ter. These fields have proved to be highly than $100 a barrel, government regula- In April 2015 YPF, the largest shale pressure to bear on the competitiveness 20 productive, with production already tion did not allow Argentine oil compa- operator in the country, reported that of Latin American oil industries, which 15 at more than 700,000 barrels a day in nies to earn more than $50 a barrel. Now shale oil production remained very low are neither the low-cost oil producers May—expected to represent more than that oil prices have collapsed, Buenos at 22,900 barrels per day and 67 million found in the Middle East, nor the com- 10 50% of total oil production by 2020. Aires is going much higher than interna- cubic feet per day of natural gas from petitive fiscal and legal regimes found in 5 Petrobras believes that presalt is still tional oil prices by allowing its producers three joint ventures in Vaca Muerta: the United States. competitive at a $45-55 per barrel range. to realize $77 a barrel for their oil—much one with Chevron at the Loma Campana U.S. shale oil and gas producers man- In $ billion 0 Even if Brazil will see oil production higher than international oil prices and field, a second one with Dow Chemical aged to bring more than one million bar- Apr-­‐13 Jul-­‐13 Oct-­‐13 Jan-­‐14 Apr-­‐14 Jul-­‐14 Oct-­‐14 Jan-­‐15 Apr-­‐15 -­‐5 increases, this internal crisis is having even providing an additional subsidy of at the El Orejano field, and a third joint rels per day of oil into the market last important consequences for economic $3 a barrel, which means an average of venture with Petronas at La Amarga Chi- year, while at the same time reducing -­‐10 growth as the oil industry represents $80 a barrel for Medanito light oil. Go ca field. Vaca Muerta has been compared cost and improving efficiencies at $100 a -­‐15 about 13% of GDP. The corruption scan- figure. to ExxonMobil’s Eagle Ford shale field in barrel. This process has accelerated even dal is also significantly impacting Petro- But Argentina is defying the global Texas in terms of its oil and gas potential, more this year, allowing a part of the U.S. Natural Gas Crude oil and products Petrochemical bras’ local supply chain, including the energy trend in more than one aspect: shale oil and gas industry to be competi- most important construction companies its national oil company YPF announced tive even at these low prices. This will put in the country. that its 2015 $6 billion capital expendi- even more pressure on the oil industries Latin American Oil Production ture was unchanged from last year, con- A big question is which La1n America Oil Produc1on At the heart of this institutional crisis in Latin America. (selected countries) was a very aggressive industrial policy of tinuing relentlessly in its quest to increase The region’s oil trade balance with the (selected countries) oil industry in which 3100 local content requirement gone wrong. production (YPF’s oil and gas output in United States is still positive, but it has Venezuela 2900 What this policy did was force Petrobras the January-April period increased by country will be able to fallen to about 700,000 barrels per day

2700 to spend more than 70% of its $40 bil- 6% and 15% respectively in relation to come out of this oil price from almost 4 million barrels per day Mexico lion annual capital expenditures—an the same period last year). YPF produces a decade ago. The United States is not 2500 amount which was already one of the 40% of the oil output and about 30% of shock in better shape. exporting its shale oil to Latin America 2300 highest in the industry—in the domestic Argentina’s 116 million cubic feet a day directly, but U.S. oil is finding its way 2100 Brazil economy to develop an oil service sector. of gas production. And the rig count— but it is even larger in size. to the region through the surge in oil- 1900 It had to do this while at the same time which is a forward-looking indicator of In the meantime, YPF continues refined products. And this is what is subsidizing gasoline imports, as well oil production—is increasing in defiance with its relentless drive to emulate U.S. leveling the oil relationship between the

Thousands barrels per day per barrels Thousands 1700 as shouldering the very costly develop- of the worldwide trend. shale producers by reducing the costs United States and the region. 1500 ment of its offshore oil resources. And Because Argentina is a net energy of extracting shale oil and gas in Argen- So which Latin American countries all of this without much help from any importer, the decline in oil and gas pric- tina. But despite a pro-business legal and oil industries can weather the chal- Apr-­‐1 May-­‐ Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 other company as legislative changes es is actually helping Argentina’s energy environment, the development of Vaca lenges ahead? Mexico seems to be a good forced Petrobras to hold a 30% stake in trade deficit, which fell by almost 50% Muerta will not be contingent only on bet because, enjoying a solid macroeco- US-­‐La&n America Oil Trade Balance any presalt development and be the sole in January-May in relation to the same a better price outlook and continuation nomic framework, it has already done US-Latin American Oil Trade Balance operator. period last year. This likely means that of cost reduction. It will be particularly the homework of liberalizing its oil and 2500 Petrobras and the government are the annual $6.5 billion energy deficit in dependent on the expected change in the gas sector, equating its pricing policy to now having to pick up the pieces of its 2014 is likely to be cut in half, as terms- governmental macro policy framework international levels, linking its energy 2000 misguided policies in the midst of a very of–trade effects and lower volumes due to that could come after the October 2015 sector to that of the United States. difficult macroeconomic adjustment the sluggish economy help to significant- presidential elections. Necessary chang- And while the potential is great in 1500 which has already thrown the country ly cut its $10 billion a year bill in energy es include the elimination of capital and Venezuela, Brazil and Argentina, ques- into recession, taking with it President imports to maybe $5 billion— contingent import controls, moving to a floating tions about their oil sectors will remain as 1000 Dilma Roussef’s popularity, now below on normal winter weather. exchange rate and the elimination of they struggle either with uncompetitive Thousand b/d 10%. However, some questions remain energy price controls. energy policies, or with an inadequate 500 The only way out for Brazil’s oil about a larger development of Argen- macroeconomic framework or with both. 0 industry—and for Petrobras—is a major tina’s vast shale resources, a possibly U.S.-LATIN AMERICA ENERGY Mar-­‐10 Mar-­‐11 Mar-­‐12 Mar-­‐13 Mar-­‐14 Mar-­‐15 overhaul of the same energy policies that important source of growth for the coun- RELATIONSHIP Luisa Palacios is the head of Latin led to this crisis. This means a major try’s economy in coming years. Equally important to understanding America macro and energy research at revision of its pricing policy, local con- The U.S. Energy Information Admin- the impact of the oil price collapse on the Medley Global Advisers in New York and

Graph Sources: Mexico Energy Trade Balance (top), Source: Mexican Statistical Agency, INEGI tent requirement policy and presalt leg- istration identified the nation as holding Latin American oil producers is to under- a researcher for the Center on Energy and Latin American Oil Production (middle), OPEC, ANP and Sener; US-Latin America Oil Trade islation (a bill to that effect is already in the world’s second largest shale gas and stand why it has occurred. This supply the Environment at the Business School Balance (bottom), Energy Information Administration Congress). fourth largest shale oil reserves. This shock was mostly generated by the U.S. (IESA) in Caracas, Venezuela.

30 ReVista FALL 2015 GRAPHS BY LUISA PALACIOS REVISTA.DRCLAS.HARVARD.EDU ReVista 31 ENERGY THE ECONOMICS OF ENERGY

lack of investment and the intrusion of 2023, a figure that could be even greater Peruvian Oil Production Reserves Proven and Probable water—it only produces 8,500 barrels if other reserves are discovered. Millions of Barrels daily. Pluspetrol’s block 1AB, now recon- Even with low oil prices and the cost of Challenges and Opportunities BY ELEODORO MAYORGA ALBA figured as block 192, is currently under importing the necessary dissolvent, this Block 1-AB 198 bid. Once it produced 100,000 barrels block provides royalties higher than 25%. Block 8 68 of oil daily; now it produces only 10,000. Its potential encompasses proved devel- Block 67 217 The accumulated production of oil for oped reserves of 70 million barrels and IMPACTED PROJECTS THE PETROLEUM SECTOR I KNOW BEST IS may have to close because of a lack of Block 64 55 this block is 716 million barrels. Yet this an undeveloped potential of 90 million Peru’s, where I recently served as Min- crude oil. What has happened? What can Perenco, a French company associ- block holds the country’s greatest oil barrels, figures that justify a new 30-year Block 39 162 ister of Energy and Mines. Because of be done to reverse a situation that will ated with PetroVietnam, has stopped reserves. With its contract scheduled to concession. Oil wells with both heavy and the recent drop in prices, oil-producing have a negative impact on Peru’s balance work in blocks 67 and 39 until oil prices Block 95 62 end in August 2015, its production was light crude oil will permit the block to countries are starting to adjust their con- of payments and future investments? go up. Its production costs—including Total> 762 evaluated for investment. Development reach 28 million barrels a day by 2030. tracts and review the sector regulation I’d like to focus here on oil production transportation on barges of an essential of the proved reserves would increase This scenario would include the develop- in order to protect their investments. in the northern and central jungle areas, dissolvent from the Gulf of Mexico and source:Perupetro chart by author production to 25,000 barrels daily in ment of the Chonta and Vivian reservoirs In Peru the necessary changes have not leaving aside other regions, including the cost of moving its own oil production been made, and there’s a risk production Camisea’s gas production. And I’d like to the first station of the pipeline—do not will continue to decline. to propose some steps to avoid declining permit it to continue operations until the The need for adjustments extends far production and to allow profits (the dif- price of oil approaches US$70 per bar- beyond a matter of investments though. ference between world price for crude oil rel. Perenco had plans to produce up to It affects the possibility of accessing new production and total costs of local pro- 60,000 barrels daily, but now limits its technologies to protect the environment duction) to keep on benefiting the coun- production to 1,000 barrels a day, which and of fair consultations with indigenous try on the national and regional levels, as is sent by river to the refinery in Manaus, and other communities. And if low prices well as business. Brazil. spur low production, the very existence Many oil-producing countries are A Canadian company, Gran Tierra, of a pipeline to get oil to markets may be responding to the drop in oil prices has decided to sell its block 95 because threatened. through changes in contracts, particu- of the fall in oil prices and disappointing In 2014, Peru was slowly starting to larly those signed for the more risky explorations of a second well. In January reverse its declining production, but investments. These measures include 2014, the company estimated that the the drop in oil prices has had a strong deadline extensions for the exploratory block had 61.5 million barrels of proven impact. The country had been produc- phase, reductions in discount rates and and probable reserves. ing some 200,000 barrels of oil daily royalties, and accelerated depreciation. Another company affected by the in 1980, but the lack of investment and However, a counter cost to these changes drop in oil prices is CEPSA, a Span- unsuccessful exploration investments would be compliance with increasingly ish firm controlled by the International had caused a decline. By 2013, Peru was strict environmental standards and with Petroleum Investment Company of Abu producing only 63,000 barrels a day. social policies to commit more resources Dhabi. Together with the Canadian com- The exception in this downward spi- to benefit the neighboring communities. pany Pacific Rubiales, which has 30% of ral has been the development of natural the project, it operates block 131, which gas deposits. Concentrated in the area of RESERVES IN THE NORTHERN depends on the oil pipeline to get its Camisea, gas has enabled Peru to enjoy AND CENTRAL JUNGLES production to the market. At the end of secure, clean and low-cost energy since The northern and central jungle 2014, CEPSA began production in one 2004. regions have a potential of likely reserves well, and encouraging tests from it justi- Before the last trimester of 2014, in relatively small fields of 20 to 30 mil- fied sinking two more wells. CEPSA has everyone thought oil production would lion barrels. None of these reserves could confirmed a small deposit capable of pro- increase. Forecasts indicated that 2015 alone sustain the construction of a new ducing between 5,000 to 8,000 barrels would end up with a production of oil pipeline: the success of oil operations daily. PETROPERU has been the major 72,000 barrels daily and reach 150,000 in this region depends on the continuity purchaser of this production. If the oil by 2020. But now, plans to develop small of service of the Northern Oil Pipeline. pipeline ceases to function, the produc- deposits of petroleum discovered in the Strategic allies need to elaborate a tion will have nowhere to go. northern jungle region are being post- plan that will develop these oil fields so The Argentine firm PLUSPETROL poned. as to profit each operator, allowing pro- has also experienced a severe drop in Current production is 58,000 barrels duction to increase in the short run and production. At the end of the 1990s, its daily—a block less than anticipated. And to maximize the recuperation and value block 8 was producing between 25 and it’s feared that the Northern Oil Pipeline of assets in the medium- and long-term. 30,000 barrels a day; now—because of The map shows the placement of the oil blocks in Peru.

32 ReVista FALL 2015 MAP BY ELEODORO MAYORGA ALBA REVISTA.DRCLAS.HARVARD.EDU ReVista 33 ENERGY ALTERNATIVE with exploration to determine if they hold this block. To rate the offers only on the of economies of scale in the costs of dis- sufficient amounts of light crude to com- basis of who will provide the best royal- solvent and transportation. PERUPET- pensate for the dissolvent imports. ties or the greatest number of wells leaves RO, the government regulatory agency, ENERGY For this all to work, the current bid- out consideration of the time and effort should call up a working group that can ding must be successfully concluded. needed to research new technologies. coordinate realistic goals for oil produc- However, a revision of the terms pub- There is a risk of a further drop in pro- tion. As PETROPERU operates the pipe- lished by PERUPETRO, the oil regulatory duction because of a delay in the bidding line and the Iquitos refinery, it should agency, is worrisome: process or because the new operator does be part of this group independently of • The deadline to present offers is quite not have the necessary experience and whether it participates in the operation short. The block has a number of fields needs more time to begin operations. In of block 192. in different areas, and a fairly complex that case, production could go down to c) I recommend contacting Petroama- infrastructure operating for years. Only 8,000 to 9,000 barrels daily, creating a zonas, Ecuador’s state oil company, which those who have worked on this block situation of very high tariffs and endan- has signed new contracts to explore (PLUSPETROL in particular) and have gering the minimum production needed neighboring blocks of the border of knowledge on the ground are in a posi- to operate the pipeline. Peru. The company must be approached tion to present sensible offers; the rest of The operation of the pipeline depends because its production could generate the the companies might have to raise their on the volume transported and the tariffs operating base needed by the pipeline. offers. charged. If the current formula is applied, d) CEPSA must receive incentives to • Another problem is the existence there will be a significant increase in elevate its production to 8,000 barrels of payments for assets, as shown on the tariffs. The question is how to avoid daily to increase the amount of dissolvent books. They are no longer realistic, giv- the paralysis of the pipeline and how to available in the region. en the low oil prices. Even if the price increase production in line with the geo- e) The new operator of block 192 will becomes effective after the second year logical potential of the region. play a crucial part in Peru’s oil panorama. and can be paid in installments, it still The bidding rules on this block should represents a significant burden in cash RECOMMENDATIONS be revised because they will determine flow. a) The most pressing need is to main- production in the near future. Combined • Moreover, relations with the indig- tain or if possible reduce the pipeline with the drop in oil prices, a fall in oil enous community have been fraught, tariff, eliminating fixed costs such as production will generate a recession with and it has been difficult to implement depreciation and to reduce the discount high social costs for this region of the the agreements made before the bidding rate from 12 to 6%, which ought to be the country. process begins. The role of the Peruvian cost of the capital of PETROPERU. This state in regards to PLUSPETROL, which measure would reduce the tariff during Eleodoro Mayorga Alba is the former has headed the operation for the last 30 the current crisis period, but later there Peruvian Minister of Energy and Mines; years, and the ineffective way of their han- should be a period of recovery so as not he is a petroleum engineer with a doc- dling of agreements with the communi- to affect the economy of PETROPERU. torate in economics, with more than 40 ties, can bring production stoppages and b) In the medium term, production years of experience negotiating contracts high costs for any company that starts up must be increased through cooperation and consulting with governments in the activities in this block. between all the companies involved. hydrocarbon sector. He can be reached at • The option for a 25% participation Otherwise each will face the problem [email protected] of PETROPERU still up in the air, adds to the uncertainty. It would seem incon- sistent for the board of directors to vote in the affirmative on a project with such environmental and economic challenges CARLOS RUFÍN 36 MAURICIO B.C. CLAUDIO A. AGOSTINI, JACQUES E. C. after turning down simpler and less risky SALLES 38 CARLOS SILVA AND HYMANS 42 projects. Anywhere else, the participation Wind Energy in Latin America SHAHRIYAR NASIROV 40 of the state would be welcome in order The Power of the Geothermal Energy Carlos Rufín is Associate Brazilian Wind Solar Energy in Chile in Central America to facilitate the relations with the indig- Professor of International Mauricio Salles is a Visiting Claudio A. Agostini is a professor Jacques E. C. Hymans enous communities. Business at the Suffolk Scholar at Harvard and Assistant at the School of Government, is associate professor • The sequence of decisions that have University’s Sawyer Professor of the Department Universidad Adolfo Ibáñez, of international relations Business School. to be made after a contract is signed of Electric Energy and Santiago, Chile. at the University of Automation Engineering (PEA) Southern California. doesn’t leave time for research on how Solar energy in high-altitude Arequipa, Peru, is captured through steel and other metal; at the Polytechnic School of the to improve the engineering practices for opposite page: wind energy in Peru. University of São Paulo.

34 ReVista FALL 2015 ABOVE: PHOTO BY RENZO NUÑES/OJOS PROPIOS; OPPOSITE PAGE: DOUGLAS JUARES, OJOS PROPIOS REVISTA.DRCLAS.HARVARD.EDU ReVista 35 ENERGY ALTERNATIVE ENERGY

Wind Energy in Latin America

Realizing the Potential BY CARLOS RUFÍN

WIND ENERGY HAS ENORMOUS POTENTIAL IN larly in the southern part of the country, Latin America. With its relatively low where wind conditions are most favor- population density, vast distances and able. Costa Rica, with a strong commit- energy needs in remote places, Latin ment to renewable energy, has installed America offers an ideal setting to harness the largest number of wind power tur- wind energy. bines in Central America, followed close- Energy needs in windy, but isolated ly by Honduras. In the Southern Cone, or remote places, such as the Caribbean Chile and Argentina are aggressively islands, the mountains and plateaus of investing in wind power, and both coun- the Andes and the Mesoamerican rang- tries are expected to overtake Mexico in es, as well as the region’s vast savannahs terms of total installed capacity over the Wind energy in Marcona, Peru. (llanos, cerrado, Chaco and pampas), can next ten years. Lastly, new projects are be met more efficiently by wind turbines also taking shape in Peru and Uruguay. than any other alternative. Wind energy Nevertheless, wind energy is still a is more easily adapted to scale than solar Nevertheless, wind relatively underexploited resource across energy: compared to solar panels or solar energy is still a relatively the region, particularly in relation to its concentrators, wind turbines generate vast potential. For this potential to be more electricity relative to the area that underexploited resource realized, energy policy needs to overcome they take up, and this difference is grow- across the region, the mindset that has dominated the sec- ing as wind turbines increase in size and tor throughout its history in Latin Amer- efficiency. Thus, wind energy can be a particularly in relation to ica and the Caribbean: the obsession with more appropriate technology in isolated its vast potential. hydroelectric generation. Despite the areas with significant energy needs. If increasing costs of building large dams planned with care, wind turbine facilities Several areas in the region are increas- in more and more distant locations, more have little adverse effect on ecosystems, ingly using wind power. The Carib- protests by indigenous communities and in the region’s vast uninhabited spac- bean, in fact, has a long history of use affected by dam construction, and grow- es, they can have few or no aesthetic and of wind energy; many sugarcane mills ing awareness of the environmental costs sound impacts either. Wind energy com- in the islands were powered by wind- of such facilities, many governments in Discharge side of a hydroelectric plant, Péligre Dam in Haiti: in the background, the dam with the spillways for discharging excess water; in plements very well the region’s hydro- mills before the advent of highly efficient the region remain convinced that tapping the foreground, the powerhouse, where the turbines and generators are located. dominated electricity grids, because steam engines burning bagasse (sug- the remaining hydroelectric potential is hydroelectric generation can easily arcane fiber). But with the Caribbean the best way forward, and are spending ownership of generation facilities, also Although environmental and social aware of this broader context and devel- respond to the intermittence of winds, in sugar industry being displaced in recent vast sums of money on projects like the face the challenges of attracting private impacts are less severe than those for op appropriate protocols and standards contrast to thermal generation, which is decades by highly competitive producers Madeira River complex in Brazil. The old investment in wind power. Wind energy large dams, the best locations for wind to engage these stakeholders to every- far less flexible in general; and, at least in Brazil and elsewhere, the area con- mindset also permeates the operation of facilities face a different kind of risk than farms may be in indigenous lands; trans- one’s satisfaction. in some parts of the region, the winds fronts high costs of energy as the islands the region’s national grids, accustomed those of technologies with a longer track mission lines may need to cross such To sum up, wind power can and are strongest during the dry season, pre- (with the exception of Trinidad) lack tra- to the predictability of generation based record. Instead of hydrological risks or lands or other environmentally sensi- should play a major role in the future of cisely when hydroelectric generation is ditional energy resources. Not surpris- on dams with large reservoirs of water, as the volatility of fuel prices, wind power tive areas. Wind projects in Mexico and energy in Latin America. It is up to pol- most limited. Lastly, the relatively acces- ingly, exploiting the powerful and con- opposed to the greater short-term inter- depends on a resource—wind—that is elsewhere have already experienced icy makers and the private sector for the sible nature of wind power technology stant trade winds has become once again mittence of individual wind power instal- less well known throughout the region, setbacks due to local opposition. These potential to be realized. means that it can be manufactured in the a highly attractive proposition for the lations—despite the reality of climate and that follows its own patterns. Such projects are no different from other kinds region, unlike other types of energy tech- islands, with strong growth in Jamaica, change, which is altering hydrological uncertainty deters private investors. of resource extraction, and as such they Carlos Rufín is Associate Professor of nologies. Brazil, for example, is requiring the Dominican Republic and Aruba. patterns and making hydro generation Innovative policies, perhaps modeled on require consultation and prior consent International Business at the Suffolk local raw materials and manufacturing in Mexico is, after Brazil (discussed less predictable too. those successfully employed in Europe, of affected communities, which in turn University’s Sawyer Business School, wind power installations, and one of the at length elsewhere in this issue of Many Latin American countries, hav- offering a fixed price for every unit of may entail sharing some of the benefits and a consultant on energy matters to region’s key players is an Argentine com- ReVista), the second largest market for ing restructured their electricity sectors energy generated, must be put in place to with these communities. Policy makers, the World Bank and the Inter-American pany, IMPSA. wind energy in Latin America, particu- to give a more prominent role to private overcome investors’ reticence. private developers and lenders must be Development Bank.

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To cope with the problem, the use of sources. Almost 300 megawatts of wind respectively), the Brazilian territory could Wind farm revenue is strongly dependent The Power of the other energy sources such as coal (3.4%), power capacity were offered at the low- have around 350 GW of installed capaci- on this issue and new R&D policies need gas (3.2%), oil (4.9%), and nuclear est price ever at a 2012 auction. The Bra- ty. The potential for offshore installations to create incentives for the adaptation of (4.3%) increased, lowering the hydro- zilian federal government contracted all is not yet exactly known, but the National the European and American designs to Brazilian Wind power sources to 82%. Between 2000 the energy that will be produced by those Institute for Space Research (INPE) con- Brazilian wind characteristics. How Wind Energy Became a Competitive Source and 2001, electricity use dropped almost wind farms for a 20 years period. The cludes in a recent study that the offshore Besides promoting sustainable energy 8% because of energy rationing. Never- megawatt per hour (MWh) of wind ener- wind capacity potential for the Brazil- development, the installation of wind BY MAURICIO B. C. SALLES theless, in 2002 the demand started to gy was purchased for less than US$48 ian coast in water depth up to 328 feet farms brings several benefits to the grow again, as in any other developing (converted from Brazilian currency on (100 meters) is 600 GW. If you consider population in areas around the power country. Brazil needed new electricity 12/14/2012). the current power capacity of the entire plants. As most of the farms are built in generation capacity and was waiting for These wind-power projects started Brazilian energy system to be almost 137 areas with a poor standard of living as BACK IN 1992, THE FIRST WIND TURBINE IN BRA- Almost a decade later, in 2001, a the first governmental action towards during a period of major technologi- GW, the wind potential is huge. Onshore measured by the Human Development zil was about to be installed. The chosen shortage of rain caused the water of the developing wind energy. cal evolution of wind turbines, which and offshore together account for almost Index (HDI), the entry of large business place was also one of the most beautiful hydropower plant reservoirs to drop to In 2004, the federal government improved performance through better seven times the installed capacity of groups has brought new investments to places in the country (or even on earth). very low levels. Brazil experienced an began to encourage the use of other aerodynamics of the blades, advanced all sources and 154 times the already these small cities. Compensatory mea- At that time, the archipelago of Fernando electricity crisis. As a result, the govern- renewable sources such as wind, biomass mechanical transmission speed systems installed wind power capacity. sures (included in the permit) and social de Noronha had only diesel generators to ment recognized it needed to find a more and small hydroelectric plants (SHP) (gearbox) and new control and operation In this sense, the investments in the responsibility policies have been carried power its electricity demand, due to the flexible electricity generation model through the Program of Incentives for strategies for turbines. As a result, wind Northeast and southern regions are out to a large degree. Current social proj- distance between the main island and the considering different primary sources of Alternative Electricity Sources (PRO power has become a very competitive changing these areas of Brazil. More ects include free community courses, continent — 545 kilometers from Recife, energy. Academic researchers had long INFA). By coincidence, that was the year source, generating energy at the same recently, new studies have pointed out a construction of recycling plants, advice the state capital of Pernambuco. The Bra- recognized this fact, but it took a crisis to that I defended a Master’s Degree at the price or lower than hydropower plants. In great wind potential also in the south- to farmers, modernization of fishing zilian electricity generation in that year make the government see the importance University of Campinas (UNICAMP) the first semester of 2015, the use of wind east in states such as São Paulo, Minas boats and construction of tanks for water relied about 92% on hydropower alone. of the possibilities they envisaged. centered on Wind Power in Power Sys- power compared to hydropower was Gerais and Espírito Santo. With the cur- storage, among other initiatives that vary tems (and subsequently wrote one of 4.2% and 62%, respectively. The produc- rent growth rate and a coastline of 5,600 according to local needs. the first theses on the subject in Brazil). tion of wind power energy does not reach miles, the country is among the world The wind power sector creates many Although PROINFA was not a very suc- its maximum capacity on a constant basis leaders in installed capacity. Because jobs (temporarily or permanently); how cessful governmental program, it was because the wind does not blow all the of the Northeast’s strong and constant many depends directly on the installed certainly an important starting point to time—it fluctuates according to the wind winds, several companies have been capacity. Rural residents have been begin the new development of wind pow- patterns. Nevertheless, these numbers especially attracted to the region for trained to work in the sector, and local er in Brazil. show a considerable improvement. both energy production and installation demand for services and products has The first governmental auction that Installed wind power grew from of the transmission lines. Rio Grande do grown. According to the Brazilian Asso- included wind power took place in 2009, almost zero in 2004 to around 6.2 giga- Norte, for example, is the first Brazilian ciation of Wind Energy (ABEEólica), just after my Ph.D. thesis defense at the watts (GW) in the first half of 2015. The state to have more than two gigawatts of 120,000 directly related jobs had been University of São Paulo (USP). Dur- Global Wind Energy Council’s (GWEC) installed capacity with 80 wind farms: it created in Brazil by 2013. In 2014, ing the two previous years I spent at a last reported ranking indicates that Brazil has become Brazil’s main producer of this 37,000 jobs were created and invest- research institute at RWTH Aachen Uni- was in 10th place for worldwide installed type of electricity generation. However, ments were expected to reach more than versity in Germany, I learned how far capacity by December 2014. The expecta- the Northeast state of Bahia is construct- US$60 billion by 2018. Recently, Presi- behind Brazilian wind power was: the tion is that the country will move to 7th ing many wind power plants and will very dents Barack Obama and Dilma Roussef discussions in Germany were about mas- place by December 2015. soon reach first place. announced a joint agreement to generate sive constructions of offshore wind farms 20% of electricity power through renew- located at the North and Baltic seas and POTENTIAL OF INSTALLED WIND POWER GENERATION able resources by 2030 (excluding hydro- many manufacturers competed to sell CAPACITY POTENTIAL power plants). wind turbines in the market. Brazil recently became one of the top Wind power generation potential These jobs are mainly temporary dur- A few years later, a government agen- five global investors in wind energy and depends strongly on the wind speed and ing the construction of the wind farms, cy (the Growth Acceleration Program- renewable energy. The National Bank the efficiency of the turbines. Wind pow- although some permanent jobs remain, PAC) began to focus on the implementa- for Economic and Social Development er installed capacity, however, is directly mainly in the areas of management and tion of a wind industry in Brazil, offering (BNDES) ended the year 2014 with an connected to job creation, as well as the maintenance. The projects also serve incentives to launch new enterprises equivalent of 2585 MW of installed capac- selling and buying of equipment (we will as a source of income for smallholders and produce domestic equipment. Due ity investment approvals for new wind get back to that). Brazil is said to have bet- because a portion of their land is leased to high competition in bids for energy power projects. According to the Atlas ter geographic conditions than Europe to house the wind farm, usually with production, prices of wind energy have of the Brazilian Wind Potential (prelimi- and the United States, because the rate 20-year contracts. In these areas, agricul- been gradually reduced, positively con- nary studies for turbine heights above of change in wind speed and direction, tural and livestock activities still can be Wind power in the Valley of the Winds (Vale dos Ventos), Brazil. tributing to the diversification of energy 246 and 328 feet—73 and 100 meters, as well as the turbulence levels, are lower. carried out at the same time.

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Beyond Brazil, the integration of renewable energy capacity that should be renewable energy into the electric grid Solar Energy in Chile added to the current energy matrix in the is facing many challenges. Germany sets next 10 years to reach the target is much a good example of high penetration of Development and Challenges higher than the average annual renew- renewable energy. In order to cope with able capacity that entered the matrix the pre-defined levels of reliability, other BY CLAUDIO A. AGOSTINI, CARLOS SILVA AND SHAHRIYAR NASIROV during the last five years. Additionally, to sources of energy must be connected to reach the renewable energy target of 20% the grid, ready to begin generating elec- by 2025, electricity grids will have to be tricity in case of a sudden lack of wind. In upgraded and expanded. the case of Germany, the backup source FOR SEVERAL DECADES, CHILE HAS STRUGGLED compensate for these changes and have Investors in renewable energies in of energy is gas or coal. One of the best to have a stable and reliable mix of en- another alternative to Argentine gas. Chile also face significant challenges. alternatives to increase the penetration ergy sources to satisfy its growing needs. The successive energy crises have Although the Chilean government has of renewable is probably energy storage In the 1980s, the country relied heavily taught us a valuable lesson. The coun- shown interest in promoting the devel- systems, but those are still very expensive on hydroelectricity, considered almost try is now more concerned with ener- opment of RES, a number of obstacles and the most promising technologies are the sole solution to its growing energy gy diversification, understanding its remain, resulting in a moratorium on only in the infancy stage of development requirements. As a result, every time important role for the security of the several projects. Most of these projects for large amounts of energy. My research the country faced a drought, there were system. The country has learned that are wind and solar technologies, with as a visiting scholar at Harvard Universi- even periods of blackouts and rationing short-term gains come at a high long- only around 10% in terms of capacity ty is about advanced energy storage sys- because not enough energy was being term cost. In addition, the economy’s realized thus far, despite having environ- tems that might allow more renewable produced. dynamism over the last decades, includ- mental approval. energies in power systems. In the mid-1990s, a combination ing the significant improvement in the The most important barriers that What is going to be unique in Brazil of continued rapid growth in energy welfare of the population (poverty, for renewable energy projects face in Chile and will be even more interesting than demand, increasing environmental con- example, has decreased from 40% to are the high cost of the initial investment, the seasonal complementarity (between cerns regarding large hydro projects, 13% in two decades), has doubled elec- The Chilean group met with NREL researchers in Denver, Sandia in Albuquerque and the Uni- limited access to financing, opposition hydro and wind) is the fact that we could and the unreliability of hydropower tricity demand. Chile is now the country versity of Arizona in Tucson and explored the latest technological developments. from local communities, the practical and use the flexibility of existing hydropow- prompted the Chilean government to with the highest energy consumption regulatory difficulties to connect to the er plants to back up the fast changes diversify energy sources by encourag- per capita in Latin America, well ahead step forward by requiring energy-gener- grid, and lack of interest from large con- in wind speeds (because sometimes ing the use of low-price natural gas of larger countries like Argentina, Brazil ating companies to include at least 5% of With almost 356 days sumers to sign long-term contracts with the wind can stop blowing in an entire from Argentina. The low-cost energy and Colombia. their electricity from non-conventional intermittent sources (solar energy is pro- region). The large hydropower plants from the imported natural gas made it Chile is also considered one of the renewable energy sources by 2010, with- of clear skies, high duced only during the day and wind ener- reservoirs in Brazil can be considered more attractive to build combined-cycle most attractive countries for the devel- out including large hydro (only up to 20 solar radiation and low gy is produced only when there is enough great storage systems. This combination power plants instead of relying on large opment and deployment of renewable MW). This quota of renewable energy wind blowing; solar and wind have plant would enable high levels of wind energy hydro plants and coal. Thus the energy energy technologies (RET), mostly set a 5% target from 2010 until 2014 as humidity, the Atacama factors of 30% or 40% at most). Remov- penetration and would turn the Brazilian sector invested heavily in this source, because its geographic location and the transition period, with 0.5% incre- Desert in northern ing or at least mitigating these barriers electric power generation into one of the building four pipelines from Argentina, diversity provide abundant renewable ments from 2015 through 2024, when and creating further incentives remains a most successful sustainable electricity setting up new gas distribution net- energy resources (RES). Significant generators are expected to produce 10% Chile offers excellent key challenge for the development of the matrices in the world. That will happen works and constructing a half a dozen potential exists in the use of biomass, of power generated through renewable conditions for generating Chilean renewable energy sector. if the wind does not stop blowing, the new combined-cycle power plants. In hydropower, geothermal, solar, wave sources. If companies do not comply with The evidence increasingly supports rain keeps falling on the right places and 2004, natural gas accounted for 26% and wind energy. In particular, Chile the quota, they have to pay a fine, which solar energy. that solar energy has great potential to the rivers continue to flow (not consider- of Chile’s total energy consumption, of has one of the largest solar potentials doubles if the incompliance occurs again. become a major source of clean and secure ing the negative impact of big reservoirs, which 80-90% came from gas supplied in the world. With almost 356 days of Although the fines are in some cases years, other renewable technologies, energy in Chile. In addition to overcom- which is another long and interesting from Argentina. As a result, in 2004 the clear skies, high solar radiation and low cheaper than the cost of compliance, including solar and wind, have started to ing the hurdles facing many renewable discussion). Argentine government restricted the humidity, the Atacama Desert in north- the policy has been quite successful, and play a more significant role. energy projects, both misconceptions volume of gas exports to Chile in order ern Chile offers excellent conditions for energy generation from RES has met or In 2013, the Chilean government about solar energy and some of its unex- Mauricio Salles is a Visiting Scholar to relieve its own domestic gas short- generating solar energy. Therefore, add- even surpassed the defined quota of 5%. increased the quota by doubling its pected benefits must be explained. at Harvard and Assistant Professor of ages. In just a few years, the gas supply ing solar energy to the energy mix can be Renewable energy generation reached renewable-energy target from the pre- Even as the costs of solar power con- the Department of Electric Energy and to Chile stopped. This brought about an important opportunity to contribute 7% of the country’s total energy gen- vious goal of 10% by 2024 to 20% by tinue to decline, the public and many Automation Engineering (PEA) at the another energy crisis in which gen- to the country’s energy diversification eration in 2012. Until early 2012, small 2025. Even though this new target pro- policymakers perceive solar energy as Polytechnic School of the University of erators were forced to replace gas-fired strategy. hydro and biomass were the leading vides attractive incentives to invest in “too expensive”—thinking that solar São Paulo. electricity with expensive and more pol- To attract renewable energy invest- renewable technologies used for the com- the development of renewable energy energy would lead to increased energy Ana Maria Peres, a Brazilian journal- luting diesel generation, and the gov- ment, several new regulatory incentives pliance of the legal quota, accounting for projects, the amount of investment in prices. However, solar panel prices per ist and former resident of Cambridge ernment promoted the construction of have been introduced. In 2008, the Chil- almost 90% of total renewable genera- new capacity required to reach the 20/25 watt generated have decreased 86% (MA), collaborated with this article. liquefied natural gas (LNG) terminals to ean government took a significant first tion. However, during the last couple of target is quite significant. In fact, the new between 1996 and 2013 because of sig-

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to roads and infrastructure to maintain Although solar power’s the flow of fossil fuels. Geothermal Solar energy has now started to play most obvious benefit a greater role in the energy matrix of Energy in is the environmental the country. There are still some prob- lems that need to be overcome to allow advantage from the full deployment of its large poten- Central producing less CO2 tial, but a future with cleaner energy and sustainable development is becom- America emissions than ing increasingly feasible. Under the Volcano fossil-fuel-burning Achieving the ambitious renewable energy goals and overcoming existing BY JACQUES E. C. HYMANS technologies, the use barriers require strong, consistent and of solar energy has a balanced policy support by the govern- ment. Unless the Chilean government potentially large social takes a leadership role establishing WHEN WE THINK ABOUT GLOBAL TECHNOLOGY value that is missed by prioritized areas of policy interven- leaders, Central America does not typi- tions to address challenges rapidly cally come to mind. But Central American traditional cost-benefit and properly, it could miss a chance to countries have indeed been in the van- analysis. materialize large-scale solar develop- guard in their use of geothermal energy: ment and to recoup the benefits of solar an abundant, constant, efficient, renew- energy investments for the develop- able and low-carbon source of electric nificant technological advances. The ment of its communities and regions’ power. costs, therefore, are becoming increas- economic growth. Establishing a policy Twenty-four percent of El Salvador’s ingly competitive with respect to other framework to accelerate market com- electricity comes from geothermal. That technologies. If pollution caused by the petitiveness, supporting the needed figure places it second out of all countries use of fossil fuels such as coal and die- confidence for investments in local in the world in its level of reliance on this sel were figured into the costs through technology advancement and manufac- power source. (Iceland is tops.) Mean- the implementation of corrective taxes, turing capacity, facilitating large-scale while, fifteen percent of Costa Rica’s elec- solar energy cost would become even solar grid integration, implementing tricity comes from geothermal, as does ten more competitive. new financing and business models, percent of Nicaragua’s and five percent Although solar power’s most obvious expanding international collabora- of Guatemala’s. Compare those numbers benefit is the environmental advantage tion to provide accelerated learning with the worldwide figure of 0.3 percent. from producing less CO2 emissions and knowledge transfer to Chile, and The basic reason for Central America’s than fossil-fuel-burning technologies, improving training, education and geothermal energy riches can be summed the use of solar energy has a potentially awareness for solar energy technologies up in one word: volcanoes. large social value that is missed by tra- are among the priority policy actions to Even more impressive is the amount ditional cost-benefit analysis. Solar be taken shortly. of geothermal energy that Central Ameri- energy can strengthen the economy in cans have under foot, but so far failed to rural areas because network extension Claudio A. Agostini is a professor at exploit. World Bank reports indicate that of traditional energy systems is typically the School of Government, Univer- the countries of the region may have up not a viable economic option for these sidad Adolfo Ibáñez, Santiago, Chile. to 25 times more geothermal energy than communities. In isolated rural areas Carlos Silva is a professor at the School they are currently using, and that geother- with lack of access to electricity, grid of Engineering and Sciences, Univer- mal power alone could cost-effectively sat- extensions are often not cost effective. sidad Adolfo Ibáñez, Santiago, Chile. isfy their entire electricity demand. Therefore, isolated, or off-grid, small Shahriyar Nasirov is a professor at Yet the Central Americans have added solar energy systems can provide a sus- the School of Engineering and Sciences, only a relatively small amount of addi- tainable and cost-effective alternative Universidad Adolfo Ibáñez, Santiago, tional geothermal plant capacity since to the diesel based solutions that are Chile. returning to peace and democratic gov- typically deployed in such areas. Chile The article is based on previous ernance after the end of the Cold War. has more than 3,500 isolated rural research by the authors, who are grate- The region’s geothermal production did communities with no access to energy ful for the financial support of the proj- increase approximately fivefold between networks, many of them lacking access ect CONICYT/FONDAP 15110019. 1990 and 2012—from 747 to 3,542 giga-

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and for renewables more generally—has been Costa Rica, whose decision to defy the Washington Consensus and keep the Instituto Costarricense de Electricidad in government hands paved the way for longer-term thinking about how best to satisfy the country’s energy requirements. Nevertheless, there is considerable momentum today for further develop- ment of the geothermal sector in Cen- tral America. The main impetus is com- ing from a country that sits on the other side of the “ring of fire”: Japan. Japanese companies have dominated the global geothermal plant equipment market for decades, in part thanks to strategically placed foreign aid offered by the Japanese government. Now Japan is redoubling its efforts to promote the sector world- wide. In August 2014, the Japan Inter- national Cooperation Agency extended a $550 million low-interest loan to Costa Rica to support the construction of three new geothermal power plants, which are expected to nearly double the country’s geothermal production when they go Above: Volcanos in Guatemala; Opposite page: women walk past Caripito Refinery. into operation around 2020. The Japa- nese are also providing major support watt-hours per year (GWh/y). But during profit-seeking companies are deterred for a Latin America-wide geothermal the same time span, electricity gener- by its high up-front costs and long lead development initiative that was initially ated from imported diesel fuel exploded times before any return on investment. proposed by climate-conscious Germany. from a mere 16 to 12,345 GWh/y. Overall, Therefore they prefer to build standard The irony is that Japan has been slow imported fossil fuels accounted for only thermal power plants instead. to exploit its own massive domestic geo- ten percent of the region’s electricity gen- The Central American countries cer- thermal potential and has barely added eration in 1990, but today they account tainly did not forget about their geother- any plant capacity since the 1990s. Sty- for over forty percent. The region’s mal riches after the 1990s. Guatemala, mied at home, Japanese geothermal marked shift away from renewables such Honduras and Nicaragua tried to use plant builders convinced the government as geothermal and hydroelectric power exploration concessions to entice for- to support them abroad. But today, with since the 1990s is highly problematic eign companies to develop the geother- Japan facing persistent energy woes fol- from both environmental and economic mal sector, but this proved insufficient lowing the Fukushima nuclear disaster, viewpoints. When oil prices spiked in to promote significant new investment. many industry analysts are expecting a the mid-2000s, the newly fuel import- El Salvador pursued a public-private geothermal renaissance inside Japan. dependent Central American countries geothermal partnership with the Italian If that renaissance does indeed come to faced financial shortfalls as high as three multinational ENEL Green Power, but pass, will the Japanese still remember percent of GDP. the company showed a strong preference their plans for Central America? The 1990s Washington Consensus lib- for generating sure profits from exist- eralization of energy markets was a main ing plants over investing in green-field Jacques E. C. Hymans is an associate cause of Central America’s increased development, and the two sides ended professor of international relations at MIGUEL TINKER SALAS 46 KODY JACKSON 50 MARIANA BARRERA 52 dependence on fossil fuels, to the detri- up in an epic, eight-year-long legal and the University of Southern California. Life in a Venezuelan Oil Camp Behind the Corporate Veil Añelo and Vaca Muerta ment of domestic renewables such as political battle that is only now coming His most recent book is Achieving Nucle- Miguel Tinker Salas is Professor of Latin Kody Jackson is a graduate student in Mariana Barrera is an Argentine geothermal. In the Central American to an end with ENEL’s decision to sell ar Ambitions: Scientists, Politicians, and American History and Chicano/a Latino/a History at the University of Texas in Austin. economist with a degree in finance who Studies at Pomona College in Claremont, He studies religious movements in the received a Master’s in Urban Planning context, geothermal energy is very eco- out and depart from the country. The Proliferation (Cambridge University California. Americas and U.S. Americans abroad in from Harvard University in 2014. nomically competitive in the long run, but only truly bright spot for geothermal— Press, 2012). different capacities.

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and countries. With few if any roots to the Life in a local community, workers were frequently transferred between camps, and the com- pany promoted an esprit de corps among its Venezuelan employees that centered on an all-encom- passing corporate culture. Company prac- Oil Camp tices favored hiring family members, thus Tío Conejo Meets handing down values such as the “Ameri- can way of life” from generation to genera- Uncle Sam tion. Yet despite their artificial nature, the BY MIGUEL TINKER SALAS camps left an enduring legacy in Venezue- lan culture and society. For the generations that worked in the oil industry, the camps reinforced their image as a privileged sec- I GREW UP IN A VENEZUELAN OIL CAMP. EVER tor of Venezuelan society. Just as impor- since I can remember, I have heard both tantly, the camps were sites of cultural and Spanish and English spoken all around social exchange, with the “American way of me or conveyed through music or films. life” influencing everything from politics With my family, I ate traditional Ven- to values. Those employed in the industry ezuelan arepas, cachapas, carne mechada expected the Venezuelan state to be the (shredded beef), fried plantain, and black guardian of this distinctive lifestyle. Many beans, but invitations to dinners at friends’ residents retained a collective nostalgia houses often meant sampling curry goat, for the experience of the camps, overlook- roti and thali, borscht, or U.S.- style bar- ing the racial and social hierarchy that becues. prevailed and the detachment that existed In many ways, Caripito, the oil town from Venezuelan society. where I was raised, embodied the changes Caripito was typical of this oil town cul- occurring throughout Venezuela after the enclave, and seeking to avoid the demand- and Shell Oil built residential camps to ture. The same ships that navigated the San discovery of oil. In 1930, the Standard Oil ing social expectations of the camp, my house their employees. In classic Jim Crow Juan River to load oil also brought an array Company of Venezuela built a port facil- parents moved to Los Mangos, a neigh- fashion, the companies created distinct of U.S. fruits and canned products for sale ity and began work on a refinery in this borhood of Caripito. However, they also areas for foreigners, typically white U.S. in the camp commissary. I still recall the town, in the state of Monagas in eastern recognized the importance of straddling employees or “senior staff,” Venezuelan amazement of eating individually wrapped Venezuela, to process oil from fields in both worlds, and my mother dutifully professionals or “junior” staff, and more red Washington apples for the first time, or Quiriquire, Jusepin and Temblador. The drove me everyday to the company school modest housing for workers. The senior savoring crisp Mexican tortillas that came promise of the oil attracted Venezuelans and our family selectively participated in staff clubs included a pool, golf course, in vacuum-sealed metal cans. Long before from throughout the country; many car- many camp activities. tennis and basketball courts, as well as McDonalds appeared in Venezuela, the ipiteños (people of Caripito) had roots in After oil was discovered in 1914, Ven- bowling alleys while the workers club typi- soda fountain at the company club regu- the adjacent state of Sucre. In succeed- ezuelan production was concentrated in cally had a baseball field, a bolas criollas larly served the “all American meal” con- ing decades, people from Trinidad, Italy, the interior of the country, where infra- court (bocce), a bar and a dance floor. In sisting of hamburgers, fries, and Coke. The Lebanon and even a handful of Russian structure and sanitary conditions had spite of this hierarchy, by the 1950s the Venezuelan diet quickly incorporated U.S. exiles also made their way to Caripito. By improved little since the 19th century. camps became symbols of U.S.-sponsored culinary preferences and tastes. 1939, Caripito had a population estimated To ensure operations, foreign companies “modernity,” with orderly communities, Like other children in the camps, I went at about 5,000 people, some 300 of whom took charge of basic services including higher salaries and access to a full range to a bilingual company school that incor- were “white Americans.” In Caripito, as in electricity, water, sewage, roads, housing, of services that sharply contrasted with porated both the Venezuelan and U.S.- most oil camps, to be white increasingly health services, schooling and a commis- conditions found in the local Venezuelan mandated curriculum. To a certain extent, became synonymous with being a U.S. sary. In these rural areas, the companies settlements. expatriate. By 1960, the total population supplanted the state, and local communi- The camps represented an impro- had soared to a little over 20,000 people. ties became dependent on foreign enter- vised and largely transitory society made Opposite page: workers dig a well in Caripito; This page from top: a Venezuelan work crew At an early age I became acutely aware prises for basic services. up of residents from different parts of takes a break in Caripito; a Coca Cola machine of how different the oil camp experience Standard Oil Company of Venezuela the United States and Venezuela. The at a Shell gas station reflects the prevailing was from the rest of Venezuela. After (later Creole Petroleum, a subsidiary camps allowed Venezuelans to interact “American way of life”; a Venezuelan work several years of living in the residential of Standard Oil Company of New Jersey), with people from other regions, races crew poses on the way to work in Caripito.

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tree, with adjacent loudspeakers playing seasonal melodies. Shortwave radios allowed expatri- ates—and some oil camp Venezuelans—to keep track of events in the United States and important news quickly spread. This was long before the Internet or cable tele- vision made speedy news a fact of life. I can recall seeing my U.S. teacher at the Cristóbal Mendoza grammar school break down in tears when the school loudspeak- er announced the assassination of Presi- dent John F. Kennedy. Another way of connecting to U.S. culture was through movies shown at the camp club; Spanish subtitles allowed the Venezuelan audience to follow the action without paying second thought to the overt racism present in many of the U.S. West- Opposite page: A young Venezuelan woman looks pensively out of her humble abode, which erns that stereotyped Mexicans and Native is posted with an ad for orange soda. Expatriates often overlooked the prevailing racial and Americans. Many of my U.S. classmates social hierarchies. Above: a colorful road map produced by Citibank Venezuela in the 1950s. at the camp shared LP records that came with a coonskin cap, plastic musket, and exposure to a bicultural milieu shaped the occasion as an opportunity to prepare powder horn and recounted the exploits the consciousness and personal sensibili- Southwest-style barbecues where local of Davy Crocket starring Fess Parker. ties of people like myself who inhabited beer flowed freely. Uncle Sam, the benevo- Venezuelans who did not live in the camp the campsARTS, or its environs. Beyond sim- lent fatherLANGUAGE figure that later morphed into or work in oil sought entertainment in the ply the ability to speak both languages, a symbol of U.S. imperialism, mixed freely San Luis movie house in La Sabana across the camps conveyed the importance of with Tío Conejo, a shrewd rabbit from a from the Creole Petroleum refinery. I dealing with difference. This experi- Venezuelan folk tale who regularly outwits straddled both worlds, and loved to watch ence, AND however, was not shared equally, CULTUREhis tiger nemesis, Tío Tigre. Mexican cowboy (charros) films or the and it usually fell on the Venezuelans Other festivities, however, diverged comedy of Cantinflas and Tin Tan in the to learn English. Besides understand- from Venezuelan traditions for which old-fashioned movie house that featured ing English, familiarity with U.S. norms no parallel activity existed. During Hal- a range of seating from common wooden and customs proved essential for Ven- loween, children dressed as Mickey benches to higher-priced chairs. Out- ezuelans seeking to advance in the com- Mouse,Arts, language cowboys, ghostsand culture and witches help provideside the theater, the virtual my friends bonds and Ifor looked pany. Interacting with foreigners became wandereda territory throughout that is always the senior shifting; camp forward from film to savoring to music corn empanadasto the de natural, but so did the imposition of a askingplastic for arts, candy they from befuddledconnect Venezu the Guarani- cazón (driedterritory. shark), a local favorite in social racial hierarchy reinforced by U.S. elans. Thanksgiving celebrations by the eastern Venezuela, made by an Afro-Vene- expatriates at the top of the social order. U.S. expatriate community, which often zuelan woman. Festivities in oil camps highlighted the included■■ Chamamé public gatherings, for Dummies and the con- The importance of oil to the 36 U.S. extent to which the camps represented sumption of frozen turkeys imported from economy and military thrust Venezuela ■■ Guarani in Film 40 self-contained enclaves of U.S. culture the United States, remained an exclusively into the midst of the Cold War. In 1962, in the heart of Venezuela. Seldom if ever foreign■■ A View activity. from Venezuelans the Museo outside ofdel the Barro Peace Corp volunteers were assigned43 to questioned, the pervasive influence of the oil■■ A industry Country had noof connectionMusic and to thesePoetry Caripito to teach English in secondary46 U.S. oil industry made political and cultur- events. A traditional Christmas in Venezu- schools and promote U.S. values. In case al ties with the north appear normal. Cel- ela had always included building a Nativ- their efforts failed, Green Beret advisors ebrations of the 4th of July melded with ity scene, but in the oil camps, this practice gathered intelligence and trained the Ven- Venezuelan independence on the 5th of was slowly displaced by ornament-laden ezuelan National Guard. In 1962, guerril- July, becoming shared events that allowed imported pine trees. To add to the festive las launched an offensive in eastern Ven- politicians and company officials to make mood, the oil company typically decorated ezuela. The U.S. military advisors assigned largely perfunctory claims of solidarity. a nearby oil well or water tower with col- to Caripito asked my local Scout troop to Expatriates, especially from Texas, saw ored lights in the shape of a Christmas report on “suspicious activity,” includ-

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ing spent cartridges we might find as we odds with community memory. Former Guyanese draftsman Isaac Chin to com- ity. Lago’s local laborers well understood hiked through the rainforest. To assuage Behind the U.S. expatriates were quite vocal about plain that “my ceiling as a non-foreign- this reality. Many remembered the infa- discontent, the town’s poor also received their attachment to Lago and the Lago staff employee was barely above my head” mous strike of 1951. Though involving sacks of grain from the Alliance for Prog- Corporate Colony (1930-1985), their home on the (Where is Choy? 2002). Quality of hous- almost half of the refinery’s labor force, ress and from Caritas, a Catholic charity. island just north of Venezuela. “In my ing openly demonstrated this disparity. the protest had ended in failure, gaining As I accompanied my parents into some heart, I know where my true home is and Though given their own sports fields, only a limited wage increase and result- of the poorest neighborhoods of Caripito Veil always will be: that small desert island commissaries and houses, Caribbean ing in the deportation of several labor to distribute food packages it became evi- Company Control in the named Aruba,” Margie Pate said, remem- employees could readily see the luxuri- leaders. Assistance from the Dutch colo- dent that oil had not benefited all sectors bering her time amongst the 3000 U.S. ous lifestyle of those in the Colony, if only nial government had guaranteed Lago’s of society equally. The camps highlighted Lago Colony of Aruba employees and their families. Eugene from a distance. Indeed, the company victory. Royal Dutch Marines remained the existence of two Venezuelas, one ben- BY KODY JACKSON Williams agreed, recalling wistfully in prohibited non-white, non-managers stationed around the refinery throughout efiting from oil, and one for which the 2003 that “when we left Aruba, it was like from entering the foreign enclave except the strike, a precaution meant to safe- promise of oil remained elusive. leaving paradise.” These bold assertions to perform the service work such as gar- guard the facility that processed over 140 Oil never fully transformed Venezuela, only made Mink’s experience all the more dening and cleaning that kept life in the million barrels of Venezuelan crude oil but rather it created the illusion of moder- IT BEGAN AS MOST THINGS DO THESE DAYS, WITH incomprehensible and, consequently, all Colony so leisurely. Thus, animosities each year, employed over 33% of Aruba’s nity in a country where high levels of a simple Google search. Looking to flesh the more intriguing. Could secret resent- abounded within and outside the Colony. workforce and accounted for over 90% inequality persisted. The camps became out my graduate seminar paper on the ments possibly be hiding behind such These examples, however, fail to explain of the island’s exports. This economic a tangible symbol of this disparity. Local Lago Oil & Transport Company of Aruba, fond remembrances? the travails of Walter Mink, the victim strength ensured government patronage residents resented the inequities in life- I typed the company’s name into that in- Not everyone, after all, evaluated Col- of neither sexist expectations nor racial in the years to come, perpetuating Lago’s style; businesses complained about closed famous search bar and prayed that those ony life quite so positively. Some female limitations. dominance over unskilled Caribbean markets; the government worried about fickle gods of the Internet might have pity “Lagoites” balked at the gendered expec- Indeed, Mink’s grievance went beyond workers. Such power did not, however, divided loyalties; and the left viewed them on me, a humble researcher. The title of a tations foisted on them as part of island issues of Colony inequality, touching appear to have affected the lives of Lago’s as part of U.S. exploitation of Venezuela’s domestic court case caught my eye among life. Company policy required teachers instead on those of company author- expatriates. These engineers, by virtue labor and resources. During the 1970s, the results. “Richard Mink v. Lago Oil & and nurses to give up their careers after of their technical know-how, held more popular protest singer Ali Primera wrote Transport Co. (05/02/66),” it announced marriage, presumably to focus on their bargaining power vis-à-vis the company. Perdóname Tío Juan (Forgive me Uncle promisingly, so I clicked on the link and wifely duties. “I do not do it wisely or The company dominated Lago could not, for fear of losing valuable John): began reading. An appeal before the Su- well and I need [my husband] so badly to employees, implement the paternalistic preme Court of New York, “Mink v. Lago” help me [raise our children],” Charlotte the political and practices so commonly associated with Es que usted no se ha paseado held some startling allegations. Walter Warden wrote plaintively in her diary economic affairs of company towns (e.g. paying in scrip). por un campo petrolero/ usted no ve que Mink, a U.S. citizen and former Lago in 1947. Local residents on the payroll Instead, it had to influence the Lagoites se llevan employee, was suing the Aruban refiner also resented Colony life, though more Aruba, much like the in more subtle ways, such as reserving lo que es de nuestra tierra/ for “improper medical care” given to his based on their exclusion from it, not their notorious United Fruit certain community privileges like nicer y sólo nos van dejando newborn son Richard in 1956. In the entrapment within. Local workers earned houses, cars and Christmas trees for miseria y sudor de obrero/ Top: Escuela Cristobal Mendoza Caripito; midst of a simple procedure, company less money for equal work, prompting Company of Guatemala. those with company standing and senior- the author of this article is sitting on the y sólo nos van dejando/ doctors had misplaced an intravenous floor, second from the right, wearing a bow miseria y sudor de obrero. (You have not tie and white shirt; the washing machine is feeding tube, leading to disastrous con- visited an oil camp, you do not see that emblematic of the type of modern purchase sequences. “The fluid,” Mink explained they take what belongs to our land, and made possible by the booming Venezuelan emotionally in a 1965 court affidavit, all they leave us is misery and the sweat oil industry. “was not fed into the vein but into some of our worker’s and all they leave us is other part of [Richard’s] lower right ex- misery and the sweat of workers.) experienced during this period inform tremity…his ankle bones were literally many of the political divisions that char- ‘washed away.’” Lago doctors eventu- Having successfully created a trained acterize contemporary Venezuela. ally had to amputate Richard’s right leg and acculturated labor force imbued with to prevent infection. It was a tragedy, company values, even the oil companies Miguel Tinker Salas is Professor of the elder Mink maintained, leaving his believed the camps had outlived their use- Latin American History and Chicano/a son “sick, sore, lame, and disabled…and fulness. Despite their eventual integration Latino/a Studies at Pomona College in still suffer[ing] great physical pain and into local communities, the lived experi- Claremont, California. He is the author mental anguish.” He concluded his suit ences of those employed in the industry of Venezuela, What Everyone Needs to asking for $325,000 on the basis of his coalesced with the perspectives of mid Know (Oxford University Press, 2015) son’s disability and his own hardship. dle- and upper-classes that viewed oil as and The Enduring Legacy: Oil, Culture This case was shocking, not only the guarantor of their status. Attempts to and Society in Venezuela (Duke Univer- because of the lurid details of medical recapture the illusory sense of modernity sity Press, 2009), among other books. malpractice, but also because it stood at A poster of the Lago Colony in Aruba, 1956.

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To try and elude this extensive influ- of shots. A woman came out of the house the heading “Añelo’s mayor was brutally ety. The coexistence of state ownership ence, Mink launched his suit in Queens Añelo and and shouted at us. We didn’t catch what assaulted.” of the subsoil and private ownership of County, New York. He offered an inven- she said, but the mayor kept on driving. He Since then, I’ve been back to Añelo a the land has encouraged local residents tive argument as to how a court in New Vaca Muerta kept going for twenty more minutes, and couple of more times, most recently in May to raise their voices and make demands York could prosecute alleged wrongdo- once we reached the end of the industrial 2015. I always ask about the people living through blocking roads and oil produc- ing committed in Aruba. Because of the Opportunity or Threat? park, we headed back down the same road. in the makeshift house up in the industrial tion. Remarkably, their empowerment is extensive business conducted between We drove by the lot where the woman park and the mayor’s car—I can’t avoid limited. It’s undermined by the personal Standard Oil of New Jersey (Lago’s New BY MARIANA BARRERA had first screamed at us. Then the night- feeling guilty about the broken window. economic benefit promised by the resource York-based parent corporation) and its mare began. A bunch of people with sticks The family had been displaced, and the boom. Añelo’s longtime residents agree Lago subsidiary, Mink claimed, the two and stones were waiting for us. They spot- insurance paid for the pickup’s front win- almost unanimously not to oppose shale companies were one and the same, sep- ted the pickup and ran towards us, block- dow. Yet I keep thinking that day’s events development because of job opportuni- arated only by a “fictitious corporation AÑELO, A ONCE FORGOTTEN TOWN 600 MILES ing the road. The mayor had to stop driv- were a condensed example of what Añelo ties and development of new alternatives veil.” This argument, while imaginative, southwest of Buenos Aires, Argentina, ing. They surrounded the car and pelted is experiencing since it turned into a boom for income generation. Local residents ultimately failed to persuade the judges. is now in the middle of an oil boom as a windows with stones and sticks. The noise town. are aware of their power to demand infra- They ruled Lago and Standard Oil sepa- result of the discovery of the Vaca Muer- was deafening: the sticks, the stones, the Vaca Muerta’s discovery put Añelo on structure and services, but they won’t risk rate entities, dismissing Mink’s case ta shale field. My first experience there, glass and the screams. the map in 2012. What used to be a for- their economic benefit because of it. Black service staff serve white kids at a based on a “lack of jurisdiction.” in February 2014, was terrifying, and it The mayor decided to lower his side gotten pass-through town was rebranded At the same time, the local private sec- camp ice cream fountain. This verdict illustrated the breadth plunged me right into Añelo’s way of life. window; immediately, all the aggressors as Argentina’s shale capital. Consequently, tor became more complex. The shale boom of corporate control at the Lago Refin- Añelo has an unusual and sharp geo- crowded around to his side. They shouted its simple governance structure suddenly not only created incentives for local busi- ity. The skills of foreign engineers thus ery and within the Lago Colony. The graphic slope that splits the town into two at him. Some of the sticks and stones were became much more complex and tangled. ness owners to expand their activities, but shielded them from the full weight of company dominated the political and areas with different altitudes. The indus- now landing inside the car. I decided to While external stakeholders arrive in town also attracted outside companies interest- corporate power. economic affairs of Aruba, much like trial park and the new urban development slide under the back seat, where I had been attracted by the oil industry, local players ed in providing services to the oil industry. Or did they? The full story of “Mink the notorious United Fruit Company are located on the high plateau. By the sitting, to protect my face and my camera. change their behavior and demands as a Walking around the town, I observed two v. Lago” hints at the true extent of of Guatemala. Indeed, such authority time I first visited the town, the upland Eventually, the way was cleared. One of the result of the new opportunity. Despite their new casinos, five hotels under construc- Lago’s authority over its expatriate undergirded the very existence of the was already cleaned of brush, smoothed mayor’s advisers asked him to leave quick- different goals, these stakeholders share tion and a huge commercial center about staff. Though beginning as a junior refinery and its staff enclave, govern- and divided into lots for several oil compa- ly. The mayor obeyed, and we escaped the fact that their responses are driven by to be launched (45,000 square feet)—an engineer in 1949, Walter Mink quickly ment concessions given to Lago because nies that fenced in their areas where trucks unscathed. The front window of the pickup speculative interests, which translate into amazing amount of space, it seems to me, rose through company ranks, eventu- of its economic value. Corporate patron- and cranes operated. Signs along the side was destroyed, and my neck felt stiff. contesting agendas and, thus, potential for Añelo’s almost 6,000 residents. These ally becoming a supervisor within the age, therefore, joined the beautiful bun- of the road pointed to exploration areas in Our next stop was the police station. conflicts. new local businesses are attracted by the Marine Department. In 1957, upper galows and pristine beaches as things Vaca Muerta, the world’s second largest The mayor filed a complaint, with me as The empowerment of local residents— promise of profits associated with new management selected him for a pres- essential to expatriate life, realities that shale gas reserve and fourth largest shale a witness to the events. The news of the rather than population growth—seems to consumer demands resulting from the tigious taskforce examining off-the- made their time in the Colony possible, oil reserve. attack went viral in the local media under be the major change in Añelo’s civil soci- cash-generating shale extraction in Vaca job safety. The middling manager was even enjoyable. Perhaps the most valu- Upon my arrival and after a five-hour particularly qualified for the role, and able aspect of this company power, how- interview in the local mayor’s office, he not just because of his rising ascen- ever, was not its extent but its invisibil- very kindly offered to drive me in his dancy within the Lago operation: his ity. The true extent of Lago’s authority pickup to the town’s new industrial park. son Richard had suffered that fateful remained largely unseen in the Colony, I immediately accepted his offer since my accident the previous year. Initially, the hidden behind the fond memories of small car did not have enough power to medical malpractice seemed to have expatriate living, the extensive privilege make the climb on its own. little effect on Mink’s relationship with enjoyed in comparison to local labor- Along the way, the mayor told me about his employer. He still worked for the ers and, according to Mink at least, the his expectations, projects and dreams for company; Lago had assumed all medi- false corporate veil separating Lago and this part of the town. “Here’s where we are cal expenses, promising to cover future Standard Oil of New Jersey. going to build the airport, ” he boasted. I treatment. The refinery upheld its part found it hard to imagine an airport in the of the bargain, but only until Mink’s Kody Jackson is a graduate student in middle of this Patagonian desert; for now, retirement in 1963. In the midst of cor- History at the University of Texas in highly congested, unpaved streets were porate downsizing and scrupulous pen- Austin. He studies religious movements the only signs of urban development. ny-pinching, Lago appears to have dis- in the Americas and U.S. Americans Meanwhile, just like every other research- continued its medical payments. Mink abroad in different capacities (business, er, I registered everything I saw with my sought legal redress, but not through missionary work, etc.). He would like camera. There was a lot with a company the Aruban courts. What island offi- to thank Dr. Jacqueline Jones and the truck, a makeshift house, and an Argen- cial, after all, would dare prosecute the Briscoe Center for American History for tine flag. I leaned out of the window of company that, in effect, paid his salary? their assistance with this article. the mayor’s pickup and snapped a couple The Argentine flag flies on the lot of the makeshift house. A company truck stands in the field.

52 ReVista FALL 2015 ABOVE: PHOTO LAGO-COLONY.COM, FROM A GUIDE PUBLISHED ON NOV 1, 1946. ABOVE: PHOTO BY MARIANA BARRERA REVISTA.DRCLAS.HARVARD.EDU ReVista 53 ENERGY FOCUS ON THE

Muerta. Although these new businesses ning institutions undermines the best way ships at the local level, characterized by will become an integral part of urban life, to take advantage of these opportunities. jurisdictional voids and long-term choices AMAZONS they are not necessarily committed to With his local advisors, the mayor chooses made with short-term criteria and through promoting a sustainable development in the projects to be developed in town, using one-off agreements. In a context of decen- town. The lack of urban regulation means common-sense criteria, along with consid- tralization and weak government, local they can arbitrarily change Añelo’s urban erations about funding and land availabil- governance is undermined, leading to landscape without permits or consultation. ity. Yet in the face of an understaffed and social and spatial exclusion in the town. The shale boom also overwhelmed an underfunded local mayor influenced by The resource curse—the concept that understaffed and underfunded municipal other stakeholders such as oil companies dependence on non-renewable natural government. The mayor’s schedule has and federal government, the inevitable resources can cause a paradoxical negative become busier because of the many com- question is who actually makes decisions impact on the economy—thus shows up at panies seeking to set up shop in Añelo. and chooses the projects to be tackled in the local level. The mayor also opened a satellite office town. The challenge should be to address this in Buenos Aires, Argentina’s capital city, This all brings me back to the threat- curse, and any effort to do it should do three to strengthen ties with the national gov- ening situation I encountered on my first things. As Uwafiokun Idemudia observes ernment and with YPF, the national oil visit and its reflection on the community in his 2012 article in the Journal of Cleaner company. As a result, longtime residents impacts of living in a boom town. The lot Production on the Resource Curse and the often can’t reach the mayor by phone or I photographed illustrated some of the dif- Decentralization of Oil Revenue, “…it must by knocking on his door or window at city ferent stakeholders and competing rent- alter the opportunities and incentives for hall. seeking interests coexisting in Añelo. On rent seeking, and (…) it should empower In more academic terms, Añelo’s mayor the one hand, without regulation or trans- the majority of stakeholders ....” I believe detached from his constituency by trans- parent criteria for the allocation, the oil it should also develop a common agenda forming the historical horizontal relation- company agreed with the mayor to settle among local and external stakeholders that ship into a top-down one, and leveraged on a specific lot to operate in Vaca Muerta, should be embedded in collective priorities the interaction with the private sector and started doing the work. On the other For Añelo, the discovery of Vaca Muerta through one-time agreements (known as hand, empowered by the shale boom, the was the opportunity to be put on the map, one-off). Private investment represents a local family who settled in the makeshift and it brought the promise of a prosperous fast and inexpensive way to increase ser- house in the lot understood this as its future. Waves of new actors and resources vice delivery and urban investment. opportunity to finally have its own land were (and are) attracted to town, increas- Changes in local governance are and house in town. After all, the industrial ing the hope for better times ahead. How- enhanced by stakeholder parachuting. In park was developed in municipal fiscal ever, generalized rent-seeking interests in essence, this means that many different land. a context of weak governments seem to entities with often conflicting interests In the absence of effective institutional be transforming these opportunities into seek to pursue their own particular specu- mechanisms to channel both stakehold- potential threats. lative goals. The national government, for ers’ claims, the overwhelmed mayor, as The good news is that this resource one, found in Vaca Muerta the opportunity the local government representative, was boom also brings the opportunity for inno- to solve its energy and fiscal crises. Like- responsible for arbitrating between them, vating and developing better planning to wise, Añelo and its new resources provide but he couldn’t provide a solution. The lack address these opportunities and threats. In a solution to the fiscal deficit of the provin- of regulation and planning institutions the particular case of Añelo, the discovery cial administration, and give oil companies undermined the ability to make clear deci- of Vaca Muerta represents the prospect of (including YPF) a chance to develop new sions; this problem was also challenged by opening a conversation about how plan- revenue and business alternatives. the lack of human and financial resources. ning can be employed as a tool to avoid the It’s important to highlight that stake- I’m pretty sure that the family knew that resource curse at the sub-national level, holder parachuting also has had posi- the pickup was the mayor’s and that they and to translate resource discovery into tive effects on Añelo’s development. New proceeded to stone it because they could better welfare for Argentina. stakeholders deliver significant resources not find another way to make their voices THEODORE JUAN LUIS BARBARA FRASER 66 NELLY LUNA for urban infrastructure and service pro- heard. In a context of decentralization and Mariana Barrera is an Argentine econo- MACDONALD 56 DAMMERT B. 62 Oil and Indigenous AMANCIO 70 vision. YPF, for instance, took the lead on a weak government, the result of these mist with a degree in finance who received Beyond Dinosaurs Forests for Energy? Communities In the Shadows of the coexisting and competing rent-seeking Extractive Industry bringing the International Development a Master’s in Urban Planning from Har- and Oil Spills Juan Luis Dammert B. Barbara Fraser is a freelance Bank on board for developing the town’s interests was a critical and complex situa- vard University in 2014. Funded by the Theodore Macdonald is a is a Ph.D. Candidate in the journalist based in Lima, Peru. Nelly Luna Amancio is a Master Plan 2030, a roadmap intended to tion. Lincoln Institute of Land Policy, she leads Lecturer in Social Studies and Graduate School of journalist specializing a Faculty Affiliate at DRCLAS, Geography at Clark University. in the coverage of conflicts, prioritize investment needs. Unfortunate- Since the shale boom, Añelo’s stake- a research project on Vaca Muerta’s urban Harvard University. the environment and ly, the lack of urban regulation and plan- holders are locked into complex relation- development. human rights.

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indeed challenge, the Ecuadoran gov- subject of multi-party (international oil POLLUTION: THE PERSISTENT Beyond Dinosaurs and Oil Spills ernment. They are testing Ecuador’s companies, indigenous leaders and envi- PROBLEM understanding of and compliance with ronmental organizations) Harvard Dia- Disputes over the mess created around Oil Development and Amazonian Indigenous Peoples BY THEODORE MACDONALD international human rights and national logues on Oil in Fragile Environments, Lago Agrio in Ecuador and other oil sites legislation as it applies to oil and other which took place at the Weatherhead in Amazonian Latin America have been natural resource development. These Center and in Latin America from 1996- going on for decades. Pollution has been and other cases and issues were also the 2002. massive and undeniable. The Texaco case ECUADORAN WRITER JAIME GALARZA’S SCATH- in Arajuno, a Kichwa (Quichua) Indian boom town they named Lago Agrio, close is certainly the best known and currently ing critique of international oil giants village located between the Napo and to the rainforest homes to Cofán, Secoya, controversial. In both Ecuador and the and pliant governments in Latin Ameri- Pastaza rivers of Ecuador’s Upper Ama- and, later, Kichwa and Shuar indigenous United States, numerous legal suits have ca in his widely read book, El Festin del zon. I picked up a copy from the Libri peoples. Oil Development and bounced back and forth since the early Petróleo (1974), helped to win him two Mundi bookstore in Quito. Though fas- About 150 miles to the southeast, the Amazonian Indigenous People 1990s. In 1996, Texaco paid out about years in jail just as Ecuador was opening cinated by Galarza’s anti-imperialist crackling chatter of Occidental Oil work- $40 million to clean up more than 100 up its Amazonian region, once again, to stance, I also hoped to understand why, ers frequently overlapped with my daily, well sites and seven spills, a remediation oil development. Galarza painted a big- during the 1940s, Shell Oil had con- two-way radio, weather reports for local COLOMBIA that it was supposed to share with its brush picture of rapacious transnational structed and then abandoned a long, bush pilots, telling them whether or not national oil company partner, Petroec- companies in the mid-early 20th cen- solid and well-drained airstrip in Araju- the morning mist had lifted or shifted uador. Although the work, coordinated tury: his Seven Dinosaurs—Standard Oil no, but left little other visible impact and instead to heavy rain. Occidental Oil was ECUADOR by Petroecuador, now the sole owner of of New Jersey, Shell, Mobil, Gulf, Texaco, almost no unpleasant memories among preparing to drill along Peru’s Pastaza, the plots, won Texaco releases from com- BP, and Standard Oil of California—doing the resident Kichwa. In fact, many people Tigre, and Corrientes rivers, an area munities and organizations, many areas whatever they darn well please in weak enjoyed the short-term jobs. And elders now known as Block 1-AB, and home remain severely polluted and unhealthy. countries. Transnational oil companies’ said that since so many young men were to numerous Achuar, Kichwa and other Current efforts to revisit the case by suing plunders are now tempered by stronger busy working for Shell, wild game actu- indigenous peoples. the new owner of Texaco, Chevron, and and more democratic governments and ally increased. Retired Shell officials in In mid-1976, two Arajuno Kichwa truly remediating the sites and communi- the existence of national oil companies Quito later explained that while some men, another American and I mean- ties where Petroecuador is the sole owner across Latin America. While Galarza was exploring had taken place in Arajuno, the dered slowly for about a week by dug- remain quite contentious. In a high-level later named Ecuador’s first Minister of strip, only a 20 minute flight from Shell’s out canoe—fishing and hunting and battle now characterized more by large the Environment, oil development for home base in Shell-Mera, was a backup observing—from the headwaters of the egos than environmental or social con- indigenous communities remains highly for emergency landings of DC-3s in bad Curaray River, through some Huaorani PERU cerns, ambitious Chevron executives take controversial and heavily disputed. weather. Shell left Ecuador in 1950 with- settlements, to the junction of the Villano on controversial class-action lawyers, an Legitimate concerns over spills and out finding marketable oil in this foothills and Curaray rivers, the site of another All locations are approximate evasive national oil company, and ques- other forms of pollution persist. Howev- area. And they left no mess, resentment Quichua village, Villano. There, sud- tionable Ecuadoran legal procedures and er, a community perspective now encom- or permanent disruption. But Galarza’s denly and like some scene from Coppola’s judges, with no likely settlement or clean- passes more than concern about the envi- lament about these earlier times (1920s- Apocalypse Now, large planes were flying up on the horizon, leaving lots of hope- ronmental damage wrought by looming 1950) was hardly the end of the oil story. in heavy equipment and men, shattering less, angry, abandoned, and impoverished international giants and includes nation- By the mid-1970s, oil development the quiet as Arco Oil prepared to explore people in northern Ecuador. (See Paul M. al governments and international law. was again in, and sometimes on, the air. another old Shell site, then named Block Barrett’s excellent recent account, Law of Indigenous peoples have new rights to Several sites that were to become battle- 10. At the time, everyone thought all this the Jungle.) land, natural resources and citizenship, grounds today fanned out to the east of was quite exciting. That changed. By contrast, in Peru, after a series of nationally and internationally. They are Arajuno. A few years earlier, most of the Now each of these sites casts current similar complaints regarding that coun- also accessing international legal institu- men of town—like those throughout the oil development disputes into high relief, try’s largest production area, the govern- tions with greater frequency and success. Oriente region—were being shuttled sometimes produces banner headlines, ment declared Lot 1-AB to be an “envi- And, though often with great difficulty, about in Bell helicopters as they worked and draws considerable local anger. In ronmental disaster,” complicating current they are demanding that their govern- stints for Western Geophysical, cutting Lago Agrio (Ecuador’s most productive desires to renew contracts. The area’s ments not simply ratify international paths through much of the northern and region), a $19 billion suit against Texaco original single operator, Occidental, has human rights agreements and progres- central Oriente to permit exploratory (now owned by Chevron) for pollution worked to repair environmental damag- sive new laws, but actually implement seismic studies. In my time (1974-76), and near there is world-famous. Those in es, reaching an “out-of-court” settlement their associated duties. about 100 miles to the northeast, Texaco- Villano and their nearby kin-community to provide funds to local communities. Gulf, having finished a massive pipeline of Sarayacu are, of course, concerned Above: A map of the location of Block 1-AB in Peru. Nevertheless, Block 1-AB—now a patch- LOOKING AROUND: FROM DC-3S to the Pacific coast in 1972, began pump- with pollution. No one wants to live Below: A meeting this summer brought the community together to discuss the new potable work of operators including Occidental, water project in Arajuno. ACIA has negotiated that it will not allow oil projects to take place TO BELL HELICOPTERS. ing crude oil out of a growing network in a polluted and dangerous place like in their communities until the community is provided with potable drinking water. Three years Pluspetrol, Burlington, Repsol, China When Galarza’s book appeared in of wells between the Aguarico and Napo Lago Agrio. Meanwhile, some Kichwa have gone by with no progress, but now it seems that construction of a water treatment plant National and others—recently suffered a 1974, I was doing ethnographic research rivers, connected through an ugly new have ratcheted up the debate to engage, will begin in March. large rupture in its 39-year old pipeline,

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Shell Oil’s 1940’s airstrip at Arajuno, 1974. Opening rain forest roads for oil pipelines and timber extraction, and avenues for colonization. and a large area awaits cleanup. be repeated. The ARCO Villano case now However, for the indigenous participants territory without prior consultation. Oil nificant restrictions on regional oil devel- ment titled significant amounts of indig- None of this is new, or surprising. In illustrates some of the recent technical at the Dialogues, vexing social and politi- company and government officials flew opment, promised to demarcate and enous lands. However, this was awarded addition to breaks and spillage along advances. In Block 10, ARCO, in addi- cal questions, and the neglected respon- to Sarayacu’s small jungle airstrip. Com- title indigenous territories. Secure land not as the single indigenous territory pipeline routes, toxic waste, which, by law tion to controlling toxic wastes, set new sibilities of the government, outweighed munity members welcomed the meet- rights would promote a unified terri- envisioned by OPIP, but rather through even in the “old days” should have been environmental standards by constructing discussions of spills and other environ- ing but immediately placed logs on the tory and solid base from which OPIP, the a series of irregular blocks in Pastaza reinjected into the well, was dumped a road-free well site and laying pipeline mental questions. Two of the major and airstrip, preventing the officials from umbrella indigenous association, could Province. The government thus rejected into unlined pits. From there pollutants in the rainforest. The company followed persistent concerns—consultation with departing. They also invited leaders of negotiate any future oil development OPIP’s demands for a broad participato- flowed into rivers during heavy rains or the model of an offshore rig, where equip- affected communities and respect for other indigenous organizations, who, for and regional planning. The idea was, of ry development program while continu- simply escaped when the dirt walls erod- ment and men are ferried in by air, and indigenous organizations—are illustrat- several years, had also been petitioning course, to prevent repetition of the envi- ing to press ARCO to meet its obligations ed. And in Ecuador, crude oil was even pipelines are laid by helicopters hovering ed by situations that developed in and the government for recognition of broad ronmental mess to the north, but more to provide for communities’ basic needs thrown onto the roads in dry weather to atop narrow cuts in the forest. This mini- around the ARCO sites at Villano and ethnic territories. The “meetings” lasted important, to replace small community and services. keep down the dust. mized damage to the forest and avoided nearby Sarayacu. 12 days, during which some government development projects and individual While ARCO easily contracted com- All of this early work produced ugly the sorts of invasive roads that easily and officials became ill (indigestion, it was handouts with integrated pan-territorial munity relations specialists, the private landscapes—large sections of denuded quickly become troublesome vectors for FROM POLLUTION TO PARTICIPA- reported), while in Quito some, includ- development planning, utilizing a signifi- company would never be in a position to tropical rain forest, severely polluted riv- colonization, logging and other incur- TION: WHERE’S THE STATE? ing President Rodrigo Borja, trumpet- cant share of the region’s oil revenues. design and implement, let alone allocate ers, and sickened human populations. No sions into indigenous territories. The In mid-1989, while I was sitting one ed the incident as a “kidnapping in the However, over the next couple of years sufficient resources for, a regional devel- one denies it. Numerous observers, jour- same sorts of technologies are being used afternoon with members of FOIN (Napo jungle,” despite Sarayacu’s statement the Sarayacu Accords languished. Mean- opment program that would extend far nalists, independent scientists, and even in Peru’s huge Camisea Gas project and River’s regional ethic federation), leaders that the officials were free to walk out at while ARCO was negotiating access and beyond its narrowly defined work area. government agencies and the oil com- many other rainforest sites. of this as well as the national indigenous any time (a long walk). Given the often providing modest local economic sup- The government thus determined panies have documented the northern In reviewing this innovative project organization (CONIAE) rushed in to voiced government claim that Ecuador port to the small communities closest to control over lands and defined the duties Ecuadoran Oriente. at the Harvard Oil Dialogues in 1997, the announce their departure for Sarayacu. was a “multicultural nation,” this tense its anticipated well site. This flew in the of the companies. So the public debate Both the Lago Agrio and Block 1-AB general manager of ARCO-Ecuador com- An extraordinary drama of land and nat- symbolic national drama drew no mili- face of OPIP’s broader demands. So, in continued, with ARCO arguing that the cases focus on cleanup. Current and mented to NRDC and The Nature Con- ural resource rights was unfolding. Ear- tary response, despite the close prox- July 1992, OPIP staged a spectacular and company was obliged only to help those carefully monitored technical regula- servancy: lier, contractors exploring ARCOs’ Block imity of a large Ecuadoran army base highly publicized, 500-kilometer, 2,000- communities directly affected by its tions suggest that nothing resembling the “What will you guys say when we can 10 had been ejected by Sarayacu commu- in Shell-Mera. Instead the officials and person March from the Amazon city of work; and ARCO continued this policy neglectful messes left by Occidental and get oil out of the ground by osmosis?” nity members, who argued that the work- community leaders jointly drafted the Puyo to Quito, the capital. Shortly there- even though it led to fierce factional dis- Texaco in northern Peru and Ecuador will Many smiled and nodded their heads. ers were exploring illegally within their Sarayacu Accords, which, along with sig- after, President Rodrigo Borja’s govern- putes within the communities and, at

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one point, sparked a short-term kidnap- and develop Block 23, a concession which, each other, Ecuador passed a series of The case demonstrates that—in ural resources. But the contrast between ping of the ARCO community relations as with ARCO’s earlier, overlapped with laws requiring consultation with the Sarayacu and across Ecuador and other what went on in Villano and Sarayacu, manager in one of the Villano commu- Sarayacu’s territory. And once again the communities, and creating mechanisms Latin America landscapes—disputes over and how communities approached rem- nities. OPIP and its NGO supporters, community said no, refusing to permit to enforce them. But as debates swirled natural resource development have now edies, suggests not only that recent legal meanwhile, responded that any develop- contractors to gather data for the essen- and government agencies competed with shifted from a nearly exclusive focus on advances make a difference, but that this ment should be a broader ethnic “territo- tial Environmental Impact Assessment. (or at least contradicted) one another the dangers of large international com- change may be structural and permanent, rial” matter, and argued that the company Sarayacu in many ways was the same over interpretation and implementa- panies to the duties of the state. While grounded in law rather than on caprice was seeking to weaken OPIP by pitting story with the same actors as Villano—an tion, CDG, beginning in 2002, advanced Galarza’s “Seven Dinosaurs” now have or contingency. While technical advances the communities against one another. oil international company (CDG), indig- its seismic studies and placed explosives the UN-defined responsibility to respect and environmental regulations have not Each had a point. Yet, several years lat- enous communities and regional federa- in the ground. Sarayacu blocked further human rights, most corporate responses tabled concerns over pollution and spills, er, at the Harvard Dialogues, both ARCO tions, government support for CDG, and advances and led the company to declare to complaints and efforts at remedia- invoking their harm is not the main con- and OPIP representatives expressed frus- international NGO support for the indig- “force majeure” and stop working. But tion, however satisfactory, will probably cern of indigenous peoples today in Latin tration with the absence of the govern- enous communities. But after the mid- the explosives remained in the ground. remain voluntary. Complaints and suits America. Nor, it now seems clear, was it ment in areas where, they argued, policy 1990s, the nature of the debate shifted Eventually, the Ecuadoran government, will probably be resolved out of court, as when these cases first emerged. decisions and provision of basis services and altered the earlier power imbalance. frustrated and angry with Sarayacu, used illustrated by the current Texaco/Chev- None of these communities and orga- were its responsibility. OPIP interestingly In May 1998, Ecuador ratified ILO violence (military and police) and intimi- ron in Ecuador and Occidental in Peru. nizations is inherently opposed to natural added that earlier governments consis- Convention No 169. The international dation. And, as inter-community tensions Such outcomes are largely matters of resource development. But most will argue tently relied on foreign missionaries to treaty went into force in May 1999, and rose, police failed to protect Sarayacu citi- good will and private decisions, which do against the manner in which it is gener- provide basic health and education to Ecuador’s 1998 Constitution incorporat- zens passing through adjacent communi- little to alter the traditional power asym- ally undertaken; that is, without proper isolated indigenous communities. Now it ed many of the same rights. Consequent- ties. metries. States, by contrast, now have local participation and consultation. The was oil companies. ly, though Sarayacu’s community persis- The aggressive violence elevated the formal legal obligations and duties to danger of such neglect and exclusion was OPIP continued to draw national and tence, CDG’s responses, and government Sarayacu’s claims from civil disputes to respect the human rights of indigenous clearly illustrated six years ago this sum- international supporters for its legitimate actions produced many of the same sorts criminal actions. This won international peoples. Drawing on the ILO convention mer, when violence and deaths shook the Oil well valve near Lago Agrio, Ecuador. demands. This led to OPIP’s inclusion in of petty intrigues, rumors, accusations, NGO support for the community. But, and UN Declaration, as well as Peru’s and oil region near Bagua, Peru. The major a multi-party commission convened to counter-accusations, demonstrations, decisively important, the violent actions Ecuador’s new constitutions, indigenous challenge of the early 21st century is the discuss the project’s progress. In 1999, insinuations and factions that surround- and legal inactions drew the attention ever, Ecuador’s decision to terminate peoples now have legal frames, mecha- failure to bridge the easily avoided gaps oil began to flow uninterrupted out of ed the Villano case, outcomes were differ- of the Inter-American Commission on CDG’s contract was based a number of nisms, and precedents through which to between progressive legislation and insen- Pastaza Province from ARCO’s environ- ent. Human Rights, where a complaint was other interests. More important, Block argue and advance inevitable local dis- sitive actions that most indigenous peoples mentally pioneering and road-free well No longer were terms like “territory,” lodged and accepted. Subsequently, 23 would simply come up for bids again putes and claims with regard to natural see as the main problem, as a glance at the site and pipeline. And OPIP was not “development” and “organizations” sim- the Commission granted “precaution- when a new round of offering took place resource development. Latin American indigenous news webpage managing regional planning. ply part of an indigenous vocabulary ary measures” to require the removal of in the future. And concerns had shifted to Servindi illustrates almost daily. At the time (early-to-mid 1990s) this thrown into the soup of a debate. Inter- explosives, and recommended movement the government. CAUTION NONETHELESS Bringing this story full circle, in early highly publicized dispute was largely, and national conventions and national legis- towards some mutually acceptable agree- With the new legal precedents, and These well-known cases, which are June 2015, the indigenous organization unfortunately, a matter of words, recrimi- lation clearly stated that indigenous terri- ment on the entire dispute. the Ecuadorian government’s persistent- often clouded by explanatory global tropes Acia Arajuno, non-existent when I lived nations, charges and counter-charges tories must be respected, natural resource Meanwhile, and directly related to ly tense relations with Sarayacu, in 2011 that have shifted from Imperialism and there, responded to renewed interest in between relative unequals. Respect for development must not harm and in fact the community’s original concerns, two the Inter-American Commission elevated Colonialism to Neoliberalism and Fou- oil development around nearby Rucul- indigenous territories and organizations must benefit affected communities, and judgments by the Inter-American Court the Sarayacu case to the Inter-American cauldian Power (all minimizing human lacta, and rumors abounded that oil com- was largely a matter of choice and relative any related negotiations must respect the of Human Right on the land rights and Court on Human Rights. In its 2012, agency), illustrate significant advances pany’s helicopters would soon be hovering power, which favored the government authority of indigenous organizations. consultation in indigenous communities 90-page decision, the court concluded, enabled by international human rights. overhead. The indigenous assembly pro- and the oil company. Many, of course, But a common legal argument soon of Awas Tingni (vs. Nicaragua, 2001) and of course, that the violence was unac- Though they cannot be expected to spark claimed its opposition, not because of any supported the underdog OPIP, but it developed. Because CDG had received Saramarka (vs. Surinam, 2007) produced ceptable and that the explosives must instant social or economic equality, the anticipated mess, but because they had not seemed that traditional sources of power the concession before the ILO Conven- critical precedents regarding indigenous be removed from the territory. But the new human rights laws, seen from the yet been informed or consulted. And, the and wealth once again predominated. tion was ratified and before Ecuador’s territories as “property” and requiring bulk of the decision focused on Ecuador’s perspective of those who benefit most leaders added, before any government offi- Fortunately, that was not the end of the new Constitution took over, the company “consultation” with regard to all phases of failure to respect the property rights of, from them, offer the possibility of long- cials showed up to discuss any possibility matter. argued that the new laws should not be development affecting indigenous lands and to properly consult with, community term changes in historically imbalanced of oil development, the government had to applicable retroactively. But earlier com- and communities. members in the development plans. The settings. The new power of human rights, fulfill its basic duty and its delayed promise SARAYACU AND INTERNATIONAL munity opposition had prevented com- The oil company (CDG) clearly had court explained, in great detail, why such however, should not be overemphasized. to provide Arajuno with potable water. PROTECTIONS pletion of the required environmental not respected those rights. In November actions were no longer acceptable or legal Though a shift is underway, ex-UN Spe- ARCO did not return to neighboring studies, so exploratory activities were, 2010, the Ecuadoran state petroleum in Ecuador or across Latin America. Any cial Rapporteur James Anaya has stressed Theodore Macdonald is a Lecturer in Social Sarayacu after 1989. But in 1996, after in fact, suspended until 2002. Despite company, Petroecuador, terminated subsequent oil development on Block that large gaps remain between recent Studies and a Faculty Affiliate at DRCLAS, land titling reshaped the provincial map, divisive activities that created individual CDG’s contract. Some suggested that 23 would have to recognize community and impressive indigenous rights legisla- Harvard University. From 1996 to 2002, he an Argentine oil company, CDG, signed community agreements and spontaneous this was a “victory” for Sarayacu. The property and include community mem- tion and broad realization of those rights, co-directed the Harvard Dialogues on Oil in an agreement with Ecuador to explore settlements, pitting communities against transnational company was gone. How- bers in all activities. particularly as they relate to land and nat- Fragile Environments.

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approached us, and before asking us to Africa and Latin America. Much of the In April 2014, Grupo Romero leave, explained that they had all legal Amazon rainforest is suitable for oil palm announced the closing of its biodiesel permits to operate in that land. cultivation. In the case of the Peruvian mill, after almost five years of operation Local conflict and large-scale defor- Amazon, in addition to biophysical suit- at less than 20% of its capacity. Peas- estation are the most visible dark sides ability, the recently pacified region has a ants with small plots of land have also of oil palm plantations. The oil extract- growing transport infrastructure and a denounced the biofuel policy as a false ed from the fruit of the plant (palm oil) favorable legal framework for the estab- promise. Many point out that farmers is used for vegetable oils and fats (used lishment of oil palm plantations, which had substituted oil palm for coca because for chips, chocolate and cooking oil, for are rapidly expanding. of that promise, and now find them- example), cosmetics (soap, shampoo, The passing of biofuel regulations has selves without markets to sell their prod- body creams, etc.) and, more recently, spawned the development of many new ucts. biodiesel. The new and growing mar- biofuel projects. Biodiesel mills in Lima, The 2005 biofuels law aimed to diver- ket for biodiesel from palm oil and its sugar cane plantations and ethanol mills sify Peru’s energetic matrix and agroin- accompanying narrative of green energy on the northern coast and new oil palm dustrial development, and stimulate the captured my interest and had brought plantations and biodiesel mills in the conversion of illegal crops through state me to the plantations in the first place. Amazon are some examples. The most promotion on the basis of free competi- Peru had recently passed biofuels regula- visible investment was made by Grupo tion. Under a free-market economy like tions, and oil palm plantations were rap- Romero, which in addition to the new Peru’s, there was no guarantee that the idly expanding in the Amazon. Facing the Palmas del Shanusi plantation, built a demand could be met with domestic pro- landscape of destruction, it was hard for biodiesel mill in its long-established Pal- duction. Unlike the situations in Ecua- me to remain enthusiastic about the envi- mawasi plantation in Tocache. dor, Colombia or Brazil, where biofuels ronmental credentials of biofuels. The biodiesel business turned out to producers coordinate with their national The Law of Promotion of the Bio- be a major failure for domestic producers, states to secure domestic consumption of fuels Market (2005) stated that ener- unlike ethanol which, though with some domestic production, this has not been getic crops are an opportunity for agro- difficulties, has been profitable for sugar the case of Peru, where improvisation industrial development, a source of jobs cane investors on the coast. Both small and lack of planning are the rule rather and an alternative to illegal crops (coca). and large-scale oil palm growers saw a than the exception. Dumping practices Peru introduced a progressive blending secure market for biodiesel production, are incompatible with free competition, Settlers near caserío Nueva Italia, San Martín region, Peru, located on the edge of Palmas del Shanusi plantation. schedule of biofuels beginning in 2009, and invested accordingly. But refineries, and INDECOPI might rule in favor of though implementation was delayed sev- both public and private, preferred to buy domestic oil palm producers in future eral times due to technical problems with imported biodiesel. They claimed that months. But it is quite ironic that pro- refineries and gas stations. Today there Peruvian palm oil biodiesel didn’t meet ducers call for state intervention when it Forests for Energy? is a mandatory blend of 7.8% ethanol in the technical specifications required comes to commercial matters, and show gasoline and 5% biodiesel in diesel. To by law. Allegedly, Amazonian biodiesel no enthusiasm at all when it comes to Biofuels and Palm Oil in the Peruvian Amazon BY JUAN LUIS DAMMERT B. fulfill the demand generated by this law, didn’t respond well to cold temperatures environmental and zoning regulations an estimate of 250,000 tons is required when transported across the Andes. for oil palm projects. annually, i.e. approximately 173,000 Biofuel producers have been working to Oil palm expansion has far from additional acres (depending on produc- meet the technical criteria, though they stopped, however. On the contrary, the IN 2008, I WAS CONDUCTING FIELDWORK ON THE The landscape of destruction was recently migrated from the Andes, they tivity per acre). claim that the criticisms are unfounded. crop is growing at a higher pace than edges of a recently established large-scale impressive. On each side of the road we told us, although they mentioned other Palm oil is one of biodiesel’s most The real reason is that refineries prefer ever. Cultivated surface area of the crop oil palm plantation: Palmas del Shanusi. saw recent or ongoing clear-cutting of residents who had been in the area for important components. The crop has to buy subsidized and dumping-priced has grown from 35,000 acres in 2000 My investigations took me to the caserío the forests. New migrants had a deal with decades. steadily expanded globally in the past (i.e. cheaper) imported biodiesel, most to around 150,000 acres in 2013. About of Nueva Italia, in the area known as madereros (timber merchants) operating The settlers explained they were three decades, given its large yields (it of it coming from Argentina, they con- two-thirds (around 100,000 acres) have Cainarachi, between the San Martin and in the area: they wanted the madereros resisting the company’s unstoppable is the most efficient oleaginous crop in tend. The impasse has been taken to been cultivated by peasant associations Loreto regions in the Peruvian Amazon. to extend the road to make their farms clear-cutting of forests and took us to the the world), its high value compared to INDECOPI (the regulatory organization of small landholders, in most cases with A conflict had been triggered there be- more accessible so they paid them with very edges of the company’s operations. other agricultural products, and rising for competition in Peru), which in 2010 support from international cooperation, tween the company, part of the power- timber from trees they cut down. At the We walked along a trail under a canopy demands for its many uses. Southeast applied compensatory measures in favor as an alternative to coca growth. But this ful Grupo Romero, and people from the end of the road, a trail started (where the that suddenly stopped by a fallen log, Asia has been the predominant pro- of domestic production, but only for a ratio is changing, as currently another plantation surroundings. To get there, road is presumed to continue as clearing opening the view to thousands of acres ducer region since the 1980s, process- limited period of time. Industrias del additional estimated 280,000 acres in two colleagues and I drove along one of advances). After walking for 15 minutes, of clear-cut past forests. The expansion ing around 90% of the world’s palm oil. Espino, part of Grupo Romero, formal- large-scale projects are pending approval many timber roads that penetrate into we arrived in Nueva Italia, where we of the agricultural frontier on the for- Partially because available land in that ly denounced unfair competition from or starting operations. Two large-scale the forest from the recently built North found a few ramshackle huts and scarce ests revealed a whole new, massive and region is diminishing, the industry is also Argentine biodiesel, and the case is under companies are leading the expansion. Interoceanic Highway. fields for crops. Most of the settlers had industrial dimension. Security guards growing in other tropical areas such as a new investigation by INDECOPI. One is the pioneer Grupo Romero. The

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promoting projects and has issued some legally questionable permits; however, Unlike the situations in the Ministry of Environment has taken legal action to stop deforestation brought Ecuador, Colombia or about by the spread of the crop. Brazil where biofuels Despite the failure of the nationally produced biodiesel business in the past producers coordinate decade, oil palm cultivation is growing in with their national the Peruvian Amazon. There is an expec- tation that, in the future, after technical states to secure domestic and competition barriers are overcome, consumption of domestic biodiesel will still be an important mar- ket for Peruvian palm oil, especially production, this has not when it is portrayed as a green alterna- been the case of Peru, tive to fossil fuel dependency. Of course, not all agriculture-based where improvisation biofuels production necessarily entails and lack of planning are large-scale deforestation and social con- flict. Crops can be grown in different the rule rather than the areas, under various production tech- exception. niques and social arrangements, such as, for example, associations of peasant we witnessed in Nueva Italia: capital- landowners who abandon coca growth ist companies partner with fractions for a legal activity such as palm oil of the state to purchase large tracts of production in already degraded areas. land, and poor farmers migrate to the Making these distinctions is crucial, area to secure land that is perceived to but what we might call sustainable be scarce, reinforcing conflicts over land biofuels are unlikely to be developed and patterns of forest destruction. under weak institutional and contradic- Using vast areas of land for biofuels tory legal frameworks such as those of production reduces the amount of land Peru. Furthermore, narratives of green that can potentially be used for food energy and sustainable production are production. And as we have seen, it may heard too often but seldom seen on the involve large-scale deforestation. This ground. leads us to the obvious question of how Demand for biofuels is growing convenient is it for a country like Peru, globally, and it also comes from areas with the second largest forest cover in that are not important biofuel produc- Latin America, to destroy its forests to ers such as the European Union (EU). produce fuels. Biofuels projects gained Organizations like Oxfam and Friends momentum as a clean fix to the energy Deforestation for oil palm in Loreto, Peru. of the Earth are highly critical of the crisis of fossil fuels, regarded as pollut- EU’s biofuels target, as these organiza- ing and perceived as scarce. However, other is the recently arrived holding com- areas require the appropriate biophysi- and oil palm producers claim that oil cation is precisely that plantations don’t tions claim that the EU doesn’t take into a massive transition to biofuels could pany created by investor Dennis Melka, a cal conditions (in terms of soil quality, palm projects don’t involve deforestation. involve deforestation. It is yet to be seen account the impacts of biofuel produc- bring about unforeseen impacts such as Czech citizen, and his associates, locally temperature, slopes, etc.) for oil palm When evidence against this is shown, how certification is going to address the tion on people and the environment in land grabs, diminishing available land known as los malayos (the Malaysians) to grow. Deforested lands do not always they explain that the projects are develop- cases of so-called legal deforestation. producer countries. for food and large-scale deforestation. after the established oil palm plantations meet these conditions, and their soils are ing in soil categorized as suitable for agri- Forestry regulations are contradictory According to Oxfam (2012), biofuels All for the quest to maintain or increase they own in Malaysia. usually degraded. Buying forested land culture; so legally speaking, they are not in Peru, and the institutional framework are an important driver of the global the current high energy consumption These new plantations have been can be very cheap because of good prices cases of deforestation. The Roundtable is going through critical changes, which rush for land deals, or land grabs, and rates, which always seems to be the involved in large-scale deforestation. In from the state. The resulting timber can on Sustainable Palm Oil (RSPO) recently makes the procedure for starting oil palm countries with poor protection of land indisputable priority. most cases, companies are attempting be sold or used for building camps; the started its implementation in Peru and is projects particularly unclear. Through rights (like Peru) are magnets for land to buy large, contiguous forested lands deforested, non-commercial biomass is currently working on a “National Inter- decentralized regional governments deals involving biofuels, or crops that Juan Luis Dammert B. is a Ph.D. Candi- from the state, free from legal claims left to rot to fertilize the soil. pretation Draft of RSPO Principles and and the participation of the Ministry of can potentially be used for biofuels date in the Graduate School of Geography, by settlers or communities. Selected The Peruvian Ministry of Agriculture Criteria.” One of the criteria for certifi- Agriculture, the state has been active in production (like oil palm). This is what Clark University. [email protected]

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Oil and Indigenous Communities

Sowing Discord in the Peruvian Amazon BY BARBARA FRASER

ON A DRIZZLY MORNING IN LATE FEBRUARY, A region, where there are virtually no wear. Only after a national television boat full of silent Kukama men motored roads, a river is the lifeblood of the com- news magazine showed footage of the slowly into the flooded forest off the munities along its banks. People drink scene did PetroPerú contract a com- Marañón River in northern Peru. Cut- its water and bathe and wash clothes pany with experience in handling spills ting the engine, one man began to row, and pots in it. The river is the only route and provide the workers with protective maneuvering the boat past a partly sub- for traveling to nearby fishing grounds, gear. The state-run company also began merged pile of rotting sacks of oily boots, neighboring communities or distant cit- to deliver bottled water, rice, canned gloves and rags. As he glided into a back- ies. And it is the dwelling place of spirits, fish, sugar and cooking oil to families in water, the oar stirred up an oily sheen ac- including those of relatives who drowned the village. companied by the smell of gasoline. and whose bodies were never recovered. By October, nearly every adult male Two days earlier, a delegation of gov- To pollute the river—created when sap in the village and many from sur- ernment officials had visited the site and flowed from the mythical lupuna tree to rounding communities were working declared it free of oil after a pipeline leak relieve a woman’s thirst—is also to con- for PetroPerú or its contractors. Some in June 2014 had spilled between 1,600 taminate their spirit world. women dropped out of the work force, and 2,000 barrels of crude into the rain In Cuninico and other Kukama com- feeling that they were neglecting house- forest. Apparently they had not seen the munities, fish are a source of both pro- hold responsibilities. Cuninico was in waste dump and the oil slick, and had tein and income. Before the oil spill, the the midst of a housing boom—virtu- not noticed that the booms that had once network of lakes and channels up the ally everyone was rebuilding, roofing formed a barrier across the pipeline canal Cuninico River from the village was a rich or expanding their homes. The excep- were useless once the water rose and left fishing ground for people from about half tion was the coordinator of Cuninico’s them floating in the forest. a dozen communities. As word spread Catholic community, who declined to “They didn’t go to these places,” said about the spill, however, the market dried work for the company. His family’s home one man, who had piloted one of the up. Not only did buyers shun fish from remained unchanged, with his son’s boats ferrying members of the delegation Cuninico, but vendors who brought fish paintings of nature scenes still visible on to the canal. “They didn’t look.” to sell in the community charged two or some of the walls. The pipeline spill in Cuninico, a three times the usual market price. Water levels in the Marañón River Kukama Indian village in the Peruvian With food and cash scarce, villag- and its tributaries rise and fall with Amazon, was small by most standards. ers jumped at the chance to work as day the seasons, and company officials said It is dwarfed by the Deepwater Horizon laborers for PetroPerú, first searching for they were working as quickly as pos- spill in the Gulf of Mexico and the oil and the place where the pipe had ruptured, sible to finish the cleanup before flood- wastewater dumped along the Corrien- then laboring on cleanup crews. The ing began toward the end of the year. In tes, Pastaza and Tigre rivers to the north. wage of about $25 a day was three or four mid-December, they declared the work For the villagers, however, it has been a times the usual day labor rate. Women finished and moved almost all their per- lingering disaster. It also became a tem- cooked or washed clothing for the hun- sonnel out. The jobs and the money van- porary employment opportunity, when dreds of cleanup workers, and several ished, but demand for fish from Cunini- the state-run oil company, PetroPerú, families rented houses to the company co did not reappear. And when the high hired local workers to clean up the oil and for lodging company managers. water brought ribbons of oil floating contaminated soil and vegetation. But down the Cuninico River again, villag- now, with the jobs and money gone, real- ECONOMICS AND ENVIRONMENT ers worried anew about whether it was ity has settled in again, says Galo Flores, AT ODDS safe to eat the fish or drink or bathe in the apu or president of Cuninico. The effort started badly—more than the water. “The spill violated our rights,” Flores a dozen men worked for a week search- In an interview in March, company says. “It has affected our entire life, but ing for the rupture, submerged to their officials admitted that they had been especially the water, because we don’t chests in oily water around the pipeline unable to clean up part of the site— Clockwise from top left: A boy washes his hands in water purified by a new water treatment plant in Dos de Mayo. A man tests the depth of have safe water to drink.” for hours at a time, clad only in regular where sacks of oily vegetation and bar- oily water after a pipeline break near the Kukama community of Cuninico, in the lower Marañón River valley in northern Peru. A woman washes In Peru’s northeastern Amazon clothes or stripped down to their under- rels filled with recovered oil had been clothes near the mouth of the Cuninico River, traditionally her community’s source of water for drinking, cooking, washing and bathing.

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areas and to pumping produced wastewa- stalled especially in places where infra- ter back underground, into either aban- Under Peru’s prior structure such as oil pipelines, drilling doned wells or new wells drilled for rein- platforms or roads is located on commu- jection. It also agreed to provide funding consultation law, which nity lands, according to Wendy Pineda, for a government-run health program for took effect in 2011, who heads AIDESEP’s geographic infor- the indigenous communities. mation systems team. The reinjection program was complet- indigenous communities Designation of several new reserves ed, and the company claims on its web- must be consulted to protect semi-nomadic groups that still site that it has remediated “almost all” of shun contact with outsiders has also been the affected sites. However, a 2014 report about any development on hold, and both indigenous leaders and by the government’s environmental over- project or administrative environmental groups have protested sight office (Organismo de Evaluación y the expansion of the Camisea gas field— Fiscalización Ambiental, OEFA) identi- decision affecting their in the tropical lowlands of the southern fied more than 90 sites requiring cleanup. communal rights. Cusco region—into the Nahua-Kugapa- In January 2015, that office upheld fines kori-Nanti Reserve, which is inhabited of nearly US$10 million related to infrac- by both nomadic and recently settled tions in the Pacaya Samiria Reserve, US$30 million, not including a reme- groups. which the company had appealed. diation fund and development projects Most of the Peruvian Amazon is now for communities in the four watersheds. parceled into oil and gas concessions, A YEAR OF NEGOTIATIONS At a press conference in April, Environ- and the government had planned to auc- The lease on Block 1AB, now renum- ment Minister Manuel Pulgar-Vidal told tion at least a dozen of them this year, bered 192, expired in August 2015, but foreign journalists that under its con- but with low international oil prices when the auction was held by the Peru- tract, PlusPetrol is responsible for reme- making exploration less attractive to vian government, there were no bidders. diating all damage in the two blocks, companies, those plans are likely to be The government could simply extend and that the government remediation put on hold. In May, Hunt Oil informed Pluspetrol’s contract. Until recently, the fund would be used for “contingencies” the Native Federation of the Madre de indigenous federations in the cuatro or emergencies. Dios River and Tributaries (Federación cuencas had insisted that all damage At the time the agreement was signed, Nativa del Río Madre de Dios y Afluen- be remediated and that a consultation conflicts were continuing in parts of tes, FENAMAD) that it was suspend- should take place before a new round Block 1AB/192, where some communi- ing exploration in part of a block that Dead fish and oily twigs gathered by villagers in Cuninico after an oil spill in June 2014. of bidding opened on the lease. Under ties, afraid that Pluspetrol might pull overlaps the Amarakaeri Communal Peru’s prior consultation law, which took out without compensating them for Reserve, a protected area in southeast- stored, and where the boat oar had Occidental Petroleum and PetroPerú the Corrientes River inside Block 1AB effect in 2011, indigenous communities damages, were negotiating individual ern Peru jointly managed by indigenous stirred up the oil slick—before it flooded, began operating in the northern Peru- reached a settlement with Occidental in must be consulted about any develop- deals with the company. Some indig- communities and the Peruvian park ser- and said work would resume when the vian Amazon near the border with Ecua- September 2013, after nearly a decade of ment project or administrative decision enous leaders said the tactics were frag- vice. The company said it had not found river levels went down again. dor in the 1970s, in two leases—known as litigation in U.S. courts. The settlement, affecting their communal rights. menting the organizations—a common the gas it had expected and that it would Block 8 and Block 1AB—now operated by announced in Lima on March 5, 2015, a They changed their position, how- complaint in Amazonian regions where reevaluate its data before deciding on its LONG HISTORY OF CONFLICT Argentina-based Pluspetrol. During most year and a half after it was reached, pro- ever, after nearly a year of negotiations extractive industries operate—and next steps. In August, the government The Cuninico villagers’ experience of that time, the hot, salty, metals-laden hibits the parties from revealing details of with government officials on issues called for close monitoring of imple- extended Hunt’s exploration permit by with the oil spill resembles similar events water pumped out of the wells along with the agreement, but Achuar leaders said it ranging from territorial rights to health mentation of the March agreement. three years. in other parts of the Amazon. The high- the oil was dumped into the Corrientes, includes a development fund of an undis- to compensation for damages. Under Both territorial rights and prior con- When the damage from the past est-profile case is that of Ecuador, with Pastaza, Tigre and Marañón rivers or closed amount, to be managed by the five an agreement announced in March, the sultation are potential flashpoints, not 40 years will be cleaned up, however, its prolonged and contentious legal battle streams that flow into those rivers. Lakes communities and used for projects such government decided to go ahead with just there but in other parts of the Peru- remains an open question. Meanwhile over pollution from decades of poorly and soil were also polluted by oil spills, as as fish farms, health care and education. preparations for the auction in parallel vian Amazon where oil and gas conces- in Cuninico, when children break out in regulated oil operations in its northern was part of the Pacaya Samiria Reserve, a In 2006, after health exams found with a consultation, which is now under sions overlap indigenous communities. rashes, mothers worry that it is because Amazon region. A similar situation in wetland supposedly protected under the cadmium and lead in the blood of indig- way in the watersheds. More than 1,000 Amazonian indigenous they are bathing in polluted water. And Peru, although less widely publicized, Ramsar Treaty, where part of Block 8 is enous villagers, demonstrators occupied The 19-point action plan signed by communities in Peru still lack formal they worry about the future. A year after has caused rifts within communities and located. various Pluspetrol facilities, includ- indigenous leaders and government title, in an area totaling some 20 mil- an oil slick and a mass of dead fish sig- indigenous organizations between those Discontent over pollution in the ing the airstrip across from the town of representatives includes health studies, lion hectares, according to the Intereth- naled a break in the pipeline, they still who want jobs and those worried about region—known collectively as the cuatro Trompeteros, on the Corrientes River. measures to improve health care in the nic Association for Development of the have no buyers for their fish. pollution, and over how to handle thorny cuencas or “four watersheds”—has been Those protests ended with a pact known communities, and installation of tem- Peruvian Amazon (Asociación Interét- issues such as remediation of and com- building steadily over the past two as the Acta de Dorissa. Pluspetrol com- porary water treatment plants. Govern- nica de Desarrollo de la Selva Peruana, Barbara Fraser is a freelance journalist pensation for damages. decades. Five Achuar communities on mitted to remediation of contaminated ment officials put the total cost at about AIDESEP). Titling applications are based in Lima, Peru.

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In the Shadows of the Extractive Industry A Hard Road for Indigenous Women

BY NELLY LUNA AMANCIO

A TELLTALE DETAIL GAVE AWAY THE CHANGING way of life for the indigenous Machiguen- ga women living around Peru’s most important gas project in the Cuzco Amazons: they had stopped harvest- ing yuca. Why bother planting the tra- ditional tuber that was the mainstay of their daily diet if they could simply buy it at one of the dozens of little shops that had sprung up around the Camisea gas project installations? Indeed, why both- er with yuca when one could easily buy rice? “If yuca is needed, you just buy it,” Eulalia Andrés Incacuna, an indigenous woman from the Kirigueti community, told us in 2006, when we first went to the far-flung villages two years before the gas project actually began full op- erations. This change in food habits reflect- ed new forms of economic exchange accompanying the Peruvian gas project operated by the private company Plus- petrol. Nine years later, health clinics in the zone report a statistical increase in chronic cases of malnutrition and sexu- ally transmitted diseases such as HIV infection; alcohol consumption is also on the rise and often translates into domestic violence. In spite of the mil- lions of dollars in royalties paid to the Peruvian state, the quality of life of the indigenous population—and especially that of women and children—has not

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carbon concessions are located in titled cases of cancer and birth defects. Uncer- indigenous lands, generating social con- tainty and the lack of response to these flicts with the local population. In some health issues only increase their anxiety. regions affected by the contamination of years of oil extraction, such as Loreto, THE SILENT ADVANCE OF HIV indigenous women have organized and Communities that were once aban- brought their complaints and demands doned by the state and isolated from to United Nations officials. “They have urban areas have now become more asserted that the contamination affects involved in commercial exchange and women in particular because of the migration to the cities, particularly changes brought about by the qual- among the men. As a result, by 2005 the ity and availability of water, the effects Amazonian indigenous communities on cattle raising (the only source of were reported to experience the first cas- work for many women) and the nega- es of HIV infection. Although statistics tive effects on family health,” indicated are hard to come by, local sources indi- a 2013 report by the former UN Special cate that cases of HIV are on the rise. Rapporteur for the Rights of Indigenous In the communities bordering the Peoples, James Anaya. Camisea project, the first officially The social impacts of the extrac- reported case of HIV infection was in tive industries are complex, but seldom 2010. That year, the local health network studied. “The extractive industry modi- identified 11 cases in the native commu- fies gender relationships. They pay the nities located around the gas project. workers well, but women have very little Mario Tavera, adviser to the Vice Min- say in the use of this money,” Balbuena ister of Public Health of Peru, says that explains. Excluded from decision mak- the increase in HIV cannot be attributed ing, the indigenous woman becomes to the extractive industry alone. “There a passive subject of the impact of the are additional factors such as migration extractive industries and the resulting and economic exchange that ought to social change. be taken into account in environmental The extractive industries affect indig- impact studies of all these projects,” he enous women in many ways. “Water observed. pollution is one of the main concerns Carlos Torres Huarcaya, an epide- of the indigenous women. With the loss miologist in Camisea’s zone of influ- of quality of this resource, the ability to ence, explains that the HIV cases are guarantee her family’s health is greatly imported into the area by the men. “The diminished,” says anthropologist Óscar young indigenous men have begun to go Previous page: Leslie Searles makes a portrait of a woman preparing yuca, the traditional staple dish. Above: A woman gently washes her Espinosa, a professor at the Catholic to centers of nighttime entertainment newborn. University of Peru who recently inves- set up in other towns, attracted by the improved. Men no longer hunt nor fish nor currency, as revealed in extensive inter- increasing international demand for tigated the impact of oil exploration on great concentrations of employees and Observing the effect of the extractive dedicate themselves to agriculture. The views. We are referring to excessive beer hydrocarbons has stimulated new explo- two communities in the Amazon region workers since the beginning of the gas industries on indigenous women in the economy of the family is greatly altered. consumption. The fact that not all the rations and exploitation of gas and oil in of Bajo Marañón. exploitation.” Amazons, Peru’s Vice Minister of Inter- It goes from being a money-free econ- persons interviewed were willing to talk territories inhabited by approximately In his initial findings, Espinosa Distance and poor infrastructure of culturality, Patricia Balbuena, asserts omy to a highly monetized one with all about the subject made the tension vis- two million indigenous people, about has found several cases of stress and the health posts make the efficient and that “it is harder for women [than for the social impacts that one can imagine. ible and, paradoxically, underlined the half of them women. In these regions severe symptoms of anxiety in indig- timely diagnosis of HIV quite difficult. men] to adjust to the changing forms In her investigation, “Ideas about Prog- conscious secrecy surrounding this sub- of Peru, Colombia, Brazil and Ecuador, enous women. “We interviewed many The head of the indigenous program of of production that the extractive indus- ress in Indigenous Wage Workers: The ject,” she observes. there are at present 81 hydrocarbon indigenous women and observed that the People’s Defender (Defensoría del try has brought to the Amazon regions, Case of the Machiguengas and the Cami- fields under production and another many suffer from these problems. Pueblo), Daniel Sánchez, recognizes the and this ultimately influences gender sea Gas Project,” sociologist Cynthia del HYDROCARBONS, WOMEN AND potential 246 sites. Together, the area Indeed, several women have experi- weakness of the state: “The health sys- relations. The firms hire men who then Castillo warns that communal indig- TERRITORY encompasses 0.41 million square miles enced hair loss. There’s no adequate tem is not prepared to handle the cases acquire goods that displace women from enous life has been completely altered What happens in the Cuzco jungles or 15% of the entire Amazon region. treatment available for these women,” of HIV in the indigenous populations of their traditional routines,” observed the by alcohol use. “Tensions surround the is repeated with different nuances Peru has one of the greatest Amazon he says. Women leaders from the zone the Amazons. It ought to have a specific vice-minister, a lawyer with expertise in adoption of new practices and attitudes throughout the Amazon regions of areas with leases given to the extractive also associate oil industry contamina- strategy that would take into consider- gender, development and demography. with the introduction of a monetized South America. In the last fifteen years, industry; an estimated 80% of hydro- tion with an increase in the number of ation the use of interpreters, as well as a

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greater state presence.” Half of the diag- tal Impact Studies have to be modi- nosed cases are pregnant women who fied to incorporate more information find out they have HIV during routine about social impact. “When we talk prenatal checkups. Only four patients about monitoring extractive projects, have received antiretroviral drugs. we think about natural resources and the effects on the environment, but the ALCOHOLISM AND FAMILY social impact requires the same degree VIOLENCE of study as the environmental one. At Another social impact associated with present there are no anthropologists or the extractive industry is the increase in specialists working on these problems; alcohol consumption. In the communi- there is no analysis of gender issues. It’s ties near the Camisea project, beer has not enough just to say there is a certain replaced masato, the traditional drink number of women in each community made from fermented grains that is and to offer them workshops in cook- consumed by the indigenous peoples of ing and textiles,” the vice minister con- the Cuzco jungle. Crates of beer pile up cludes. in the port and in the small shops, and What’s to be done then? Environmen- improvised bodega-bars sell it through- tal impact studies should incorporate out the day. The local health authorities more research into social impact. “Moni- point out that although they have no toring of extractive projects focused on natural resources and pollution, but not on the social impact,” declares Espinosa. No local studies exist Studies about the extractive indus- tries’ impact on the lives of indigenous linking domestic violence women are very scarce. Del Castillo and alcohol in the stresses in her thesis that it is neces- sary to carry out “more in-depth study indigenous populations of to observe how spouses appraise the the Amazon, but most of ‘progress’ their husbands say they are experiencing. The view of the individual the women associate abuse who has not left the community, who has with alcohol consumption. stayed to take care of the home, who sup- ports her husband in his work tasks, who formal study of the illnesses associated does not have the same opportunities as with alcoholism, the consumption of her spouse, can be quite different from beer is evident on a daily basis. the ideals of life held by the Machiguen- No local studies exist linking domes- ga man.” tic violence and alcohol in the indig- Without these studies, the Peruvian enous populations of the Amazon, but state’s support of the affected communi- most of the women associate abuse with ties becomes deficient, above all because alcohol consumption. The Peruvian vice there is growing evidence that indigenous minister notes with concern the lack of women and their children are experienc- anthropological studies on the effects ing a more precarious situation than they of the extractive industry on indigenous had in their traditional system of life. women. “There is no real sense of the size of the impact, starting with the way Nelly Luna Amancio is a journal- that monetary economies disrupt tradi- ist specializing in the coverage of con- tional gender relations. The breakdown flicts, the environment and human in their traditional system will create rights. She is editor and founder of new patterns if these changes are not Ojo-Publico.com, a website dedicated to monitored, ”observes Balbuena. investigative journalism, data analysis What can be done, then? The vice and new digital narratives. Contact: minister believes that Environmen- [email protected] An indigenous woman prepares food.

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and ushered in what Este- setbacks in its Iraq misad- infrastructure. Despite its implications of social media Transforming U.S.-Latin American Relations vadordal, Giordano and venture and the economic economic slowdown, China and accelerating people-to- A REVIEW BY MICHAEL SHIFTER Ramos identify as a “third and financial crises, Latin remains a formidable eco- people connections. Indeed, wave of regionalism” start- America had a larger space nomic player in many of the the volume demonstrates that ing around 2003. In some to pursue a more indepen- region’s countries, and there the region has offered a great respects, the most recent dent political and economic is no sign that its strategy deal to the rest of the world. Routledge Handbook of Latin with most of Washington’s the associated costs. period has been paradoxical. course. This is particularly will become less aggressive Kathryn Sikkink argues America and the World, edited other approaches towards the Several chapters devote On the one hand, as Natalia true of/in South America, as or diminish in coming years. persuasively that much of the by Jorge Domínguez and Anna region. attention to what Covarrubias Saltalamacchia documents in Mexico and Central American The volume also contains work on human rights that Covarrubias (Routledge: Taylor Domínguez and Covarru- and Domínguez call, in their her chapter, regional group- remained profoundly con- solid chapters on Latin Amer- emerged in Latin America and Francis Group, 2014, 482 bias have assembled a superb introduction, “the ings have proliferated over nected to the United States. A ican relations with Europe has been of immense value pages) diverse and first-rate group second wave of regionalism the past decade—some, like confluence of factors account and another with Japan. Oth- and utility to the same cause of analysts and scholars to (that) took place in the late the Bolivarian Alliance for for the region’s opportunity to ers could have been included in other parts of the world. On December 17, 2014, illuminate in particular the 1980s and early 1990s.” They Latin America (ALBA), with exercise greater “autonomy,” on the region’s relations with And in another chapter on after U.S. President Barack processes that have rendered aptly characterize the 1990s a decidedly anti-U.S. cast, a construct that runs through India and South Korea, which human rights, Peruvian Obama and Cuban President Latin America’s relationship as the “liberal decade,” when and others, like the Union the volume and gets detailed were not discussed in this jurist Diego Garcia-Sayan Raúl Castro simultaneously with the rest of the world it appeared to many observ- for South American Nations treatment in theoretical chap- otherwise complete volume. maintains—somewhat at announced the decision to barely recognizable from the ers that, with the end of the (UNASUR) and the Commu- ters by Roberto Russell and Among the book’s many odds with prevailing assump- move towards normalizing 1980s. The volume is soundly Cold War and the move from nity of Latin American and Juan Gabriel Tokatlian and merits is an emphasis on the tions—that despite the bilateral relations—after conceived, conceptually authoritarian to democratic Caribbean Nations (CELAC), another by Arlene Tickner. complex interplay among relentless attacks against the more than half a century coherent and well-organized. rule, Latin America was following a tradition dat- No country exemplifies such a domestic political factors for inter-American system in of estrangement—there It begins with a fine War—in fact, the region’s converging on three funda- ing from Simon Bolívar that shift in its regional and global foreign policies and global recent years, the impact of was little backlash. Cubans overview chapter by Abra- global links were arguably mental notions: democratic expresses Latin American profile since 2003 (when Lula relations. Andrés Malamud’s rulings by the Inter-American cheered, and even in Miami’s ham Lowenthal and Han- stronger before that fierce politics, market economics, solidarity and independence. became president) as much chapter on presidential Court of Human Rights has, traditionally hardline Cuban nah Baron highlighting the ideological battle emerged— and productive coopera- On the other hand, however, as Brazil, a story well told in decision-making in Latin on balance, been positive and American community, criti- region’s transformations, fol- but there is little question tion with the United States. if one carefully examines pol- the chapter by Monica Hirst American foreign policy is quite considerable. cism was muted. A counter- lowed by sections focused on that globalization in recent The heightened promise icy positions, Latin America and Maria Regina Soares de particularly instructive. In Although history shows productive policy, linked to varied theoretical approaches, decades has accelerated such of multilateralism in the has arguably never been more Lima. During this period, another chapter, Russell and that Latin America’s global the Cold War and frozen in examinations of five Latin a process. In the latter part of hemisphere (which ultimately variegated and fragmented, moreover, the region (with Tokatlian argue that dur- engagement does not neces- time, had at last been adapted American countries’ foreign the 20th century, the United proved to be elusive) is amply as each government pursues few exceptions) sustained ing the Kirchner era foreign sarily march forward in linear to the 21st century. policies, the role of extra- States was the predominant documented. Chapters on the its separate national agenda. solid growth rates and man- policy was significantly fashion, there is reason to That development, which regional actors, the prog- external actor involved in the Organization of American This volume helps resolve aged to reduce poverty, even shaped—more so than in believe that the tendencies secured Obama’s legacy in ress—and limits—of integra- region. Vast asymmetries in States by Thomas Legler, the apparent contradiction inequality, and expand its other periods—by internal witnessed, particularly in Latin America and took tion and multilateral efforts, power defined a complicated trade and economic integra- between heightened region- middle class. domestic politics. All of the recent decades, towards the away virtually the only U.S. and thematic studies most and ambivalent relationship, tion by Antoni Estevadordal, alism and unprecedented To be sure, one of the most authors understand that to region’s deeper and more policy stand unifying the germane to Latin America’s often marked by both coop- Paolo Giordano and Barbara disunity. Several chapters, significant developments in explain foreign policies one varied relations with the rest entire region against it, came international relations. There eration and conflict. Such Ramos, and North America especially one by Arturo Latin America of the past has to examine the dynamics of the world, will continue. too late to be included in is a lot to track and digest. power differentials naturally by Robert Pastor (to whom Santa-Cruz, emphasize decade has been the greater of national politics. This is even so for the United this excellent and impres- Although some overlap and gave rise both to a paternal- the volume is dedicated) the importance of Latin presence and deeper engage- As a measure of the States which for all the talk sively wide-ranging volume unevenness in quality are istic attitude in the United provide an analysis of this America’s identity, reflected ment of extra-hemispheric volume’s scope, the analysis of its declining influence, co-edited by Jorge Domín- inevitable—the sheer scope of States and to suspicions and phase. Today there is a in a long history of shared actors, most particularly goes beyond governmental remains a key player in Latin guez of Harvard University the material covered results resentments against the greater measure of realism on history and culture. In this China on the economic front. relations and encompasses America. Mark Williams and Anna Covarrubias of El in some unwieldiness—the United States in many parts these questions. Expectations sense, markedly divergent China’s major economic role globalization processes offers useful ideas how it Colegio de Mexico. The book chapters are generally of very of Latin America. For Wash- have been considerably scaled national strategies on a range in the region is, not surpris- originating in the region, can take better advantage systematically reviews the high caliber. Each makes a ington during that period, back. of issues—from trade to basic ingly, mentioned in virtually including civil society groups of opportunities to become dramatic changes that have distinct and valuable con- anti-communism trumped New global forces and notions of governance—are every chapter in the volume. and movements and expand- more productively involved. taken place since the Cold tribution to interpreting an all other interests. The Cold pressures—coupled with Al fully compatible with a In a separate chapter, Mar- ing numbers of multilatinas, As Nicola Philips reminds us War to the present, not only enormously complex and con- War years left a lot of baggage Qaeda attacks on New York desire to join together at the garet Myers offers a compre- Latin American businesses in her compelling chapter, the in inter-American affairs but stantly evolving landscape. that, as a number of the chap- and Washington, D.C., on regional level, to project and hensive analysis of China’s that operate worldwide. In volume comes out precisely at especially in Latin America’s The chapters make clear that ters argue, manifests itself to September 11, 2001—helped assert greater confidence on evolving engagement in Latin light of the dynamic quality a moment when fundamental global relations. Until now, Latin America’s engagement this day. There are signs that turn the page on that brief the global stage. America, chiefly through of global interactions today, power shifts are taking place U.S.-Cuba policy had been an with the world did not begin the shift in U.S.-Cuba policy interregnum of unity and In the 2000s, with the trade, but also financing and, the book might have even throughout the world and outlier, notably out of sync with the end of the Cold has begun to mitigate some of hemispheric cooperation United States suffering increasingly, investments in gone a bit deeper, probing the there is tremendous flux and

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uncertainty. impact of an array of ques- lenges—another eloquent of Latin American politics ior, by the sacrifices made, tional consensus supportive of these families, often unable Ops. We met before dawn Prominent Latin Ameri- tions, including helping to reminder of the region’s rich at Georgetown University’s the plans developed, the their rights to protection.” to have children of their own, at ICE’s headquarters near cans have long had key global broker the U.S.-Cuba rap- contributions to the world. School of Foreign Service. migrations embarked upon Because of wide media are “saving” children who downtown Phoenix where leadership roles, but perhaps prochement. Although the With Jorge Domínguez, to secure reunification when attention, the public is famil- might otherwise grow up in I watched as burly, heav- no one more so than Jorge Church gets scant attention Michael Shifter is presi- Shifter has co-edited three family unity has been inter- iar with some facets of child orphanages lacking opportu- ily armed members of the Mario Bergoglio, archbishop in this volume, few doubt that dent of the Inter-American editions (2003, 2008, and rupted,” Bhabha writes. immigrationsuch as the flow nities afforded them in their team finalized their list of of Buenos Aires, who became Pope Francis will continue Dialogue, a policy forum on 2013) of Constructing Demo- The basic right to family of unaccompanied minors new environments. “targets” —immigrants who Pope Francis in 2013. The to bring his peculiarly Latin Western Hemisphere affairs cratic Governance in Latin life is a “crucial bedrock of from Latin America to the But why then are children had been ordered to leave first Latin American pontiff American perspective and based in Washington D.C. America, published by Johns a just migration policy,” she United States and from Africa who are fleeing often horren- the United States but had has already had an enormous sensibilities to global chal- He is also adjunct professor Hopkins University Press. later adds. and the Middle East to the dous conditions on their own, remained after their depor- Even so, through various European Union. who in effect are attempting tation dates had passed and examples, Bhabha shows As Bhabha’s book points to “save themselves” or to were therefore now consid- how family reunification for out, the children are not flee- reunite with family members ered immigration fugitives. deserving migrant children ing for a single reason, but already abroad, often not All of the targets were what is often delayed or denied often for multiple reasons at viewed in the same favor- one ICE supervisor had altogether by legal obstacles the same time. Some are trav- able way? These children, as referred to as “low-hanging and flawed policies. eling to join families that have Bhabha notes, are impeded by fruit”— fugitives lacking Human Rights, Human Woes A second part looks at the already migrated. Some are conflicting legal and bureau- criminal records living and A REVIEW BY DANIEL GONZALEZ hidden phenomenon of child fleeing war, civil unrest, natu- cratic hurdles intended on working relatively openly trafficking, in which children ral disaster and persecution. one hand to protect the rights in the United States despite are transported, often by Others are in search of work, of children and on the other their removal orders under smugglers, for the purposes of education, opportunity and to protect national sover- the mistaken notion that no Child Migration & Human Rights top of the levee, a plume of Bhabha’s sweeping new book, exploitation, either for their sometimes adventure. Still eignty. one would come looking for in a Global Age by Jacqueline white dust trailing behind. A Child Migration & Human physical labor or for work in others are being trafficked or And if the solution to them. After agents knocked Bhabha (Princeton University Border Patrol agent told them Rights in a Global Age. the sex trade. smuggled, when, as Bhabha the rising phenomenon of on the door of one house, I Press, 2014) to climb inside and the truck Bhabha, the Professor In this section, Bhabha notes, they are at great risk of unaccompanied children is watched from the curb as a sped off. of Practice on Health and argues that the common exploitation, and abuse. to improve the conditions in teenage girl, a U.S. citizen The two boys walked It was mid-June in 2014, Human Rights at the Harvard characterization of traffick- Bhabha’s book goes beyond their home countries, so there left behind with a legal resi- up the road to the top of a the peak of the so-called School of Public Health and a ing as a form of modern-day some of these more obvious is less reason to migrate, why dent aunt, stood outside in levee and then sat down in “surge” of child migrants lawyer, is one of the foremost slavery, which is how I have forms of child migration and then is not the same standard the doorway tearfully calling the gravel and weeds. In the fleeing Central America and experts on transnational child often heard it presented, is is most provocative when applied when it comes to out, “Mommy, Mommy” as near distance overhead, the then crossing the border migration, refugee protec- inaccurate. It ignores the fact delving into myriad human international adoptions? The agents took her mother and Anzalduas Bridge spanned from Mexico into the United tion, and children’s rights and that it is the migrant children rights issues associated with author argues they should father away. the Rio Grande, connecting States along the Rio Grande citizenship. themselves who seek out a international adoptions. It be viewed as a last resort, so Afterwards, back at ICE’s Mission, Texas and Reynosa, Valley in south Texas. Never Spanning multiple con- relationship with their traf- had never dawned on me to that children have more of a headquarters, the supervis- Mexico. before had I witnessed such tinents, her superb book is a fickers believing they both think of international adop- chance of growing up with ing Fug-Ops agent asked me The boys, no more than 13, an astonishing scene, taking comprehensive examination will benefit through an offer tions as a form of child migra- their own families in their what I had thought of that turned out to be from Hondu- place the last day of my week- The “permisos” of course, of child migration across the of work only to end up being tion, but of course they are, own countries. The implica- morning’s raids. I found the ras. Earlier that Saturday, in long trip to the U.S.-Mexico turned out to be a lie, market- globe and the accompanying exploited because of their since so often they involves tion, of course, is that interna- work heartbreaking and told the pre-dawn dark, they had border to cover the surge for ed by enterprising smuggling human rights implications. vulnerability. the movement of children tional adoptions, rather than him the arrests seemed to crossed the muddy greenish The Arizona Republic. Instead organizations to exploit the Divided into three parts, “Understanding and from dysfunctional develop- being philanthropic, provide confirm critics’ accusations waters on a raft piloted by of trying to evade the Border growing desperation of chil- the book first explores the engaging with this “voluntary” ing countries to nations in a convenient alternative for that the newly energized smugglers, who deposited Patrol, as unauthorized dren and juveniles eager to movement of children who element in trafficking rela- the developed world, usually childless families in developed policy of aggressively pursu- them on the banks of the migrants have done in the flee the grinding poverty and cross borders attempting to tionships affecting children is to families with means in the nations. ing undocumented parents United States and told them past, these children—traveling vicious gang violence gripping reunite with parents who crucial to developing lasting West. This sort of ambivalence of U.S. citizen children was to keep walking until they alone, or with mothers and many areas of Honduras, El migrated earlier in search of solutions,” Bhabha argues. The book contrasts the dif- is a common theme through- breaking up families. The encountered a truck painted other family members—were Salvador and Guatemala. work to support their families The third part of Bhabha’s fering public attitudes toward out the book, and reminded ICE supervisor, acknowl- white with and green stripes, actually turning themselves The flow of Central Ameri- or parents who had fled war book explores how children international adoptions and me of the day several years edged that the raids were the markings of the U.S. Bor- in to the Border Patrol in a can children and juveniles and other calamities. fleeing persecution and seek- children fleeing to other coun- ago when I accompanied indeed heartbreaking. But der Patrol. desperate hope that by doing to the United States is just “The basic human intu- ing asylum in other countries tries on their own. Interna- members of the Immigra- he quickly dismissed the Within minutes, a Border so they would be given “per- one element of the growing ition that family life is crucial increasingly “encounter hos- tional adoptions tend to be tion and Customs Enforce- criticism that the raids were Patrol vehicle came zoom- misos” to stay in the United phenomenon of child migra- for the well-being of children tility and a climate of suspi- viewed in a favorable light, ment’s newly formed Fugitive tearing apart families. The ing in from the distance on States permanently. tion explored in Jacqueline is confirmed by human behav- cion despite a broad interna- since the public perceives that Operation teams, or Fug- deported parents, he argued,

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were free to leave with their television became regulars Rivera y los Cachimos. But ultimately controls politics, U.S. citizen children instead Musical Creation and Hardship in variety shows conquering things were not the same. Puerto Ricans give great sig- of leaving them behind with A REVIEW BY PEDRO REINA-PÉREZ the public with their unique Although they played for nificance to the realm of daily legal family members or sound. Crowds adored their eight years and recorded routines and culture as it is friends. original and defiant approach some of his most memorable the only allowed possibility Since then, more than to plena and son. No other songs (written by Tite Curet for imagining a nation.” 100,000 undocumented The People’s Poet: Life and changes that would come to two popular genres in which group had achieved so much Alonso), his life was irrepara- parents of U.S. citizens have Myth of Ismael Rivera, an Afro define “modern” Puerto Rico, dancers and drummers con- fame in an island with such bly broken. Pedro Reina Pérez, a histo- been deported, according to Caribbean Icon by Rosa Elena and their music became the stantly improvise. This was pervasive racism. They tested Carrasquillo’s book rian, journalist and blogger, some estimates, and indeed Carrasquillo (Pompano Beach: sound of an era. the foundation upon which established prejudice and approached Maelo’s biog- was the 2013-14 DRCLAS many of them have taken Caribbean Studies Press, 2014, In The People’s Poet: Life he built his artistic career. found extraordinary support raphy not simply as that of Wilbur Marvin Visiting their children with them 246 pages) and Myth of Ismael Rivera, Maelo’s mother Mar- in the general public. But an artist fallen from grace Scholar. He is a professor of rather than live apart In an Afro Caribbean Icon, Rosa garita initiated him in music. when Ismael was arrested by his fame and fortune Humanities and Cultural her book, Bhabha makes a The day Rafael Cortijo’s Elena Carrasquillo traces Through interviews and and charged for drug posses- but that of a creator whose Agency and Administration compelling argument that remains were put to rest the life of Maelo, offering a archival research, Carras- sion as the band was return- work brought down barriers at the University of Puerto thousands of U.S. citizen in Puerto Rico in 1982, his nuanced interpretation of his quillo takes a close look at ing from playing in Panama, in terms of social class and Rico. Among his books and children have been subjected admirers came out in full rise and fall as lead singer this family, revealing how door. Cortijo y su Combo, he and the band quickly fell race. In her words, “Ismael edited volumes are Compa- to “defacto” deportations as force to honor their tropical for the ensemble Cortijo y intimate influences played a however, challenged conven- from grace, experiencing a illustrated a type of hero of ñeras la Voz Levantemos a result of the government’s music hero one last time. But su Combo as a metaphor crucial role in his sensibility. tion as they clearly defined devastating blow to their postcolonial times in which (2015), Poeta del Paisaje removal of their undocu- one man caught everyone’s of post-colonialism in the In 1954, Maelo and themselves as mulatos and popularity. Maelo served a heroism abandons patriotic (2014) and La Semilla mented parents. attention as he walked in Caribbean, and Puerto Rico Cortijo soon joined forces in were in very high demand. four-year sentence. martyrdom for daily survival. Que Sembramos (2003). Bhabha’s book is provoca- front holding the coffin over in particular. She follows Conjunto Monterrey where They began playing in hotels, After being released, he Particularly on an island More of his work at tive on many levels, point- his head with both hands. To his evolution from child- Cortijo played bongos and and with the advent of formed a new band, Ismael where the U.S. Congress www.pedroreinaperez.com ing out that while migrant all the people who lined the hood in Santurce (Musical Rivera, congas. Maelo gained children are afforded certain streets, Ismael Rivera’s grief Cradle 1931-1954); his rise to a reputation as a clever lead human rights protections was evident, in this last trib- stardom (The Golden Years singer with much creativ- under a growing body of ute to the man with whom 1954-1962); troubles with ity in improvisation. After a international law, these he had shared the stage and the law (Imprisoned 1962- short stint in the U.S. Army, rights are frequently ren- a long history of musical 1966); incursion into the he returned home to become dered ineffective by the push creation and hardship. emerging salsa scene (Salsa the lead singer for Orquesta Frequently asked •$100 supports four subscriptions to copies of ReVista for their portfolio, as to deport migrant children at Few artists have captured Heights 1966-1979); and Panamericana and shortly Latin America well as publication of website and e-mail the country level. the public’s imagination final curtain call (Desolation after rejoined Cortijo in his questions about ReVista •$300 supports twelve subscriptions to information. We prefer digital photos, like singer Ismael Rivera, 1979-1986). Santurce is a new Combo and went on How can I subscribe to Latin America 300 dpi. Queries to Daniel Gonzalez, a senior “Maelo,” a veritable legend of storied neighborhood where to reach stardom traveling All subscriptions are tax-deductible . reporter at The Arizona urban Puerto Rican music. runaway slaves took refuge in with the band to New York, ReVista? to the extent permitted by law. Republic, writes about immi- His was a life of extremes, the 17th century and infused Europe and South America. You may subscribe on-line at or by sending an e-mail patron donation to benefit a particular ReVista. What’s the process? border and Latino affairs. literally and metaphori- with strong musical practic- was happening, Puerto to . ReVista is country or city. Send checks made pay- He was co-lead reporter for cally whose dramatic arch es. By the 20th century, San- Rico underwent a dra- free, but we ask that you donate, if pos- able to Harvard University to the atten- ReVista, the Harvard Review of Latin The Republic’s 2014 “Pipe- extended well beyond his turce had become San Juan’s matic transformation led by sible, to cover increasing mailing costs. tion of June Carolyn Erlick, DRCLAS, America, is published three times a line of Children” series about lifetime. Tenacity, creativity first suburb, a very dynamic industrialization and by the 1730 Cambridge St., Room 206, Cam- year, and each issue focuses on a differ- the surge of unaccompanied and audacity were three of neighborhood with cultural development of tourism as a How much does it cost? bridge, MA 02138. You may also donate ent theme. We welcome queries from children and families fleeing the traits that distinguished diversity and richness. Life magnet for economic growth. on-line. students, professors (Harvard and non- Central America, which was him from his peers. Today he in Villa Palmeras, the modest Beachfront hotels with casi- ReVista is free to anyone in the world Harvard) and community members, but awarded the 2015 Hillman is still revered as troubadour section where Maelo grew nos were built, and the island who wishes it. However, we welcome I’m a photographer and would most article assignments are made by Prize for Newspaper Journal- genius for his resource- up and spent the better part was promoted as a tourist donations and patrons. Please consider like to contribute to ReVista. invitation. Harvard faculty and students ism. He also received this ful intonation and for his of life, was infused with destination in the U.S. mar- a subscription donation to support your What should I do? may submit suggestions for the “Build- year’s Ancil Payne Award for unique talent for improvisa- musical rhythms rooted in ket with great success. Yet, subscription and others, particularly ing Bridges” section. Interested book Ethics in Journalism. He is tion. With Rafael Cortijo, African traditions like bomba for all the talk of moderniza- library and university subscriptions. Since ReVista is a thematic publi- reviewers (non-Harvard welcome!) are a two-time Virg Hill Arizona his compadre and musical and plena. Maelo learned tion, people of color were not • $15 suggested student donation cation, we are often looking for very also welcome to express their interest. Journalist of the Year. He has sidekick, he burst into the how to build barriles and allowed in ballrooms and • $25 suggested regular donation specific images. However, we also want We prefer books written or edited by a journalism degree from The San Juan scene at a time of panderos, the two percussion most hotels. Musicians had • $50 supports two subscriptions to to build our archives. Photographers are Harvard-related authors. Queries to University of Iowa. many cultural and economic instruments used in these to enter through the service Latin America not paid, but are given complementary .

82 ReVista FALL 2015 REVISTA.DRCLAS.HARVARD.EDU ReVista 83 BUILDING BRIDGES

catalogues, and renewed on paper made of recycled DAVID ROCKEFELLER CENTER FOR LATIN AMERICAN STUDIES Building Bridges with connections that should serve fibers, and annotated: “Para Harvard Library’s users well. hacer el papel de este libro Cuban Libraries Of course, researchers no se dañó la naturaleza. Se BY LYNN M. SHIREY of Cuba require collections utilizó papel reciclado blanco VISITING SCHOLARS AND of non-academic materials incorporándole fibras de as well. Several large U.S. tabaco. ” (“This book’s paper research libraries, including was made without damag- FELLOWS PROGRAM Since the beginning of the ener), I took advantage of a Harvard’s, collect posters, ing nature. It uses recycled U.S. trade embargo on Cuba recent trip to Cuba to renew printed ephemera, postcards, white paper that incorporates in the 1960s, the Harvard ties and agreements for aca- photographs and film. Artists’ tobacco fiber.”) Libraries have been unable to demic resource-sharing with books are particularly inter- We will continue to rely THE CENTER purchase materials directly administrators and librarians esting: Ediciones La Vigía of on a mixture of personally Founded in 1994, the David Rockefeller from Cuban institutions, pub- at Cuba’s leading research Matanzas has a long history coordinated exchanges and Center for Latin American Studies at Harvard lishers or booksellers. We rely institutions. of fabricating works-of-art- out-of- country vendors to University works to increase knowledge of the chiefly on vendors from third- The Cuban government including-text (or vice versa) obtain Cuban materials until cultures, economies, histories, environment, party countries—for example subsidizes the great majority using artisanal and low-cost a true economic opening and contemporary affairs of past and present Uruguay, Canada and Spain— of academic publications on techniques such as mimeo- between the two countries is Latin America. who make regular purchas- the island. That means that graph and Xerox, as well as achieved. Complete freedom ing trips for U.S. libraries. In many of those materials are staples, brown paper and to purchase and exchange THE PROGRAM recent years, several small not available commercially: found objects. Their recent library materials through Each year the Center selects a number of U.S.-based vendors have been thus personal contacts among publication Pescador de eneros direct commercial entities distinguished academics (Visiting Scholars) and able to do so as well. institutional staff remain (2015), by Rey Montalvo, is would most likely involve the professionals (Fellows) who wish to spend one We encourage Harvard stu- paramount. The Biblio- printed on brown craft paper lifting of the U.S. embargo, or two semesters at Harvard working on their dents on semester-long Study teca Nacional de Cuba José and hand-bound in cardboard which must be authorized by own research and writing projects. Abroad trips (Harvard has Martí and the libraries of the that has a white string netting the U.S. Congress. The Center offers nine fellowships that pro- sent students to Cuba on an Universidad de La Habana and pieces of blue colored In the meantime, I have vide support for one semester. Applications exchange with the University and the Casa de Las Américas fabric affixed to it. The cover, begun conversations with from those with their own resources of Havana since Spring 2007) (research institute) all publish which is made to look like a publishers and potential ven- are also welcome. to bring back books, posters essential materials on Cuban variation of the Cuban flag, dors in Cuba in preparation and other materials to donate history, politics, economics, also displays the image of a for such a change. Scholarly Visiting Scholars and Fellows are provided to the university libraries. Fac- culture and education that guitar and the black silhouette journals are beginning to be shared office space, computers, library ulty members who travel to are only available through of a man playing the guitar. published and accessible privileges, access to University facilities and the island and visiting Cuban exchange or as gifts (Cuban The Casa Editora Cuadernos online (Revista de la Biblio- events, and opportunities to audit classes and researchers often collaborate institutions are very gener- Papiro (Holguín) also publish- teca Nacional de Cuba José attend seminars. The residential fellowships as well. ous)! I met with representa- es artists’ books like Orishas Martí; Temas), but print cover round-trip travel expenses, health As the librarian for Latin tives of all three institutions en Cuba, a portfolio contain- monographs continue to be insurance, and a taxable $25,000 living stipend America, Spain and Portugal and returned with a suitcase ing six booklets with legends elusive, fragile and time- while at Harvard. Appointments are typically at the Harvard Library (Wid- full of books, publication of Afro-Cuban deities, printed consuming to obtain. Our for one or two semesters. Recipients are expected to be in residence at the University a goal is to make the best Cuban minimum of twelve weeks during the semester. research available to our users in a timely fashion—for this ST we need open economic rela- APPLICATIONS DUE FEBRUARY 1 tions and a developed book THE APPLICATION DAVID ROCKEFELLER trade. Cooperation with our CENTER FOR LATIN Cuban colleagues remains Applications should be submitted electronically to [email protected] AMERICAN STUDIES crucial during this time of or via the online application form. For the form and further details please visit change. http://www.drclas.harvard.edu/scholars . 1730 Cambridge Street CGIS, South Building Lynn M. Shirey is the Librar- David Rockefeller Center for Latin American Studies Cambridge, MA 02138 ian for Latin America, Spain Phone: 617-496-1588 and Portugal at the Harvard [email protected] Library (Widener). HARVARD UNIVERSITY

84 ReVista FALL 2015 NON-PROFIT ORG U.S. POSTAGE PAID BOSTON, MA PERMIT NO. 1636 1730 Cambridge St., Cambridge, MA 02138

CONTRIBUTORS

40 Claudio A. Agostini is a professor at the School of Government, pre-doctoral research fellow at Boston University’s Global Economic

Universidad Adolfo Ibáñez, Santiago, Chile. 52 Mariana Barrera, an Governance Initiative. 8 Simon Romero is the Brazil bureau chief

Argentine economist, received a Master’s in Urban Planning from for The New York Times. 36 Carlos Rufín is Associate Professor of

Harvard University in 2014. 62 Juan Luis Dammert B. is a Ph.D. International Business at the Suffolk University’s Sawyer Business

Candidate in the Graduate School of Geography, Clark University. School. 38 Mauricio Salles, a Visiting Scholar at Harvard, is Assistant

24 Ramón Espinasa is the lead oil and gas specialist at the Inter- Professor at the Polytechnic School of the University of São Paulo.

American Development Bank. 66 Barbara Fraser is a freelance 16 Myrna Santiago is professor of history at Saint Mary’s College journalist in Lima, Peru. 80 Daniel Gonzalez is a senior reporter at of California. 78 Michael Shifter is president of the Inter-American

The Arizona Republic. 42 Jacques E. C. Hymans is associate professor Dialogue. 84 Lynn M. Shirey is the Librarian for Latin America, Spain of international relations at the University of Southern California. and Portugal at the Harvard Library (Widener). 40 Carlos Silva is a

50 Kody Jackson is a graduate student in History at the University professor at the School of Engineering and Sciences, Universidad of Texas in Austin. 70 Nelly Luna Amancio is a Peruvian journalist Adolfo Ibáñez. 24 Carlos G. Sucre is a consultant at the Inter- specializing in the coverage of conflicts.56 Theodore Macdonald is a American Development Bank. 46 Miguel Tinker Salas is Professor of

Lecturer in Social Studies and a Faculty Affiliate at DRCLAS, Harvard Latin American History at Pomona College in Claremont, California.

University. 32 Eleodoro Mayorga Alba, is the former Peruvian Minister 13 Lisa Viscidi is director of the Energy, Climate Change and Extractive of Energy and Mines. 2 Francisco Monaldi is Baker Institute Fellow Industries Program at the Inter-American Dialogue. in Latin American Energy at Rice University. 40 Shahriyar Nasirov is a professor at the School of Engineering and Sciences, Universidad FEATURED ARTISTS: MARCELA MAGNO, and RONALD MORÁN

Adolfo Ibáñez. 28 Luisa Palacios is the head of Latin America macro FEATURED PHOTOGRAPHERS: LESLIE SEARLES, MEREDITH KOHUT, and energy research at Medley Global Advisers in New York. 38 Ana JOSÉ GABRIEL MARTÍNEZ FONSECA, NELSON GARRIDO, ADEMIR

Maria Peres is a Brazilian journalist. 82 Pedro Reina Pérez was the ESPIRITU, ALBERTO LEVY, DAVID HUAMANI BEDOYA, DOUGLAS

2013-14 DRCLAS Wilbur Marvin Visiting Scholar. 20 Rebecca Ray is a JUARES, RENZO NUÑES and RICARDO STUCKERT.