Volume 44, Number 175, October-December 2013


EDITORIAL
NON-RENEWABLE RESOURCES, LARGE COMPANIES AND FINANCIAL PROFITS

revista164Is the extractivist sector an alternative for development in Latin America? Latin American governments must reflect deeply on the challenge of development in the coming years. It is time to examine the performance of the extractivist sector and how it has provided mining companies with large profits, but also contributed to tax retentions that have given at least some countries the chance to increase public spending, and therefore raise social spending. But the future of non-renewable resources has been put at risk due to the perception that the financial earnings obtained from extractive activities have not benefited the communities where the mines are located. It is therefore necessary to explore the persistent preeminence of development and the non-renewable minerals sector and its relationship with profit-seeking capital. Regardless of the order of these factors, it is time to open a discussion. To what extent have Latin American governments taken into account the fluctuations in prices of commodities of the extractivist sector in financial markets? What relationship is there between the economic cycle, price volatility in the extractivist sector and futures markets? Who are the leaders of the principal companies in this sector? And, finally, how have profits from exporting countries been channeled to benefit society and families?

Answering these questions will only serve to debate the primary-extractivist model that has mainly benefitted some Latin American governments. For example, prices on the world scale behaved in the following way from 2003-2012: gold rose 372% and 4% in volume; copper rose 384% and its production rose 5%, iron rose 302% and its volume 25%. Now the cycle of these prices is on the down swing in light of the falling gdps of emerging nations, which, despite the fact that they continue to grow have a decreasing rate lower than what was achieved before 2008. Global gdp growth rates have fallen over the course of the “great crisis.” The ephemeral repercussions in both the United States and Europe persisted at the time of publication of this editorial, including the fallout from the crisis that threatens the growth of the brics and the rest of under-developed countries.

Price decreases in the extractivist sector are already under way: the value of mining has fallen 74% in the first half of this year.

The future of the main mines in Latin America, Teniente in Chile (copper), Yanacocha in Peru (gold) and Cerrejón in Colombia (coal) is uncertain. The same is true of mining countries whose exports in this area only represent 48.9% for Peru and 33.3% for Bolivia.

The major mining companies on the global scale, such as bhp Billiton, Vale, Río Tinto, Shenhua, Anglo America, Suncor Sxtrata, Barrick, Freeport-McMoran and ndmc, control part of mining production in Latin America and are reorganizing their investment plans in light of falling mineral prices in financial markets. The companies that dominate the market in Latin America are as follows: Vale in Brazil, Coldeco, Escondida, Antofagasta plc, Collahuasi in Chile, Grupo México and Minera México in Mexico and Minera Antamina and Southern Peru Copper Corp in Peru.

As such, the commodities-based development agenda is at risk for countries whose currency mainly comes from extractive activities. It is important to note that at least in the Andean community, in countries such as Bolivia, Colombia, Peru and Ecuador, much of the extractive mining industry is located largely in indigenous territories or places occupied by ethnic minorities, where the relationships between the communities, local, government, mining and environmental authorities play a key role. Even so, their basic needs have not been entirely met.

An analysis of extractivism as a development alternative goes beyond the dependence of these countries on the currency they receive for their exports. The challenge to achieve is to create fiscal policy that channels this currency into public spending to benefit the population, create jobs, improve living conditions and reduce poverty. Latin America has an abundance and wealth of non-renewable resources, including oil, gas and minerals, making ever more urgent economic, political and social analysis. In light of the significant demand for these products in world markets and their elevated prices in financial markets, the following questions are pertinent: Have governments used taxes collected for the exports of extractive activities to the benefit of their societies? Who usufructs the large profits? Who has benefited – large public, private or foreign companies?

In the articles section of this edition of Problemas del Desarrollo, a work by Guadalupe Mántey, “Would a More Flexible Exchange Rate Improve Competitiveness?” debates the role of inflation objectives in managing macroeconomic policy versus the desire to substitute for a real competitive exchange to increase exports. The author indicates that one of the most relevant conclusions of her research is that devaluation in a developing country does not produce the same effects as in a developed nation, where debt is taken on in their own currency. Devaluation has negative repercussions on companies and banks by decreasing their competitiveness. The real exchange rate must be sustained by the State using a strategy whose products for export have a high added value.

The ethics of development is a topic that is frequently unclear in the field of economics and even in the realm of social economics. Nikos Austrolakis develops an analysis of the importance of development ethics in his work, “Challenging Conventional Economics: An Ethical Development Paradigm,” not only for social economics and part of economic science, but also by contributing three objectives necessary to achieve ethical development: satisfying the material, cultural and spiritual needs of society, social justice among the population and, finally, an ecological balance and environmental sustainability. The main focus of the article is to maintain that in a global world, development ethics is a reality oriented by individuals and society.

“The Emerging Phenomenon of Unemployed Agricultural Day Laborers,” by Antonieta Barrón, starts by describing vulnerable employment and unemployment as defined by the International Labor Organization to demonstrate the vulnerability of jobs in rural areas. The author shows how unemployment has reached unprecedented levels as it has spread to rural and urban populations, revealing the close link between unemployment, vulnerable employment and poverty. She uses three regions to demonstrate her hypothesis: Valle de Culiacán, Sinaloa, Valle de San Quintín, Baja California and Armería, Colima. As the crisis has affected the precarious conditions of employment and income, two phenomena have emerged: migration and unemployment.

Beyond the importance of the soy crop starting with its expansion in the humid Pampas region in the mid-1990s, soy has been a commodity that has provided the government in power and the major agricultural export consortiums with significant tax retentions. In, “The Takeover of Soy and Dutch Disease in Argentina: An Agricultural Curse?”, Alicia Puyana and Agostina Constantino go further in depth on the “Dutch disease” that was an effect of abandoning livestock to involve the economy in a process of increasing agriculture, a result of the appreciation of the real exchange rate and a decrease in the commercial surplus. The recovery of the manufacturing sector starting in the last decade was also a response to the over-valuation of the real in Brazil, which allowed the industrial sector to grow in Argentina. As such, the outflow of capital has prevented domestic accumulation. This situation cannot continue in the long-term, which is why State intervention will be necessary.

Starting from an attempt to define space and power, with references to other authors, Ariel García and Alejandro Roffman set forth the idea that space and power are inherent to social relationships in their article, “Power and Space: Revising the Theory of Regional Topics in Argentina,” and are therefore involved in an accumulation regime. Their conceptual contributions have been developed from the perspectives of the political economy, sociology and the geography of surplus. Precisely in this relationship, “[...] the economic base of power relations is the surplus.” These authors wonder whether “the incorporation of new technology implies reformulating power relations in space or if these relations continue to be based on the appropriation/management of the surplus.” They question whether the difference between a geography of production and a geography of surplus is necessary.

Starting from a reading of globalization and the financial crisis, Susana Nudelsman analyzes the role of global instability and the international crisis from a perspective of causality. The excess of banking intermediation through “special purpose vehicles,” financial instruments of the shadow banking system, slipped through the fingers of regulators. The epicenter of the crisis in the United States marked macroeconomic policy in European countries. In china and Latin America, prudential macroeconomic policy, mainly those implemented in nations in the south, created a certain separation from the crisis. Still, financial fragility lies below the surface.

In the commentary section, in the article, “The G20 in Los Cabos: A Lost Opportunity for Much-Needed Change,” Carlos Rozo and Aleida Azamar highlight the importance of the G20 summit, which took place under unique circumstances. Days away from the elections in Greece, in the midst of the ongoing European crisis, Mexican authorities faced a challenge. The G20 agenda was created to achieve structural reforms, strengthen the financial system, and achieve food equality, sustainable development and a green economy in the face of climate change. All of these were the initial priorities. However, the reality was that the fiscal and banking crisis in Europe became the true priority. The authors emphasize the importance of emerging economies on the world stage in this brief commentary.

The review section introduces five books: Revolutionary Progress in Latin America, by Rémy Herrera, reviewed by Héctor González Lima, Development Potential, Public Policy and Fostering a Sustainable Territory, by Carlos Bustamante, Baldemar Hernández and Adolfo Sánchez (coords.), reviewed by Irma Bernal, New Global Macroeconomics: Income Distribution, Employment and Growth, by Guadalupe Mántey and Teresa López (coords.), reviewed by Patricia Rodríguez, Latin American and Caribbean Integration, Politics and Economics, by José Briceño, Andrés Rivarola and Ángel Casas (eds.), reviewed by Raúl Vázquez and European Sovereign Debt and Financialization, by Alicia Girón and Marcia Solorza, reviewed by Alma Chapoy.

Alicia Girón
Journal Editor
unam, September 2013

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PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 49, Number 194 July-September 2018 is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
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