Extractive industries lead to growth without social benefits

The economic growth driven by extractive industries as its main motor, led by increasing commodity prices, “is not benefitting the majorities” of the population of developing countries, according to the Social Watch Report 2012, that will be launched in New York on Friday 9.

“In an effort to attract investors, safeguards and performance requirements have been waivered and the result has been environmental deterioration without social benefits” in countries such as Armenia, Azerbaijan, Bolivia, Chile, Venezuela and Zambia, wrote in the prologue Roberto Bissio, coordinator of Social Watch and editor-in-chief of the report.

Extractive industries, single-crop cultivation in vast areas and big energy projects are some aspects of priority given by governments to economic growth. “The description of the situation in Vietnam could well apply in many other places,” adds Bissio, and quotes the national report written by VUFO-NGO Resource Centre, focal point of Social Watch in that Asian nation: “The country’s rapid economic growth is placing tremendous strains on the natural environment. As the population, economy and process of urbanization all grow, the main threats to the environment include overexploitation of forests, loss of arable land, water and air pollution, soil erosion due to unsustainable land practices, loss of biodiversity through –among other factors—poaching in national parks and environmental damage due to mining.”

“Inequality is the reason why, against all theories and models, poverty is not receding, or doing so very slowly, even in countries where the economy is growing fast,” warns Bissio in the prologue, titled, as the whole Social Watch Report, “The right to a future”. 

Next, some abstracts of national contributions to the report related with the consequences of the extractive activities: 

Armenia: Undermining the environment 

Despite recent economic growth, Armenia continues to confront economic, social and environmental challenges. The Government launched a sustainable development programme, but at the same time made substantial investments in mining and other extractive industries. The Government has also failed to address pollution, deforestation, soil degradation, and other environmental issues. Only 7% of the territory remains forested, down from 35% two centuries ago, and much of this is degraded.

The leading causes include use of wood for fuel and the Government’s decision to allow mining in ecologically sensitive areas. Many environmental problems in Armenia are closely linked to corruption, especially in forestry and mining. For example, environmental restrictions are not enforced in most mining operations; from 2001 to 2007, the then-Minister of Nature Protection issued several mining licenses to relatives. Many forest areas have been improperly reclassified and allocated to private individuals.

The Government is pursuing an extraction-led development model, as evidenced by its willingness to allow massive investment in mining. The Armenian Copper Program (ACP), for example, has been granted a 24-year license to extract copper and molybdenum ore from the Teghut Mountains. ACP has declared that it will compensate for the damage by planting trees in Yerevan, but new trees cannot replace established forest habitats; mature trees may not survive a move. The mining operations will produce waste rock and tailings, which may contain silver, gold, rhenium, lead, arsenic, copper, molybdenum, zinc and sulfurous chemicals. [National report by the Center for the Development of Civil Society.]

Azerbaijan: The demise of the extractive economic model 

One of the world’s most industrially polluted territories, Azerbaijan needs to change its old resource-dependent extraction economy into a sustainable one, and also a better dialogue between Government and civil society is needed. The country’s reliance on oil and petrochemical industries continues to cause grave environmental damage, ranging from soil contamination to water and air pollution.

Being one of the birthplaces of the oil industry, Azerbaijan has a long history of economic dependency on petroleum extraction. There is evidence that petroleum was used for trade in the 3rd and 4th centuries AD, and refining activities in Baku are mentioned in writings of [the] 17th century. A proper oil industry was established in the late 19th century.

Currently the petrochemical industry remains the country’s most prominent although in 2010 it had already reached its historical production peak of 1.12 million barrels per day. Some predictions show there will be a massive drop in production levels from 2015 to 2025. [National report by Public Finance Monitoring Centre and Environmental Law Centre “Ecolex”.]

Bolivia: Progress and setbacks in the defence of Pachamama 

The Government has made an explicit commitment to a coherent policy to combat climate change, but the current development model in the country is built around the extractive sector. The economy and the strategies to overcome poverty are based on oil and gas production and mining. 

Oil production and mining have become the mainstays of the country’s economy, the basis of public finances. More than a third of the income of the department (province) governments comes from hydrocarbon profits (35.6% in 2005, 43.3% in 2006 and 43.2% in 2007), according to CEDLA. Foreign sales of primary products from the oil, gas and mining sectors now account for no less than 69% of total export revenues, in contrast to the previous five-year period when there was a more balanced distribution and these sectors only had a 47% share. In the 2006 to 2009 period, mining came to the fore; it increased by an annual average of just over 20% and became the biggest factor in national production. [National report by the Centro de Estudios para el Desarrollo Laboral y Agrario (CEDLA)]

Chile: Extractive economic model remains virtually unchanged 

The country’s development model is tied to resource extraction and the Government is still prioritizing energy sources such as coal that have serious negative ecological effects. The country urgently needs to develop or strengthen institutions to handle environmental threats, a new energy policy, regulations to govern biodiversity, to change its electricity generating profile and also to bring civil society organizations into the debate about sustainable development.

Since 1992 Chile has undergone big political, economic, environmental and social changes. Its extractive economic model, however, has remained virtually unchanged. The mainstay of the economy is still the export of natural resources with low levels of processing, and the environment is still being intensively exploited, particularly by the mining, fishing, agriculture and forestry sectors.

Regulations governing copper mining are either deficient or not yet in place and the sector is fraught with problems: the State levies a specific tax rather than receiving royalties, mining operations have only been obliged to close works since the environment law came into force in 1997, there are projects currently in operation whose environmental impacts have never been evaluated, there is no public register of places that have been polluted by mining and there is no plan to deal with mining sites that have been closed down or abandoned. [National report by Fundación Terram.]

Venezuela: The unfortunate consequences of extraction-based growth 

The economic model has had serious negative environmental consequences and has proved unable to meet people’s needs. There has been some improvement in education, but other areas of basic rights like health and housing have regressed. The country needs to design a development model that is genuinely sustainable.

Since the early 20th century development models in Venezuela have been based on an extractive economy and the export of energy resources. International prices for crude oil have now recovered, but there was a recent period of economic crisis during which, according to official figures, the Venezuelan economy contracted for 18 consecutive months. This resulted in spending cuts for social policies.

The basis of the Government’s development model is large oil, gas, mining and infrastructure development projects, but these have serious socio-environmental impacts and are not sustainable in the long term because they are based on extraction-led growth. This exploitation of the country’s oil and gas resources has also interfered with [social policies as] the project to mark out the boundaries of indigenous lands [that] was due to have been completed in 2002. [National report by the Programa Venezolano de Educación-Acción en Derechos Humanos (Provea)]

Zambia: The economy grows while the poverty presses
 
The country’s economy has been growing since 2000, but poverty continues to be a pressing issue. Although the Government has shown some concern regarding environmental challenges, the plans put in place have failed to create public awareness about soil erosion, loss of biomass, climate change and deforestation.

High poverty levels and lack of alternative sources of livelihoods exacerbate environmental degradation resulting from the dependence of poor people on natural resources. Over the last 40 years the forests have been depleted due to population increase, economic imperatives, charcoal production, demand for new land for agriculture and uncontrolled fires.

Increasing activities in mining and construction also contribute significantly to deforestation. The practice of slash-and-burn agriculture to feed a growing population is widespread. Logging is also increasing. [National report by Women for Change]

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