Resource nationalism in Latin America

The progressive nationalization of natural resources in the developing world has nary been more pronounced in recent years than with legislation passed by the governments of Venezuela, Bolivia, and Ecuador. These three nations are governed by leaders who have been heavily influenced by political ideologies which call for national governments to take control over their natural resources, as part of an effort to become self-sustaining economies free of foreign influence.

The decision by some leaders in Latin America to progressively acquire a monopoly of state control over their countries’ natural resources – which also act as the main conduits for foreign investment – have naturally left Western investors and corporations in a bind. Traditionally, political hostility in Venezuela, Bolivia, and Ecuador has been directed towards US policies and corporations in the region, but Canada has recently found itself at the certain of a brewing battle emerging from the Bolivian brand of resource nationalism.

Vancouver-based mining firm South American Silver Corp. was effectively declared ‘corporis non grata’ in Bolivia last week when the president of the Andean nation, Evo Morales, cancelled the Canadian company’s mining rights and appropriated control over its flagship Malku Khota silver mine. The nationalization of the mine follows closely on the heels of a similar event last month when Morales declared government ownership of the Colquiri tin and zinc mine which was owned by Glencore International PLC, a global mining powerhouse.

Although South American Silver CEO Greg Johnson noted his surprise at the quick nationalization of his company’s assets in the country with little prior warning, Bolivia has followed closely in the footsteps of its powerful regional ally, Hugo Chavez’s Venezuela, a country that has quickly nationalized components of its mining, energy, construction, and telecommunication sectors as a part of its “Bolivarian Revolution”. It should therefore come as no surprise that Morales swiftly revoked the company’s mining rights and put the mine under direct government control. The Bolivian president’s decision to override South American Silver’s operations at Malku Khota comes after mass protests by indigenous people in the area who are opposed to the mining company’s presence.

Resource nationalism amongst the member states of the “Bolivarian Alliance for the Americas” – an economic and political hub consisting of Venezuela, Bolivia, Ecuador, Nicaragua, Cuba, Dominica, Antigua, and Saint Vincent – has resulted in the evaporation of investor confidence in the region, as well as the loss of outside access to much of the resource-laden South American continent. Although the Ecuadorian government has not followed suit in nationalizing its natural resources as its allies Bolivia and Venezuela have done, President Rafael Correa (a close personal friend of both Morales and Chavez) threatened in the past to nationalize his country’s oil sector.

Outside of the Bolivarian Alliance, other Latin American countries have broached the topic of nationalization, raising further concern for foreign investors. In Argentina for example, the government of President Cristina Kirchner recently nationalized a Spanish-owned oil company called YPF and declared it a public utility sending foreign investors into a frenzy to ditch their corporate assets, with the conglomerate now under state control. Interestingly enough, Kirchner’s political base in the ruling Justicialist Party (Partido Justicialista) derive their governing strategies from the manifesto of the late Argentine leader Juan Perón, an ideology which calls for a three pillar model comprised of “social justice, economic independence, and political sovereignty”.

While the Justicialist model is more similar to centre-right conservative models seen under Latin American regimes in the 60s (Pinochet’s Chile comes to mind), the role of resource nationalism in the region has been adopted by countries with vastly differing political heritages. Accordingly, alarm bells are ringing for corporate and governmental bodies seeking to develop Latin America’s mineral wealth, and this is no surprise given the fact that nationalizing of privately held assets is enough to spook companies who strive for leverage and control over their multi-billion dollar operations in the developing world.

Peru, much like its other Latin American neighbours, has recently waded into the resource nationalism controversy after that country’s electorate chose a candidate from the Nationalist Party, Ollanta Humala, as the nation’s new president. Humala’s predecessor, Keiko Fujimori, was known to be “investor-friendly” according to BusinessWeek. The new president however, comes from a similar ideological school of thought that is touted by Argentina and the Bolivarian Alliance. Upon his election, foreign investors immediately began selling their stocks in the Andean country, although Humala soon made it clear that he did not plan to nationalize foreign-held energy assets.

Still, resource nationalism is gaining popularity not only amongst national governments in South America, but also amongst ordinary citizens. This situation has unfortunately transpired into violent incidents in some places like in the Peruvian state of Cajamarca, where a massive gold mining project presided over by Denver-based Newmont Mining Corporation was met by angry protests from local inhabitants and resulted in the death of one protester a few weeks ago.

On another closely-related side note, the indigenous peoples of South America have also factored into the issue of resource nationalism by asserting their own traditional ownership over their tribal lands all over the continent. With an estimated 48 million-strong population, Amerindian populations are a force to be reckoned with as well by both national governments in their home countries, and by international investors. The detention of suspected FARC rebels in Colombia by tribesmen from southwest Colombia shows that aboriginal populations are also fed up with outsider influence in their affairs, and we can expect to see many more indigenous and non-indigenous Latin Americans pushing back against foreign corporations under the aegis of resource nationalism.