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The Energy and Environmental Aspects of the FTAA
Dr. Ramón Pichs

When evaluating the American initiative to establish the Free Trade Area of the Americas (FTAA), energy and environmental aspects must be taken into account. Even Though they have not been identified as central themes for any of the FTAA's nine basic negotiation groups (1), they constitute core aspects of the hemispheric agenda.

Indeed, an integration project like this one, conceived in order to perpetuate every kind of Latin American dependence with respect to the United States and, above all, to guarantee the interests of U.S. investors in this continent, would have serious implications in strategic sectors of Latin America and the Caribbean such as those related to energy activities and environmental protection.

IMPLICATIONS AND MOTIVES OF A HEMISPHERIC ENERGY INTEGRATION.
One of the fundamental components of the U.S. project in hemispheric energy integration. In this sense, while the present republican administration recognizes the global nature of the energy problem, is has put special emphasis on the need to "construct a solid and interdependent energy association in the Americas…" In other words, it is arguing for "common energy security", which would guarantee adequate and reliable access to energy.
It should be noted that this has been historical objective of the U.S. in its relations with Latin America, forcefully reviving the American project to integrate the whole hemisphere. Although the Middle East -where two thirds of the world petroleum reserves are located- will continue to be and area of special interest for the industrialized countries, each one of the big economic blocks in formation would try to diversify the sources of petroleum supplies, dedicating particular attention to the petroleum basins situated in their respective geographical areas of greatest influence.
Among the energy attractions of Latin America and the Caribbean, it is worth noting that the region as a whole is a net exporter of hydrocarbons. Eleven percent of the world's petroleum reserves are located in this zone and it produces about 15% of the crude extraction. As well, this region has almost 6% of the international natural gas reserves, great coal reserves -enough for 288 years of exploitation- and abundant renewable resources like hydro energy, of which it has almost 23% of the world potential.
For the last 30 years the region has been considered as a strategic area, above all for the United States, due to its geographical proximity and greater political stability compared with other exporting regions in the underdevelopment world. In addition, it is calculated that Latin America possesses reserves sufficient for 33 years while United States petroleum reserves only last for 10 years if the level of the 90's the region covered more than 37% of U.S. petroleum imports.
It must be remembered that energy integration with the U.S. under the concept being promoted for this continent by that country's government, has, above all, the aim of guaranteeing the industrialized north certain access to the energy required to maintain the irrational patterns of energy consumption exceeding the equivalent of eight tonnes of petroleum, while Latin America and the Caribbean, a net exporter of energy, only registers a per capita commercial energy consumption equivalent to 1,2 tonnes of petroleum annually, according to United Nations data for 1997.
That being the case, the U:S: energy expedient is far from being the model the Latin America and Caribbean countries should imitate. The energy crisis that has affected the U.S. in recent years, marking a highly critical moment with the sudden rise of electricity prices in the state of California, confirms this idea. The genesis of this crisis, which extended to other states of the Union, is associated with problems derived from the deregulation of the electrical sector in that state starting in 1996. Among other thins, that deregulation accentuated the imbalance between supply and demand in the electrical sector, with serious implications for electricity supply. Note that some 24 states of the Union have approved deregulation laws.
The new National Energy Policy, launched in May 2001, begins with the analysis that in 2001 the U.S. faced the most serious energy shortage since the beginning of the seventies, with effects that spread to the whole Union. It stands out that one of the most notable features of the crisis was the high energy prices and the fact that in some states like California, power outages became part of the residents' daily life.
After defining the crisis as being the result of an imbalance between supply (stagnant) and demand (growing) the new National Energy Policy puts particular emphasis on increasing the supply of energy being offered, above all from conventional and nuclear sources. It also dedicates special attention to the repair and modernization of the energy infrastructure like the transmission lines, refineries, oil and gas pipelines.
Increasing the supply of energy on the basis of conventional fuels (preferably petroleum, natural gas and coal) is really one of the fundamental objectives of the energy policy. It notes that between 1,300 and 1,900 new electric plants are required, and it argues for the expansion of nuclear electrical generation, which already represents 20% of the electricity produced in the country. As well, it proposes to open of the Arctic Wildlife Refuge (Alaska) to exploration and relax the laws limiting emissions of contaminants.
Under this conditions, the promotion of renewable energy resources, which only contribute 2% of the electricity generated in the country, and the programmes of energy saving conservation, would be relegated to a secondary position and consequently would not receive proper priority.
As was expected, the new National Energy Policy has been the object of severe criticism both in the U.S. and abroad. Internally, criticism from the Democratic Party and from the diverse environmental NGO's stands out, considering this plan to be the realization of the oil companies' dream. It is noteworthy that President George W. Bush as well as Vice-President D. Cheney, director of the team that elaborated the Energy Plan, were oil executives, and the petroleum companies were among the principal contributors to the Republic presidential campaign. The external criticism, many of which have been formulated from Europe, point out as well that this plan takes the present U.S. administration even further away from meeting the U:S. commitment to strategies responding to climate change.
One of the pillars of the hemispheric energy integration being promoted by the U.S. in the advance before-hand of the privatization and deregulation of the national energy sectors, in the wake of two decades of application of neo-liberal formulas to this sector in Latin America and the Caribbean, with the consequent erosion of participation by the states in this strategic sector.
For the principal Latin American exporters of hydrocarbons, an integrationist scheme of this nature merely constitutes a mechanism of renewed economic and technological dependence with respect to U.S. and means, overall, the renunciation of sovereign control of strategic natural resources, like those of energy. For the region's net importers of hydrocarbons, the energy variable would continue being a factor totally out of control and subject to foreign parties.
Such tendencies, far from contributing to resolve the regional energy problems, will significantly reinforce the vulnerability of Latin America and the Caribbean, a region where an elevated external bet in that sector persists, around 30% of the population is without access to electric services and there is a great dependency on traditional fuel (wood, charcoal and others) above all in rural and suburban sectors, among other problems.
In the midst of the complex world economic situation, and taking account of the erratic course of intentional oil prices in the last three decades, the development of regional energy co-operation continues to be an alternative to alleviate the effects of the socioeconomic crisis.
It should be remembered that in the region this sector's potential is very unequally distributed. Consequently, the Latin American exports are concentrated in only five countries: Mexico, Venezuela, Ecuador, Trinidad-Tobago and Colombia and two of these nations -Mexico and Venezuela- comprise around 86% of the region's proven petroleum reserves. The majority of Latin American countries basically depend on imports of petroleum for the functioning of their economies.
The Latin American energy sector provides ample possibilities for becoming a factor for change and co-operation between the region's countries. This fact has been recognized historically, but the join efforts undertaken in that direction have been limited, as the figures on regional petroleum trade show.
In 1999, Latin America produced around 506 million tones of petroleum and only consumed some 300 million tones, but one cannot speak of the existence of a self supplied market since near 46% of production went to extra-regional markets and around 24% of crude consumed that year came from outside the area. In 1999, Latin America and Caribbean oil exports represented 12% of the world total, second after the Middle East, with 8% of that going to the U:S: and 9% to Western Europe.
Among the few energy co-operation schemes existing in Latin America and the Caribbean, is the San José Pact between Mexico and Venezuela, which favours about a dozen hydrocarbon importing nations of Central-America and the Caribbean. Since its signing in August, 1980, this pact, which has no precedent as instrument of co-operation among underdeveloped countries exporting of importing petroleum, has been renewed annually.
In October, 200, the Caracas Energy Accord was signed, conceived by the government of Venezuela as an accord to supply various Central American and Caribbean nations with petroleum under preferential conditions. This accord functions in a parallel manner to the San José Pact and constitutes an additional step in the necessary South-South energy co-operation.
Other experiences of collaboration in this sector in the Latin American region are the shared utilization of part of the hydro electric potential; the existence of partial electrical interconnections among Central and South American countries; joint utilization of certain hydrocarbon resources; and horizontal co-operation accords among energy companies of the region allowing for exchange of experiences and information.
With respect to the zone's potential for advancing toward the formation of a Latin American energy market, it is worthwhile to mention other initiatives or programmes, such as the necessary establishment of schemes for financial protection to reduce impact of crude price fluctuations; the improvement of inter-regional transportation or energy products; better utilization of the region's refinery capacity; intensification of exploration for hydrocarbons; adoption of policies favouring more efficient use of petroleum derivatives, and new efforts to diversify the regional energy balance.
Realization of these initiatives for regional energy co-operation as an alternative to a hemispheric integration serving the interests of the U.S., supposes an adequate evaluation and accounting of the interests of the region's energy exporters and importers, considering as well the situation of the least developed countries.

THE ENVIRONMENTAL DIMENSION OF THE FTAA AND CHALLENGES FOR LATIN AMERICA AND THE CARIBBEAN.
When analyzing the environmental dimension of the FTAA, the fact must be taken into account that the Latin American and Caribbean region's abundant endowment of natural resources in one of the areas that has historically attracted the interest of American investors.
In addition to the abundance of energy resources documented in the previous section, it is important to mention also the case of the resources of potable water. In the U.S., the internal renewable water resources per capita only amounts to 8,838 cubic meters a year. While this figure is slightly higher than the average for the Organization for Economic Co-operation and Development (OECD), it is much below the level of 27,328 cubic meters per capita for Latin America and the Caribbean and 87,971 cubic meters per capita for Canada. Latin America and the Caribbean have around one third of the global usable water potential.
As well, Latin America and the Caribbean possess a significant part of the world mineral reserves; 23% of the potential arable land; 23% of the forest and 40% of the animal and plant species in existence, including the world's greats diversity of flora. The sources of bio-diversity are particularly attractive, above all for the big American pharmaceutical companies, which with the FTAA would have the ideal mechanism to liberalize access to that important new material, to re-enforce their "intellectual property rights", and to strengthen their competitive position on the global scale.
Nor should we ignore the principal characteristics of the largest FTAA member's environmental profile, in which the irrational American patterns of production and consumption and their negative impact on the natural environment in the U.S., regionally and globally, stand out.
The U.S. -with less than 5% of the world population- spews 22.2% of world Co 2 emissions, the principal greenhouse gas. Emission per inhabitant of that country averages 19.7 tonnes of Co2 each year, that is, more than nine times the average emissions per inhabitant of the Third World and almost eight times the Latin American and Caribbean per capita average.
Nevertheless, the present administration has repeatedly stated its refusal to ratify the Kyoto Accord pf the United Nations Framework Convention on Climate Change, which has the basic objective of stabilizing the concentrations of green house gases in the atmosphere at a level that would prevent dangerous interference in the climatic system derived from human activities.
On top of this, the U.S. emits 63,8 kg. Of sulfur dioxide (SO2) per capita according to 1993-98 figures, 38% more than the OECD average; the nuclear wastes generated amount to 2,700 tonnes of heavy metal annually (1998). With respect to the recycling of wastes, the U.S., recovering just 41% of the paper and cardboard and 26% of the glass, has remained far behind other industrialized countries that exhibit better behavior on these indicators, like Sweden at 62% and 76% respectively, Holland: 62% and 82%; Switzerland: 63% and 91%; Germany: 70% and 79%; and Austria; 69% and 88%.
On the environment, far from proposing a substantial advance in fulfilling the U.S.'s national, regional and global commitments, the current American administration appears to be acting in the opposite direction, as is confirmed by, for example, the refusal to ratify the Kyoto Accord, and the reduction of federal funds destined to various environmental programmes.
Beyond the rhetoric about how economic growth -through trade and investment liberalization- must be consistent with the objective of sustainable development, the official U.S. positions concerning the theme of the environment at the FTAA negotiations do not contribute concrete proposals for seriously confronting hemispheric and global environmental concerns.
For example, no mention is made of the high environmental cost the liberalization of foreign investments, bearing in mind that many of these investments would be directed toward ecologically sensitive sectors like forestry, mining, maritime transport, extraction of hydrocarbons and fishing, among others.
Nor is there reference to the environmental responsibilities transnational corporation would have, or any indication the U.S. could endorse the principal of caution in adopting environmental regulations. This principle implies taking action opportunely even when full scientific certainty about a specific environmental problem does not exist. As well, the U.S. position concerning the relationship between the FTAA and the multilateral environmental accords, is not being clarified.
In view of these realities, the serious environmental vulnerability problems facing Latin America and the Caribbean would be significantly aggravated under a hemispheric integration scheme like the one proposed under the FTAA.
Latin America and the Caribbean register great dependency on primary activities and on the sectors of transformation and services that use natural resources. During recent years, basic products have come to represent more than 50% of Latin American export income.
This dependency has grown considerably during the last two decades and the present Latin American and Caribbean export structure is more vulnerable than the one that existed 20 years ago, according to CEPAL, estimates. Consequently, the region's terms of exchange as a yearly average eroded by 3,1% during the 1980's and by 0,7% in the 90's.
As well, broad sectors of the Latin American and Caribbean population, who live in conditions of poverty, have no other alternative that to prey to the environment to try to survive and, since this involves underdeveloped economies highly dependent of the export of basic products, as the environment is degraded, the principal sources of export income are significantly affected.
Under these conditions, in trying to compensate for the fall in the prices for export of raw materials by increasing their volume, the regional export effort have generated even greater pressures on natural resources.
The reinsertion of (Latin) America into world markets has been based to a large extend on an export effort and the promotion of foreign investments , relying on exploitation at all cost and the under valuation of the region's natural heritage; the results are disappointing.
In the domain of trade, in spite of the export effort registered, the region's participation in total world exports continues to be very low, barely above 5%. The boom or exports of manufactured goods in some countries of the region, like Mexico, Central America and some Caribbean nations, has largely been associated with the proliferation of assembly activities (maquiladoras) having a low level of integration with the national economies.
According to CEPAL, Latin America has already entered the stage in which abusive and indiscriminate exploitation of existing resources would put a break on development. Thus, for example, it is estimated that 80% of the commercially exploitable fishing grounds in the southwestern Atlantic and 40% in the southeastern Pacific are subject to maximum patterns of exploitation, or to over-exploitation of exhaustion.
A significant part of the environmental deterioration and alteration of ecosystems in Latin America is explained by the effects of the so-called "green revolution" undertaken by the agricultural sector after the Second World War, with heavy participation by transnational capital. In addition to the growing artificialization of the eco-systems, this process accelerated the emigration of campesinos to urban areas, with the adverse environmental implications.
Since the beginning of the 80's, the negative ecological effects of the crisis were added to the highly harmful impact of the adjustment programs imposed on the debtor countries by the international monetary and financial institutions. On the one hand, the process of socioeconomic adjustment has translated into a severe cutback to environmental budgets, with the resulting reduction of monitoring activities; postponement, resizing or cancellation of projects with environmental purposes; and reduction to the minumum of environmental impact studies, among others. As well, the export effort carried out by the debtor countries under conditions of adjustments has given rise to notable pressure on certain export products, with a high environmental cost.
On the other hand, in so far as the adjustment programs have worsened the condition of poverty for broad majorities of the Latin American population, they have also contributed in this way to re-enforce the ecological deterioration in the region.
Among the principal environmental problems the region suffers from the erosion, salinization and reduction in productive capacity of the soils; the deforestation, loss of biological diversity, pollution of the air, oceans and rivers; and the pollution caused by urban wastes and toxic chemicals.
With respect to the soil erosion, it is worrisome that in a region in which the economy of the majority of the countries is based on agriculture and agro-industry, some 300 million hectares (10% of regional territory) are subject to moderate to very severe erosion. To a large extend this problem is explained by the land tenure system prevailing in the region, in which 10% of the population controls 90% of the arable land. This leads to over-exploitation of areas under cultivation, above all on the part of small property owners.
Remember that soil degradation generates desertification and it is estimated that each year regional losses due to desertification may reach a billion dollars. Many of this phenomena like erosion and the reduction of productive capacity of the soils, are closely tied to deforestation and has become worse due to the expansion of the agricultural frontier toward ecologically fragile zones, and overuse of the land. Concerning deforestation, in the last twenty years Latin America and the Caribbean, which possess 51% of the world's tropical forest, have one of the highest rates of deforestation among underdeveloped regions.
Deforestation in these countries has been accelerated of various reasons, such as: new colonization of cultivation or animal husbandry, commercial lumber cutting, inefficient use of traditional bio-mass fuels like firewood and charcoal, construction of new high way networks, and incentives established by certain economic policies that promote activities harmful to the natural environment.
With respect to reserves of potable water, only Barbados, Haiti and Peru suffer from hydrologic stress, although diverse zone in various countries are also affected: northeast and northwest Mexico, areas of the Pacific coast of Central and South America, zones of the Andean altiplano and vast portions of Patagonia.
It should be taken into account that two thirds of regional territory are classified as arid or semi-arid, and demand for waters tends to increase rapidly. As well, more than a quarter of the regional population even lacks adequate water supply and sewage systems. At the same time, there is a high level of water pollution, with adverse impact on human health.
Concerning biological diversity, one of the principal worries is the growing loss of species, many of which have not yet been properly studied. As a whole, the Latin American and Caribbean region occupies the second place as concerns the number of endangered bird species (after the Asia-Pacific); third place in endangered mammals (after the Asia-Pacific and Africa); third place in endangered marine species (after Asia-Pacific and North America); second place in endangered reptiles (after the Asia-Pacific).
As well as the growth of marginal areas and water pollution, what stands our in urban space is air pollution and that caused by solid and toxic wastes.
The region's CO2 emissions in 1999 were 34% higher tan in 1980. That increased was fundamentally generated starting in 1984 due largely to changes in the region's productive structures in the 1999´s associated with the current privatization processes. The main causes for the air pollution are associated with the rapid growth in the number of automobiles, growth of industrial activity and higher energy production, among others. Some of the Latin American cities showing the highest levels of atmospheric pollution are Mexico City, Sao Paulo and Santiago de Chile.
A significant part of the air pollution is attributed to then energy sector, which maintains a high level of dependence on production and consumption of fossil fuels, especially petroleum, and low levels of energy efficiency. In these countries, coherent policies for efficient energy use have not been carried out in a generalized form, due basically to the financial and technological limitations that face the region. According to estimates for recent years, expansion and modernization of the energy sector would require about 20 billion dollars annually in investments.
In this context, the majority sectors of the rural and urban low income population do not have access to basic energy services of the required
Quality. Firewood, the inefficient use of which has highly harmful effects on health, the economy and the environment, continues to hold first place in the residential energy consumption structure of Latin America, above all in the poorest areas like Central America.
Approximately 60% of the region's population depend on firewood and charcoal as domestic fuels; and in general, the traditional bio-mass fuels contribute more than 40% of the total energy requirements of the area's poorest countries like El Salvador, 35%; Nicaragua, 42%; Paraguay, 50%; Honduras, 55%; Guatemala, 62%; and Haiti, 75%, according to United Nations' figures.
While those principally responsible for global atmospheric pollution are the industrialized countries, the underdeveloped ones, including Latin American and Caribbean countries, could see themselves severely affected by the consequences arising from such phenomena as the strengthening of the "greenhouse effect" or global warming.
Thus, for example, the island states of the Caribbean and other countries of Latin America with low shorelines would be among those most prejudiced by the implications of the greenhouse effect, in relation to the foreseeable rise in the level and the greater probability of hurricanes, cyclones and tropical storms, among other negative effects.
In fact, they have already begun to feel some of these adverse consequences; it is suspected that the serious condition of coral reefs known as "bleaching of the coral" is associated with the rising of ocean temperatures caused by global warming. These environmental problems impose a high socioeconomic cost on the region's countries, particularly in strategic sectors like tourism, fishing and agriculture, among others. It should not be forgotten that 60% of the Latin American and Caribbean population lives less that 100 km. From the coast, and 60 of the 77 biggest cities are coastal.
Among the factors of socioeconomic and environmental vulnerability for many Latin American and Caribbean countries is the propensity for natural disasters -tropical storms, hurricanes, tornadoes, river floods, earthquakes, volcanic eruptions, droughts, forest fires and landslides- and the low recovery from these situations.
With respect to the pollution caused by garbage and toxic wastes, the effects of cross-border movements of toxic wastes into the region are particular concerns, in addition to the problems of local management of urban and industrial wastes, especially when the lack of control and evaluation systems for the impacts resulting from this traffic are taken into consideration.
The rising costs for treatment of toxic wastes in industrialized countries -up to about three thousand dollars per tonne- has stimulated the export of these wastes to underdeveloped countries, where they can be buried without treatment for about five dollars a tonne. In these cross border traffic of toxic wastes, their supposed utilization as "raw" or "recyclable material" in the destination countries has often been used as an argument or pretext.
Concerning the link between population and the natural environment, some authors think Latin America has entered a phase of "demographic transition", given that the region's annual rate of population growth was around 1,7% for 1993-2000, down from 2,3% between 1960-1993. Nevertheless, the population dynamic continues to generate strong pressures in terms of additional requirements for food, potable water and natural resource. In industrialized countries, the annual rate of population growth fell from 0,8% between 1960 and 1993 to 0,4% for 1993-2000.
On the relation between urbanization and the natural environment, it is worthwhile to note that in 2000 Latin America was the most urbanized region of the underdeveloped world, with 74% of its population in cities, but poverty has been a factor closer linked to the region's urban problems. Since the beginning of the 80's the majority of the poor in the Latin America and the Caribbean live in urban areas. The growth of urban poverty closely related to the unplanned urban explosion and the proliferation of informal human settlements, in the majority of cases lacking basic services.
The impulse toward modern environmental institutionalization and new regulatory frameworks in the region arose starting from Earth Summit in 1992. As of that date, the majority of countries created ministries as the highest authorities over the environment, for the declared purpose of providing the environmental effort with the required integration and efficiency. Nevertheless, a big gap persists between the proposed objectives and the rules in force, on the one hand, and their real fulfillment, on the other.
Two central problems that required solution without delay at the international level in order to provide comprehensive answers to the requirements of socioeconomic development and environmental protection, are those related to the financing of sustainable development and the transfer of appropriate environmental technologies. Both aspects have particular relevance for Latin American countries, above all in the wake of a "lost decade for growth" in the 80's and the eclipse of the "decade of hope" in the 90's. But the FTAA, far from being an adequate path for achieving such objectives, would constitute and additional obstacle for advancement in those directions under the criteria of development, equity and sustainability.
In recent years, other initiatives compatible with the direction of the FTAA and having and important environmental and/or energy component, have been announced at the regional/sub-regional level. In these sense, note should be taken of the cases of the Mesoamerican Biological Corridor from south-southeastern Mexico to Panama, pushed by the World Bank (2), which corresponds with the interests of the U.S. government, army and transnational corporations; and the Plan Puebla- Panama officially announced by Mexican President Vicente Fox in June, 2001, with the purported objective of contributing to the sustainable development of territories including the Mexican states of Campeche, Chiapas, Guerrero, Oaxaca, Puebla, Quintana Roo, Tobasco, Veracruz and Yucatan; as well as the Central American countries of Guatemala, Belize, El Salvador, Honduras, Nicaragua, Costa Rica and Panama.
Many of the concerns expressed in this paper with respect to the energy and environmental aspects of the FTAA are also valid to the above-mentioned programs, which manifest considerable connection among themselves and with the FTAA project, and likewise, a high degree of correspondence with the interests of U.S. capital in such sensitive sectors as energy, biotechnology, the pharmaceutical industry, and others.

Notes
1. The nine FTTA negotiating groups refer to: investments, competition policy, intellectual property, market access, services, governmental purchases, dispute resolution, agriculture, subsidies, anti-dumping and safeguards.
2. In January 2001, the World Bank authorized 19,1 million dollars for this seven year "ecological" project.