Current Political and Geopolitical Landscape Across the Major Latin American Economies
Published: 24 April 2018 03:58
Dr. Susan Kaufman Purcell shares her views on how the current political and geopolitical landscapes of some of the major Latin American economies will affect the mining sector.
Miners & Investors: Which countries will have pro-mining policies and which ones will cause headaches and what role should governments play in resolving community conflicts?
Dr. Susan Kaufman Purcell: Latin American politics has become less predictable in recent years. The commodities boom that ended in 2010 had allowed the political systems of the region to appear more stable and institutionalized than they really were, since it is always easier to govern when economies are expanding than when they are contracting. The latter situation creates a zero-sum game in which one group’s win is seen as another group’s loss, thus making it difficult to dampen conflicts. Technological breakthroughs such as computers, mobile phones, and social networking via Facebook and Twitter have also made it relatively easy for aspiring political unknowns, as well as special interest groups, to suddenly mobilize a following to press for their preferred policies and political leaders. As a result, traditional political parties in the region have given way to new kinds of parties representing new kinds of aspiring leaders. Electoral competition has increased, making it harder to predict the outcome of elections.
Most of the larger Latin American countries have presidential and/or congressional elections scheduled in the coming year or two. Chile’s is perhaps the most predictable, since it is likely that former president Sebastian Pinera, a conservative, will be elected president once again. The odds are also good that President Mauricio Macri of Argentina will increase his party’s representation in the midterm congressional elections in November. In Mexico, the current frontrunner is Andres Manuel Lopez Obrador (AMLO), a left-wing politician who has vowed to reexamine all trade agreements and oil contracts signed with foreign companies. In Colombia, there are too many candidates to predict who will emerge as the top two candidates in the first electoral round, with the possibility of Colombians having to choose between a left- wing and a right-wing candidate in the second round of voting. Brazil’s current president, Michel Temer, will not run in 2018. It is not clear, however, whether his successor will be a member of the political establishment, including former president Luis Inacio “Lula” da Silva, or a new charismatic populist figure.
Finally, with U.S. influence in the region diminished, as Washington deals with crises in the Middle East and Asia, China in particular, as well as Russia, Cuba and Iran, have increased their presence and influence in Latin America, particularly in troubled Venezuela.
Miners & Investors: Venezuela- How can the crisis be resolved and what will be the impact on the rest of the region?
Dr. Susan Kaufman Purcell: The Nicolas Maduro regime is very unpopular. Oil production and foreign investment continue to decline. Washington has begun to impose sanctions on members of the Maduro government. Nevertheless, Maduro refuses to resign and to date, has not been pushed out of the presidency. Cuban intelligence officials and military personnel continue to provide crucial information and operational expertise to the government, which has continued to imprison opposition leaders and gut the country’s democratic institutions. China, which many observers thought would cease supporting Venezuela financially, has made new investments in mining and other industries, perhaps betting that even if the regime falls, its investment will remain viable. So far, Venezuela remains able to buy refined oil from the United States, and, despite its economic difficulties, is investing money in Syria to help build a refinery there to process its oil. The idea of a negotiated settlement is still being talked about, although it is not clear why the opposition would participate in still another negotiation after its earlier willingness to do so met with total failure. Presidential elections are scheduled for 2019, but it is not clear that the elections will occur or who will be the candidate. While the upper levles of the military are still with Maduro, there are reports of divisions in the lower level of the military, but few people as yet believe that a military coup is a possible or desirable outcome. Various Latin American democracies, as well as the European Community, have called for a negotiated settlement, but they are unlikely to be able to put meaningful pressure on the regime. As Venezuela continues to deteriorate, Colombia will feel the greatest impact as large numbers of Venezuelans will cross the border the two countries share and further burden a country that is trying to implement its peace process with its guerrillas while dealing with other challenges.
Miners & Investors: Which countries will have pro-mining policies and which ones will cause headaches?
Dr. Susan Kaufman Purcell: In general, the more institutionalized democracies that also understand and accept the need for foreign investment will have pro-mining policies. However, the pursuit of such policies is not guaranteed. In Latin America, the more institutionalized democratic governments are usually found in the more economically developed countries, especially in their cities, which means that the population also has access to more information that is critical of the government via mobile phones, social media, multiple channels of television and the Internet. There is more freedom of expression than exists in those countries with “elected authoritarian” governments.
As a result, citizens in democratic countries are more willing and able to take issue with, and work to block or overturn, those government policies that that they regard as counter to their interests. In Chile, under President Michele Bachelet, a mining project that had gotten the necessary environmental permits was not implemented after several members of the government turned against it. On the other hand, one of the region’s “elected authoritarians,” President Rafael Correa of Ecuador, who opposed an important mining project because he did not want to lose the support of the country’s indigenous groups, subsequently decided that Ecuador greatly needed such foreign investment and reformed the country’s laws so as to make them more welcoming to capital from abroad.
In addition, there are times when the type of government is less important in predicting government attitudes toward mining than the price of commodities. During the commodities boom of the first decade of this century, almost all governments took steps to increase not only the government’s share of the profits but also the role of the state in the commodities sector. The pro-business reforms of President Fernando Henrique Cardoso in Brazil’s oil sector, for example, were systematically replaced by more nationalistic policies subsequently implemented by Presidents “Lula” and Dilma Rousseff. And the example of President Correa’s change of heart regarding foreign investment in the mining sector cited above was related to the drop in oil prices following the end of the commodities boom, leading him to decide to make Ecuador less dependent on oil by encouraging more private investment in mining.
Latin America has many excellent laws on the books pertaining to all sorts of issues. Unfortunately, it is also a region of the world that often fails to implement these laws, either because they do not wish to do so or because they lack a functioning legal system that enables them to do so. Local governments are often the most deficient in the power and resources needed to ensure implementation of environmental and other kinds of laws or regulations relevant to business operations. Unfortunately, there are no easy solutions to these problems. However, a good place to begin is to make sure that local communities that will be affected by a mining project are both informed about the project and consulted concerning its implementation early in the process. Several countries, such as Peru, already have laws requiring such prior consultation. Companies also should explain how the project will benefit the community and what they will be doing to avoid pollution and contamination. In addition, when possible, they should inform the local inhabitants of the kinds of jobs the project will be creating and offer job training, when possible, to members of the local community. They should also try to work with and educate the members of the local and regional governments, but whether those efforts will bear fruit will depend on whether they are lucky enough to find honest and enterprising local officials who are willing to serve the interests of the people they govern as well as their own.
ABOUT THE AUTHOR
Dr. Susan Kaufman Purcell is an independent consultant on Latin America based in Miami, Florida. She is the former director of the Center for Hemispheric Policy at the University of Miami and was Vice President of the Council of the Americas, a not-for-profit business organization of mainly Fortune 500 companies with investments in Latin America. She was also a Senior Fellow and Director of the Latin America Project at the Council on Foreign Relations and a member of the State Department’s Policy Planning Staff during the Carter and Reagan administrations. Dr. Purcell holds a PhD degree in political science from Columbia University and is a director of Valero Energy Corporation, a Fortune 100 company.
- Off the Record: Peru’s Miners See CSR, ESG, Innovation as Key to Unlocking Funding
- Latin America Mining Roundtables Report
- 5 mining projects to watch out for in Latin America
- Diego Temperley of Auscham on the potential of Mining and development of Lithium in Argentina
- 5 minutes with Frank Holmes, CEO and CIO at U.S. Global Investors
17 Apr 2018
13 Dec 2017