Bolivia’s mining dilemmas: Between Mother Earth and an ‘extraction economy’

By Federico Fuentes, Cochabamba

May 15, 2010 -- The tremendous success of the April 19-22 World People's Summit on Climate Change and Mother Earth Rights held in Cochabamba, Bolivia, has confirmed the well-deserved role of its initiator — Bolivia's President Evo Morales — as one of the world’s leading environmental advocates.

Since being elected the country’s first Indigenous president in 2005, Morales has continuously denounced the threat posed by the climate crisis and environmental destruction. Morales has pointed the figure at the real cause of the problem: the consumerist and profit-driven capitalist system.

Morales is leading a powerful Indigenous movement pushing change in Bolivia and the region, which raises restoring harmony with nature as one of its key banners. This revolutionary movement, with Indigenous and peasant organisations in the forefront, has pushed the traditional Bolivian elite from power through a combination of electoral battles and mass insurrections. It has begun the struggle to create a new “plurinational” Bolivia — based on inclusion and equality for Bolivia’s 36 Indigenous peoples.

There is an immense sense of Indigenous pride and empowerment in Bolivia, a country whose original inhabitants were traditionally excluded. This revitalised Indigenous pride was a key feature of the Cochabamba conference, reflecting the important role of the region’s Indigenous and peasant movements in environmental struggles.

The conference’s final declaration contained a strong emphasis on “the recovery and strengthening of the knowledge, wisdom, and ancestral practices of Indigenous Peoples” as an alternative to the destructive capitalist model. Vice-minister Raul Prada said the conference represented the start of a “world revolution of Vivir Bien”. Vivir Bien is an Aymara indigenous concept that means “living well and not at the cost of others”.

Imperialism

Together with these elements of Indigenous “cosmovision”, the declaration included a strong anti-capitalist and anti-imperialist sentiment, again reflecting the mood of the summit. It argued that, “for there to be balance with nature, there must first be equity among human beings”. It squarely denounced “developed countries, as the main cause of climate change”, calling on them to assume “their historical responsibility”.

Imperialist capitalism, benefiting First World multinational corporations, has not only intensified divisions between rich and poor within countries and environmental destruction. It has also entrenched divisions between developed and underdeveloped countries.

Having carved up the world among them, imperialist countries such as the United States, European countries and Australia have used their domination over Third World countries to keep them underdeveloped. The economies of underdeveloped countries have been geared towards extracting raw materials for the benefit of the economies of the imperialist nations.

This gearing of Third World nations’ economies to providing cheap raw materials for export, at the mercy of market prices often manipulated by speculators, rather than seeking a rounded internal development, helps keep these countries in a state of permanent dependency and poverty.

Perhaps no country demonstrates this system better than Bolivia.

Bolivia's legacy of dependence

Four hundred years ago, the Bolivian mining town of Potosi was the third-largest city in the world. Millions of tonnes of silver were extracted — helping finance a large part of Europe’s industrial development.

Today, thousands of cooperative miners work Potosi’s hollowed out silver mines in sub-human conditions to eke out a basic living.

Bolivia, whose resources made Europe rich, is South America’s poorest nation — its economy dependent raw minerals and gas exports. Breaking this dependency is a key challenge for the Bolivian government — and brings with it many difficulties.

In the 2005 election campaign, now vice-president Alvaro Garcia Lineras summed up this dilemma when he said Bolivia’s choice was “industrialisation or death”.

The Morales government has reclaimed state control over gas and mineral reserves and nationalised 13 companies involved in gas, mining, telecommunications, railways and electricity. This increased state intervention means the public sector has increased from 12% of gross domestic product in 2005 to 32% today.

With the 2006 nationalisation of gas reserves and signing of contracts with private companies in the sector more favourable to the state, the hydrocarbon sector alone has dramatically increased its contribution to the state budget from US$678 million in royalties in 2005 to $2 billion last year.

This extra revenue has allowed the government to increase social spending, particularly through new benefit payments to pensioners, families with children in school and pregnant women. An estimated 2.8 million people out of Bolivia’s population of 9 million receive one of these new payments.

All of the macroeconomic indicators show important improvements in Bolivia’s economy. Last year, Bolivia had the highest rate of economic growth in the region. Having maintained a budget surplus for the past five years, the government has ensured its international reserves have reached a record US$9 billion.

Despite this, the government has largely proven unable to make serious headway with its industrialisation program. Several of its key mining projects face serious strife (see the article below) and the country is yet to open a single gas processing plant.

A combination of troublesome relations with multinationals and a lack of technical staff, among other factors, help explain why.

As a result, Bolivia’s economy — and therefore social programs — is arguably more dependent on extraction-based activity than five years ago.

Debates and dilemmas

This problem gets to the heart of debates that arose at the climate conference over difficult questions. These include the involvement of progressive governments, such as in Bolivia, Venezuela and Ecuador, in oil mining in the Amazon, as well as the deepening of the extraction-based economic model in Latin America.

Alberto Acosta, the former president of Ecuador’s constituent assembly that produced the world’s first constitution that explicitly defends the rights of Mother Earth, said: “It is necessary to question the capitalist logic and construct a post-capitalist society.” However, he added: “We have to clearly point out those that are responsible [for the climate crisis] and look at our responsibilities. “While it is true that the rich are the principal culprits, our countries that are tied to the world economy with an extractivist logic guarantee that these processes of accumulation continue reproducing themselves.”

It would be suicidal to argue that Bolivia should simply shut down its gas and mining industry, with the deadly social impacts that would entail. The dilemma was summarised by former Bolivian hydrocarbon minister Andres Soliz Rada. He described the “trap” Morales finds himself in, between “his industrialist offers with which he achieved his re-election and the indigenist demands to comply with his proclaimed defence of the environment”.

Morales expressed this dilemma when he responded to environmentalist and Indigenous groups who oppose oil exploration in the Amazon by saying: “What will Bolivia live off?” Without oil revenue, there would be no money for government benefits payments, he added. Morales’ comments might surprise some only familiar with his powerful denunciations of inaction on climate change on the international stage. But the reality is his government’s proposed industrialisation program and redistributive social spending is a big part of why it maintains high popular support.

This contradiction is enforced on Bolivia by the imperialist system. Overcoming it ultimately requires rich nations to pay their climate debt — and help provide the means for poor countries such as Bolivia to develop sustainably.

In the meantime, Third World governments that seek to break the deadly cycle of poverty and underdevelopment will face difficult choices.

In 2007, Garcia Linera explained: “The outlook according to which the indigenous world has its own cosmovision, radically opposed to that of the West, is typical of latecomer indigenists or those closely linked to certain NGOs ... Basically, everyone wants to be modern. The Felipe Quispe [Indigenous] insurgents, in 2000, were demanding tractors and internet.”

One example of this was the recent tensions between Indigenous peasants groups over changes to the government’s land reform law. Indigenous organisations from the Amazonian region in the east strongly criticised former vice-minister of land, Victor Camacho, and the Unique Confederation of Rural Labourers of Bolivia (CSUTCB) peasant confederation, for trying to “peasantise” Indigenous communities via changes that would prioritise individual, and not collective, land titles.

This apparent contradiction between an “Andean cosmovision” (a concept that seemingly leaves out the other 34 Indigenous groups based in Bolivia’s non-Andean regions) and Indigenous peasants demanding individual rather that collective land titles can be understood if we grasp the dynamic underlining the Morales government.

Indigenous nationalism

Rather than representing a desire to return to ancient Indigenous times, this government is the product of a new anti-imperialism whose roots lie in previous nationalist movements. It surpasses previous nationalist experiments because, for the first time, it is not military officers or the urban middle classes leading the project, but Indigenous and peasant sectors.

Its solid core is represented not by Indigenous organisations of Indigenous peoples (who are also peasants) who have most questioned the apparent divorce between the government's Panchamama (“Mother Earth”) discourse and its action. It is represented by organisations of those peasants (who are also Indigenous) who benefited from previous land reforms by nationalist governments — and today own individual plots.

This is not to deny the important role the specific organisational, economic and political models of the country’s Indigenous people play in the process. This is what most clearly differentiates it from previous nationalist governments and is a crucial aspect of its revolutionary dynamic.

Nor can it be denied that the Bolivian government is the leading global advocate in defence of the environment and promoter of a global alliance to wage such a struggle, incorporating strong elements of Indigenous cosmovision in its discourse.

However, there is the need for a serious debate in Bolivia, which appears to be beginning post-conference, over how to begin a transition from its extraction-based and dependent economy towards a post-capitalist, sustainable society.

This will require going beyond romantic declarations of the birth of a new “civilisatory and cultural perspective” or a “world revolution of Vivir Bien”, and understanding the complex reality of Bolivian society and the difficult process of change underway.

Bolivia’s mining dilemmas

By Federico Fuentes, Cochabamba

May 15, 2010 -- Perhaps no other sector better exemplifies the challenge the Bolivian government faces in lifting the country out of the poverty and dependency afflicting South America’s poorest nation than its all-important mining industry. Mining minister and former miners’ union leader Jose Pimentel told Green Left Weekly: “Bolivia has been a mining country for more than 500 years, ever since the Spanish came and discovered the legendary wealth [of the silver mines] of Potosi. And when we look at the situation today, we can say that a large part of the country continues to depend on mining.”

For example, Pimentel said an estimated 90,000 workers affiliated to hundreds of cooperatives are attempting to subsist from mining “in a rudimentary manner”. “This sector impacts on important cities such as Potosi and Oruro, where practically the only productive activity is mining. So to get rid of mining in one blow would not only bring with it social problems, but could even create situations of rebellions because large groups of people would be directly affected.”

Moreover, revenue from mining has also become increasing important for the government’s social spending aimed at lifting up the poor majority. Rising global prices meant that mineral export revenue jumped in the first quarter of this year to US$464 million. This represented 32% of Bolivia’s total export revenue — a 77.7% jump in revenue compared to the same quarter last year.

With companies now forced to pay higher royalties and the state playing a more active role in the sector, the government has been able to redistribute a greater share of this wealth via its pro-poor social programs.

But the government is facing pressure from local Indigenous communities demanding that it comply with its environmental discourse. It also faces troubles in its relations with multitnational mining corporations and the challenge of using a weakened state that was privatised and dismantled by previous neoliberal governments to state to promote its industrialisation drive.

Mutun

One example is the project to extract and process iron ore from Mutun, the eighth largest iron-ore mine in the world. In 2007, the government signed a contract with Indian company Jindal to exploit 50% of the Mutun mine. The agreement included the construction of an iron smelter and steel factory to ensure that value-added products would be exported (not just raw materials, as is often the case with poor nations).

The project, involving a projected investment of $2.1 billon by Jindal, was presented as evidence that a stronger state working with private capital could develop the country’s economy. Yet, three years later, this dream is no closer to being realised. Relations between the government and the company have taken a turn for the worst.

Due to Jindal’s lack of compliance with its contractual obligations, the government announced in April its decision to collect $18 million in warranty bonds. It accused Jindal of having invested only $12 million of the $600 million required by now under the terms of the contract.

Jindal has challenged the move, blaming government inefficiency in dealing with the relocation of local communities.

Having neglected to nationalise the land with the iron-ore deposits, the government has had to go through tedious and drawn-out negotiations to verify and buy out individual landholders.

This process has been further hampered by the fact that most landowners had no land titles to legally sell, forcing the government to delineate each landholding. Some peasants unhappy with the amount of land designated to them have refused to sell.

In April, tensions also boiled over between local Indigenous communities and owners of the massive San Cristobal mine, Sumitomo Corporation, in Potosi. San Cristobal accounted for 55% of Bolivia’s mineral exports last year, with Sumitomo netting around $1 billon in profit.

Locals are angry that in an area suffering from desertification, and where access to fresh water is increasingly scarce, Sumitomo extracts 50,000 litres of underground water a day, free of charge, while paying a tiny $38 million in royalties last year.

When this was publicly exposed, locals began to set up roadblocks, burnt down a local company office and overturned several train carriages carrying mineral exports from the mine to Chile.

The problem for the government is that under the current mining code, Sumitomo is able to make use of “legal vacuums” that place no obligation on the company to pay for its water usage.

Pimentel said this will have to change in the new code set be presented to the Plurinational Assembly later this year. “It is impossible to continue these kinds of mining practices.” He said the new law must “enforce a more rational and efficient use of these resources”.

Sumitomo claims such measures, and the protests, are putting in danger its investments and financial viability.

Lithium

Perhaps the government’s biggest dilemma is the proposed, extremely lucrative, large-scale exploitation of the world’s largest lithium mine. An estimated 19 million tonnes of lithium, roughly half of the world’s supply, is said to be located in Bolivia’s Uyuni salt flats. At stake is about $1 billon a year.

“In the case of lithium”, Pimentel said, “we are now constructing a pilot plant to extract lithium as well as boron, potassium and magnesium. Next year we hope to enter into the final stage of our project, with the creation of an industrial plant, the first job of which will be to produce lithium carbonate. Afterwards, we will move towards industrialisation of lithium carbonate, producing things such as batteries, where naturally we will have to look for strategy partners that can guarantee us technology and markets.”

There is no shortage of multinationals seeking to become “strategic partners”. No official tendering process has opened, but rumours are French company Bollore-Eramet is frontrunner for the partnership, with its proposed “Franco-Bolivian project for Bolivians to live well and in harmony with Pachamama [Mother Earth]”.

Other contenders include Sumitomo and the South Korean Cores Corporation. Cores is currently involved in the Coro Coro hydrometallurgical project to extract and process about 10 million tonnes of copper. The project is criticised by Indigenous communities protesting the lack of prior consultation, and plans to divert local river ways to supply the mine with water. This will directly affect about 300 peasant families.

The lithium deposits are located within one of Bolivia’s most famous tourist attractions. Concerns about the environmental impact of mining have been raised. There are also concerns over the lack of transparency and public discussion regarding such a critical project for Bolivia’s future.

Given the problems with the practices of the multinationals, which rather than helping Bolivia’s industrialisation have kept Bolivia dependent on the extraction-based development model, there are serious questions about the sector’s future.

Bolivia: ‘No excuses for killing Mother Earth’

By Federico Fuentes, Cochabamba

May 15, 2010 -- Under the Bolivia's constitution approved in January 2009, the state now controls all minerals, metals, precious and semi-precious stones in the country. While respecting previously granted concessions to private companies, it has restricted new concessions to joint ventures with the state

In 2007, the Bolivian government returned 100% control of the Huanuni tin mine to the state-owned Comibol. On May 3, the government nationalised the Glencore-owned antimony smelter, which has been out of operation for more than two years. The decision was taken due to Glencore’s 10-year non-compliance with its investment commitments, instead choosing to begin dismantling the privatised smelter.

It follows on from the government’s 2007 decision to nationalise the Glencore-owned Vinto tin smelter.

However, Comibol is far from having recovered from two decades of disinvestment and privatisation by successive neoliberal governments. Explaining the need for “strategic partners”, Bolivia’s mining minister Jose Pimentel told Green Left Weekly of the difficulty of accessing credit for industrialisation projects.

“Multilateral or commercial banks generally give loans for infrastructure, electricity, highways but not for industrialisation. This has been one of the factors why we have had to seek out strategic partners that can give us the necessary technology and invest capital, and guarantee markets for us.”

But, facing trouble with its “strategic partners”, the government has recently indicated that it may be willing to move ahead independently where possible. One example is the announcement it will begin mining 50% of the Mutun iron-ore deposits. To finance this, the government said it would use revenue from the sale of $11 million worth of iron ore reserves that Comibol has in storage.

Pimentel also said that after five years of steady economic growth, Bolivia’s currency reserves “have reached $9 billion and I think that some of the projects we have in the pipeline could be directly financed from there”.

Bolivia is also discussing with Venezuela setting up a “grand-national” joint state mining company, within the framework of Bolivarian Alliance of the Americas (ALBA), an anti-imperialist trading bloc launched by Cuba and Venezuela in 2004.

“This is a space that we see as much more important, given that sovereign peoples are beginning to negotiate among themselves in order to replace the transnationals.”

Regarding environmental concerns, Pimentel said, “while we can demand the companies improve their environmental practices by carrying out a more rational and efficient exploitation, we cannot ask the same of the workers in cooperatives who live directly from mining... We believe we have to carry out a policy of supporting small producers to solve environmental problems by creating the mechanisms whereby they can carry out their activities without large economic costs.”

A new stricter mining code, combined with “stringently assuring that mining companies respect all environmental problems”, means there should “be no excuse for the mining industry damaging the environment and killing Mother Earth”, Pimentel said.

[Federico Fuentes is a member of the Socialist Alliance of Australia resident in Venezuela. He attended the April 19-22 World People's Summit on Climate Change and Mother Earth Rights held in Cochabamba, Bolivia. These articles first appeared in the Australian socialist newspaper, Green Left Weekly.]