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ECLAC Promotes Better Governance of Natural Resources to Maximize their Contribution to Regional Development

Latin America and the Caribbean has had difficulty translating boom periods for exports into long-term growth processes.

5 March 2014|News

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Photo: Marcelo Sayao/EFE

In a new publication, the Economic Commission for Latin America and the Caribbean (ECLAC) poses the need to promote better governance of natural resources in the region to maximize their contribution to development with equality and sustainability, as well as to foster the long-term structural change associated with innovation and technological development that reduces dependence on extractive sectors.

The report, entitled Natural resources: status and trends towards a regional development agenda in Latin America and the Caribbean, is an ECLAC contribution to the debates inside the Community of Latin American and Caribbean States (CELAC) and was delivered to the foreign affairs ministers of that organization's member states during a summit that took place in Cuba in late January.

ECLAC envisions the governance of natural resources as a set of sovereign policies regarding management of a given property and the appropriation and distribution of income to maximize its contribution to sustainable development, based on strong institutions capable of tackling macroeconomic, fiscal and public investment challenges.

Latin America and the Caribbean has one third of the globe's freshwater reserves, a fifth of its native forests, 12 % of its arable soils and abundant biodiversity and ecosystems of importance to the global climate-such as the Amazon jungle-along with plenty of resources linked to mining and energy.

According to the document, the region is home to at least 49 % of silver reserves (Peru, Chile, Bolivia and Mexico), 44 % of copper reserves (Chile, Peru and, to a lesser degree, Mexico), 33 % of tin reserves (Peru, Brazil and Bolivia) and 22 % of iron-ore reserves (Brazil, Venezuela and Mexico), among other metals and minerals.

In addition, according to figures from 2012, Latin America and the Caribbean is the world's second biggest area in terms of oil reserves, after the Middle East, concentrating more than 20 % of them. A less favorable fact is that regional gas reserves lost relevance in the last decade and now stand at around 4 % globally.

In the case of South America, natural resources-including shipments by the agro-industrial sector, as well as mining, hydrocarbons and other sectors-represent more than 70 % of total exports.

With regard to their market value, the report shows that by mid-2013 international prices for basic products had moderated after rising in the previous decade, although they were still at high levels compared to the values seen from 1980 to 2013.

To glean income from the export of basic products, states usually use fiscal instruments, like income tax and royalties levied on companies dedicated to extractive activities. Occasionally, they also participate in the exploitation of resources, either through public companies or by owning shares.

ECLAC warns that historically Latin America and the Caribbean has had difficulties translating boom periods for natural resource exports into long-term economic development processes, with stable growth levels that enable countries to drastically reduce poverty and raise per capita income.

To reach that goal, the regional United Nations organization defends the need to work toward a political consensus that includes more progressive state participation in income from the exploitation of natural resources-meaning that during cycles of high prices, the percentage of the state's take rises-and the development of institutional mechanisms that allow for systematically saving those extraordinary inflows and investing them efficiently in education, health, infrastructure, innovation, etc.

ECLAC also advocates for developing a state policy oriented toward a structural change with long-term productive diversification, which can reduce dependence on extractive sectors and foster new industries associated with innovation and technology.