ANÁLISIS QUINCENAL: Transparency and Extractives Update from Latin America
By Carlos Monge, RWI Latin America Regional Coordinator
With Claudia Viale and León Portocarrero
January 5th – 19th, 2009 |
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Bolivia seeks to diversify markets for its natural gas.
Until the end of 2008, Bolivia exported 31 million cubic feet (MCF) of natural gas per day to Brazil, but beginning in late December through the early days of January 2009, Petrobras reduced its demand by more than 30%, to around 20 MCF a day. This alarming change opened a debate on the need to reduce Bolivia's dependency on Brazil as a gas export customer.
Petrobras gave a variety of reasons for its reduction in demand. They pointed out that high levels of rainfall through the current season had made the use of hydroelectric plants easier, replacing thermoelectric plants for power generation. Therefore, the reduction would be temporary, lasting only until about April. Another reason mentioned was the improvement in the affordability of oil derivatives due to the international crisis and the collapse in oil prices. This latter reason could imply a more prolonged reduction in demand, depending on the behavior of international prices and the length of the crisis.
The impact of these shifts was so stunning that in early January the Bolivian company YPFB announced that it feared an impending crisis, since Bolivia had also experienced a fall in exports to Argentina. Discussions about alternative natural gas markets began soon after.
The Minister of Planning and Development Carlos Villegas announced that beginning January 12th, the volume of natural gas exported to Argentina would increase from 2,6 to 7 MCF a day, allocating to that market the gas that Petrobras had ceased to import. The fall in Brazilian demand thus would help meet the demand from Argentina that had previously been difficult to fulfill.
It is also highly likely that Bolivia will seek diversifies export markets within Brazil itself. Indeed, on January 14th and 15th, negotiations took place between the Bolivian Government and the Brazilian company Transborder Service Gas (TBS) regarding natural gas exports to the Cuiabá thermoelectric plant. Initial announcements stated that 2,2 MCF would be exported daily, but final prices and volumes were not yet set.
It was also announced that the Government was considering exporting natural gas to Chile, an issue that is part of a 13-point agenda being negotiated by authorities from both countries. It must be noted that in a referendum held in 2004 by then-president Carlos Mesa, the population declared firm opposition to gas exports to Chile. But with the fall in demand from Petrobras, this option is being considered again. If both countries actually reach an agreement around this issue, it would be a historic turning point in diplomatic and trade relations between Bolivia and Chile, which have been long overshadowed Bolivia's demand to reclaim a route to the ocean, lost in its defeat in the War of the Pacific in 1879.
Finally, another alternative that is being considered is the export of natural gas to Uruguay and Paraguay, since the Ministry of Hydrocarbons has recently signed an energy agreement with officials from both countries.
Summarizing the situation, Minister Villegas said that: "all the volume [of natural gas] is now accounted for". Bolivia produces 42 MCF daily, of which 5,8 are consumed in the domestic market, 24 are exported to Brazil, 7 to Argentina, 2,2 would be exported to Cuiabá and 3 MCF per day would be used as fuel to transport these shipments.
But there is reason to temper the optimism about these approaches, in light of recent announcements of an increase in total Bolivian gas production, which would generate a surplus of 8,5 MCF per day, and due to the ongoing international crisis which could continue to impact the country’s demand. The search for concrete agreements with new markets must be ongoing.
The Government of Ecuador announces plans to put the ITT oil field up for bidding
In July 2007, Ecuador's Government announced an initiative preventing the extraction of oil from the Ishipongo Tambococha Tiputini (ITT) Amazon field, located in the center of the Yasuní natural reserve. This environmental proposal was based on an attempt to sell certificates worth US$350 million a year, which would guarantee the international community that the oil from this field would remain in the ground.
However, due to the lack of concrete progress of this mechanism, state officials announced on January 9 that Petroecuador's Board had began to prepare the bidding process for this oil field. Minister of Mines and Oil Derliz Palacios stated that: "The agreement was to wait until January for a response (to the environmental alternative); but since it does not exist, the next Board Meeting of Petroecuador is being set up to define the road to follow for the bidding of ITT."
In response to the new situation, Roque Sevilla of the Administrative and Directive Council that promotes the conservation of Yasuní said the State should more clearly define its position on whether or not to exploit ITT. Sevilla said that the Council had obtained positive responses from European governments, but more time needed to get concrete results.
Sevilla also mentioned a forthcoming proposal to the Government based on the issuance of carbon certificates for 410 million metric tons of CO2, which could generate US$ 11,600 million in the next 10 years, a figure that would exceed the benefits of 30 years of oil exploitation. The director of the South America program of the International Union for Conservation of Nature (IUCN) Robert Hofstede affirmed that the carbon certificate proposal is innovative and could be included within discussions in Copenhagen, where a new protocol would be signed.
Hofstede further clarified that the Government had established an extra six month deadline and that the Yasuní initiative had already obtained US$ 10 million in funding. In his opinion, what is lacking from the proposal to leave the oil in the ground is: "to design a type of certificate that meets all the requirements and is validated by an independent certifier, a guarantee that these papers can be sold in the international market, a task that takes more time."
It is, therefore, a crucial moment for an initiative that at the outset seemed to herald a new alternative development strategy to Ecuador's chronic dependence on oil rent. The progress of Yasuní is being followed closely in several parts of the world.
The wave of layoffs in the extractive sector intensifies across Latin America
In the last two months of 2008—after a serious fall in the price of metals—massive layoffs were recorded in the Latin American mining sector. The trend worsened in the first weeks of 2009, sparking conflicts with workers and unions, who feel that the cuts exceed the losses in companies' profits.
In Peru, Mining Federation President Luis Castillo announced on January 8th that to that date, 5,561 workers had been fired in the sector; the Ministry of Labor recognized 4,000 firings. These layoffs have taken place even at large-scale mining companies that continue to earn high profits. For example, Doe Run Peru, whose profits grew by 9,3% in 2008, fired 457 workers. The most alarming case is at the Yanacocha mine, where 800 workers were fired, even though profits increased by 35% in 2008. Furthermore, Yanacocha is a gold producer, so it has not faced the same drop in prices.
According to experts on mining issues from several civil society organizations, the surge in layoffs was facilitated by widespread reliance on independent contractors and limited unionization in the sector. Indeed, 80,000 out of the 100,000 workers in the mining sector are hired on contract, which makes them more vulnerable to layoffs and pays them lower salaries than those on company payroll. Also, only 30% of these workers belong to a union.
In Bolivia, the total number of mining layoffs has not been published yet, but it was reported that at the Sinchi Wayra company alone—which operates in Oruro—1,270 workers were fired between December and the first weeks of January. In response, the workers of this company marched to La Paz on January 13th to protest the layoffs and the lack of attention from the mining company representatives, who did not attend a meeting called by workers and the Ministry of Mining. The sector-wide layoffs had already prompted a 24-hour strike in all mining centers on January 9th.
On January 13th, Chile's Minster of Mining said falling prices and several mining shutdowns had generated 10,000 newly unemployed workers. Small-scale mining was the most battered; since current prices are below their production costs and 398 sites—20% of the total—had to close, leaving almost 9,000 thousand workers jobless. Within large-scale mining, BHP Billiton announced that it would fire 2,000 workers, Teck Cominco, 475 and the Luksic group, 122 more.
In Argentina and Brazil, layoffs have been concentrated in the steel companies. Indeed, the Argentinean Company Siderar, which belongs to the Techint group, decided to postpone the construction of a blast furnace for its operations and fired one thousand metal and construction workers. Meanwhile, the Brazil's National Steel Company (CSN) fired 300 full-time workers and 100 part time workers in December, and 200 more in January due to cutbacks in production.
The situation for extractive sector laborers is different in each country and thus the impact of the current crisis the most effective responses should be tailored accordingly. The challenges of Perus contract hiring system and the prevalence of small mines in Chile pose very different challenges. But in all cases, workers are demanding that they not be the first victims of the international and sector-wide crisis.
Sources: El Mercurio, Jornal do Brasil, Yasuní Depends on You, Business News Americas, Elcomercio.com, eldeber.com.bo, La Razón, La Republica.com.co, Página|12, Folha Online
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