Abstract
In recent decades there has been a tendency throughout Latin America of the expansion of activities associated with the primary sector, such as mining, oil, cattle and soy, namely reprimarization. This tendency reflects the growth of the commodities markets and China in recent years. This paper examines the implications for both the environment and development in general, as a result of the reprimarization tendency in Argentina and Brazil.
1. Introduction
In recent decades there has been an expansion of activities associated with the primary sector, such as mining, oil, cattle and soy, throughout Latin America. Where this has come at the expense of manufacturing industry, this tendency is often referred to as reprimarization. This reflects the strong growth of the commodities markets during recent years and is thus linked to the stellar growth of China. In examining the shift to reprimarization in Argentina and Brazil, there are a range of key impacts on the environment, the most notable being: (1) deforestation of the Amazon Rain Forest linked to the expansion of lumber, cattle and soy; (2) air, water, and soil pollution as a result of mining and the use of pesticides in agriculture, especially for soy; (3) soil erosion as a result of mining and soy. There are also major socio-environmental concerns around the issue of hydroelectric dams, strongly tied to mining in several countries of Latin America. This paper examines the implications for both the environment and development in general, as a result of the reprimarization tendency in Argentina and Brazil. Beyond the environment, there are also major concerns with respect to industry, wages, informal work, and the perennial problem of being just primary goods providers to the first world, rather than seeking a means by which a serious alternative development trajectory could be pursued.
In Latin America, since the turn of the century, several countries experienced victories of left or center-left parties, and a subsequent break from orthodox neoliberal policies. In the case of the two largest economies of South America, namely Argentina and Brazil, many have argued that the changes that took place constitute a new model of economic development, namely, new developmentalism. 2 In the next section, a brief summary of neoliberal globalization is presented and how this has contributed to the tendency of reprimarization in Latin America. In the third section, the relationship between the reprimarization tendency and the environment is considered. In the fourth section, reprimarization and the implications for development are critically evaluated and alternative trajectories discussed, and lastly, overall conclusions are presented.
2. Neoliberal Globalization and the Tendency Toward Reprimarization
For most of Latin America, exporting of primary goods predominated until the early decades of the 20th century. The Great Depression during the 1930s marked a point of inflection regarding the centre-periphery dynamic. As a result, certain countries pursued the policies of Import Substitution Industrialization (ISI), and thus increased their economic autonomy. As a result of this historical shift, Brazil and Argentina became two of the most industrialized countries in Latin America.
2. 1. Neoliberal globalization
During the 1970s the IMF encouraged the expansion of debt for countries such as Argentina, Brazil and Mexico. This led to increased industrialization for Brazil and Mexico, but unfortunately to deindustrialization for Argentina. This increased debt became problematic, especially after the Volcker interest rate shock of 1979. In fact, it was seen as the principal catalyst for the debt crisis in Latin America during the 1980s. As a result, the IMF and creditors of the first world used the debt crisis as leverage for forcing countries to adopt neoliberal policies, often undermining national industry. For example, free trade meant less protection for national industry and financial deregulation increased financial speculation often at the expense of investment in manufacturing.
TNCs were also key actors in this process of neoliberal globalization, transforming production processes across the globe. Associated with the increasing domination of transnational corporations (TNCs), there has been the emergence of a transnational capitalist class (TCC), as argued by Robinson and Sklair (Robinson 2004 and 2008, Sklair 2001). This has been concomitant with the expansion of transnational commodity chains across the globe. Given the imperative to accommodate the interests of TNCs and the new TCC, there has been a decline in terms of the importance or relevance of national policies, be it industrial, commercial or financial. Between transnationalization and the implementation of neoliberal policies, there was a clear end to the alternative represented by ISI.
2. 2. Neoliberal reforms and mining
The neoliberal reforms in the mining sector were particularly notable and in Latin America, at least 14 countries made changes to accommodate TNC investment in mining. The reforms were implemented, as much in countries with a major mining tradition, such as, Chile, Bolivia, México and Brazil, as in those countries which had been almost inactive, such as the cases of Ecuador, Argentina, Uruguay, Paraguay and Colombia. Investments in mining exploration in Latin America increased by 500 percent between 1991 and 1999 (see Borg 1998). Latin America went from being the fourth most common destination for investment in mineral exploration in 1991, to the primary destination by 1997. The amazing growth of China then led to the surge in the prices of metals at the world level, quadrupling between 2002 and 2007. As a result, many Latin American countries experienced an increased role of the State in mining and associated infrastructure projects.
2. 3. Tendency towards reprimarization in Argentina and Brazil
During the last fifteen years, there has been a marked increase of trade and investment with China, primarily driven by China’s interest in insuring the supply of raw materials. China has increased trade and investment, as well as purchasing land in many countries of the region, linked to several sectors: agroindustry, hydroelectric dams, mining, and infrastructural projects. In part, this has been accomplished through major loans for several Latin American countries. Before considering reprimarization, a brief discussion of deindustrialization in Argentina and Brazil is presented below.
2. 4. Deindustrialization in Argentina and Brazil 3
In the case of Argentina, the first wave of deindustrialization began in 1976 with the dictatorship and the second was during the 1990s with Menem (see Cooney 2007). The first period reflects several issues, though most significant for reprimarization was the move away from manufacturing toward seed oils and soy, while the second period in the 1990s reflected the deepening of neoliberal policies and accommodating the rules imposed by the WTO.
From the 1930s through the 1970s, Brazil experienced several decades of solid industrial growth, becoming the industrial powerhouse of the region. Considering the most cited measure of deindustrialization, namely manufacturing’s share of GDP in percentage terms, Brazil achieved its maximum percentage in 1986, at 32%, but has dropped to roughly 15 percent (see Figure 1). This latter tendency is also evident in the series for manufacturing value added as a percentage of GDP, having declined from over 35 percent of GDP in 1986 to only 10.91 percent in 2014. Brazil maintained the highest interest rates in the world, in order to continue attracting foreign capital, yet leading to an overvalued currency. In spite of success for the financial sector, it clearly hurt manufacturing.
Value Added by Brazilian Manufacturing Industry (Percent GNP), 1947-2013.
3. Impact of Reprimarization on Exports in Brazil
Exports tripled between the years 1999 and 2009, however the exports of primary goods grew by 525 percent. As seen in Figure 2, the ratio of primary goods exports to that of industrial exports has increased substantially. In 1995, this ratio was 0.31, implying that primary goods represented less than a third of industrialized goods. Over the last fifteen years, this index continually increased, reaching 0.99 in 2014. The principle products exported by Brazil in 2014 are primary goods: iron, soy oil and other soy products, sugar, coffee and beef.
Ratio of Primary to Manufacturing Exports (Brazil, 1995-2014).
4. Reprimarization and the Environment
The principal socio-environmental impacts brought about as a result of the tendency toward reprimarization are presented below, ranging from deforestation in the Amazon, to problems of air, soil, and water pollution, to the problems of hydroelectric dams.
4. 1. Deforestation of the Amazon rain forest linked to, lumber, cattle and soy 4
The Amazon currently constitutes a frontier for capital accumulation, with an ever growing presence of TNCs. In recent decades, the economic expansion in the Amazon has been increasingly integrated with world markets, primarily for soy, cattle, lumber, and minerals. A common trajectory is the removal of trees for the lumber industry in order to establish cattle ranching. This is often followed by an intermediate crop prior to the planting of soy, given the need for reestablishing the nutrients in the soil lost during livestock production. Although soy is heralded as a green and environmentally friendly alternative to cattle ranching, it is often the motor behind the process of deforestation in the Amazon, given its higher profitability, associated with extracted ground rent. Moreover, the issue of deforestation is not just a Brazilian issue, but is relevant for concerns of climate change for the planet.
From 1990-2007, the gross value of soybean production in the Amazon region grew by 21 percent per year, while cattle herds were growing at rates of 7 percent per year, compared to less than 1 percent for the rest of Brazil. Most of the growth in Brazilian cattle—an increase of more than 180 percent in 16 years —occurred in the Amazonian states of Mato Grosso, Pará, and Rondônia, where deforestation is greatest.
4. 2. Soy, pesticides and GMOs 5
The famous Green Revolution took place in the 1970s, introducing new varieties of grains, cereals and seed-oils and biotechnology was key for the production of soy, among other crops. The recent shift toward a more intensive use of biotechnology reached a more mature stage in the 1990s. This was with the introduction of a technological package including genetically modified zero-tillage seeds (GMOs), more agro-toxins, such as fertilizers, pesticides and herbicides, especially glyphosate (Teubal 2006). In Argentina, this shift led to a significant replacement of cattle for soy and wheat, especially the former and the increasing role of the ever more dominant GMOs and toxic cocktails. At present, both Brazil and Argentina are two of the main producers and exporters of soy with transgenic soy constituting almost 100 percent of Argentine production, and 93 percent of Brazilian production.
“Roundup Ready” is a variant of a soy seed particularity resistant to glyphosate. As a result, the intensive use of “zero tillage” combined with RR increased productivity and reduced the level of erosion initially. However, afterwards the opposite took place as the toxic cocktail ended up impoverishing the soil in terms of nutrients, particularly impacting the microbial mechanisms necessary for a healthy subsoil. The soil eventually suffered an erosion worse than the initial one and led to the destruction of key aspects of the biosphere. The use of pesticides also affects workers and moreover, are transported through the air, impacting adjacent communities, causing general health problems as well as more serious illnesses, such as cancer or anencephaly.
The growing expansion of zero tillage, the transgenic seeds and pesticides increased land concentration in Argentina significantly: 82 percent of the producers occupy only 13 percent of the land, while 4 percent of the large producers occupy 65 percent. Currently, six major export companies dominate all the value chain production of soy and 50 percent of the lands are in the hands of 2 percent of the property owners (CIFRA 2011). A key factor is the transnationalization of inputs, in which the small clique of TNCs achieved consolidation as providers of seeds, fertilizers, and pesticides and thus capturing an increasing portion of the ground rent generated by such activities. The TNCs associated with agrochemicals include Monsanto, Syngenta, Nidera and Bayer, while those which dominate the grain business are referred to as ABCD: Archer-Daniel Midland, Bunge, Cargill and Dreyfus (Kejsefman 2014). It is worth noting the extent to which these mostly foreign TNCs have come to capture a major portion of ground rent through the imposing of GMOs, pesticides, and zero-tillage technology.
4. 3. Environmental impacts and resistance in mining 6
A major role being carried out by the State has been the development of hydroelectric dams, which are fundamental for the generation of electricity necessary for the processing of minerals. This has brought about a number of serious social and environmental conflicts during recent years. In the case of Brazil, there have been major conflicts, such as Rio São Francisco in the northeast of Brazil and Belo Monte, in the State of Pará, with the projected displacement of 24,000 people, many of which are indigenous communities.
Other environmental problems with mining involve toxic waste generated, especially due to the increased usage of toxic chemical reagents. There are also the problems brought about through processing and chemical treatment; thousands of tons of rock are processed, of which more than 90 percent are solid and liquid waste. In addition, the tendency toward open pit and large scale mining only exacerbates the situation. There are diverse forms of chronic contamination and accidents which impact the air, soil and water, deforestation, and irreversible changes to the water table, etc. These are all issues generating negative effects for public health.
According to the Observatory of Conflicts in Latin America (OCMAL), 7 in 2014 there were roughly 180 social conflicts around the mining areas in Latin America—the region with greater indices of conflicts of this type, reflecting the negative impacts on peasant and indigenous communities. In the particular case of Argentina, OCMAL documented 26 social conflicts linked to large scale mining projects over the period of the last 2 decades, from the provinces in the north, such as Jujuy through to Patagonia, such as Santa Cruz. There are numerous examples of communities becoming organized around environmental issues related to mining and soy among other activities, such as the Union of Citizen Assemblies (Unión de Asambleas Ciudadanas-UAC), composed of concerned communities all over Argentina. 8 There are many other relevant cases in Argentina and Brazil, and elsewhere, but due to space limitations, they cannot be elaborated upon here.
5. Reprimarization and Implications for Development in Latin America
As discussed above, the increasing transnationalization of the global economy has been a major factor in explaining the tendencies toward both deindustrialization, but especially reprimarization, in recent decades. In addition to the role of the State, TNCs and the emergence of the TCC, and the role of the WTO have also been crucial. At present, most countries in the periphery have minimal chances of seriously competing on the world market in the area of manufacturing other than TNC assembly plants and are thus forced to rely on those exports which have an associated differential rent, namely primary goods. In fact, if the WTO rules were in effect in the 19th century, neither the U.S., nor Germany could have come to have the success they did in competing against Great Britain (see Chang 2002).
5. 1. Evaluation of current trajectories
As referred to above, recent changes reflecting a break from orthodox neoliberal policies have been pursued in several Latin American countries. In the case of the two largest economies of South America, namely Argentina and Brazil, several authors describe these changes as constitutive of a new model of economic development, namely, new developmentalism. 9
After the crisis of 2001-2002, Argentina achieved growth rates of roughly 8-9 percent from 2003 through 2008, but since then the results have been more mixed and most recently troubling, with the growth of GNP being an anemic 0.5 percent in 2014 and 2.1 percent in 2015, Argentina has officially entered a recession in 2016, with a forecasted –1 percent for the year 2016. Moreover, there are major concerns with inflation, unemployment, wages and the informal economy. In the case of Brazil, during the period of Lula’s government, from 2003-2010, the growth of GDP was 4 percent and during the government of Dilma from 2011-2014, it was slightly more than 2%. However, it was a mere 0.1 percent in 2014 and in 2015, Brazil entered a recession, with a decline of –3.8 percent, and an estimated drop of –3.4 percent for 2016. ECLAC is predicting a contraction of roughly 1% for all of South America in 2016, given the decline in commodity prices and the recessionary trend globally.
Thus, the expectation of higher growth and major advances in real wages associated with new developmentalism is not reaching fruition in either Argentina or Brazil. Nevertheless, infrastructural projects did experience reasonable growth recently, especially those associated with projects linked to reprimarization, such as hydroelectric dams. In both Argentina and Brazil, recent agreements with China reflect the latter’s increased role supporting infrastructure for the production and transport of principally primary goods.
In spite of shifts away from orthodox neoliberal policies, the support of the elites has been for prioritizing primary goods production, implying the continuity of the tendency of reprimarization. Moreover, the reality is that any country that is a member of the WTO has by necessity a neoliberal trade policy, and thus serious limitations regarding the possibility of autonomous national policies. Overall, this has led to notable industrial decline, in spite of exceptions of certain industrial niches, which have had success, such as satellites in Argentina and military airplanes in Brazil.
In spite of the claims of both countries being in a phase of new developmentalism (see Cooney 2015), both these economies have seen a significantly reduced role for industry compared to the ISI period. In spite of the advances of industry in the ISI period for both Argentina and Brazil, neither were able to fully consolidate their processes of industrialization. In evaluating the current trajectories and potential for Argentina and Brazil, the hopes of greater autonomy in the region are strongly tied to the potential of the regional trading bloc, namely Mercosur.
5. 2. Alternative trajectories for development
The current situation of Mercosur and the economies of Brazil and Argentina are by no means optimistic in the short or medium term, and yet Mercosur is where the greater possibility of development lies. There is a need to examine more closely the specific limitations that derive from WTO membership: limiting the options individual countries previously had regarding trade policies, tariffs, subsidies, etc. This has resulted in the loss of autonomy for countries to pursue policies aimed at fomenting national development.
Unfortunately, breaking from the WTO at present would mean suicide for any single country and will only be successful if done by a bloc, of say 20 or more countries, either exiting en masse or threatening to exit unless an overhaul is carried out. In my view, the former would make more sense but neither are on the table politically or economically at present and would only become feasible if a major crisis or shake up in the world economy analogous to what took place in the 1930s were to occur.
Perhaps most fundamental is the issue of class alliances. The current trajectories referred to as new developmentalism, are still dominated by the interests of the elites linked to the transnationalization of the economy, namely the emergent TCC, than to the working classes or the possibilities of a class alliance associated with industrialization. Thus, the changes in Argentina and Brazil, which broke from neoliberal orthodoxy achieved improvements regarding social inclusion, but did not result in structural changes necessary for pursuing a new model of development capable of sustained improvements in the standard of living for the majority. It is necessary to recognize that the elite base of economic power is often the same for progressive governments, needing to accommodate these increasingly transnationalized elites, which have placed their bets on the processes of reprimarization and global financial markets.
One alternative trajectory would require developing regional industrial policy in the context of Mercosur and pursuing complementarity instead of direct competition. However, there seems to be more evidence supporting the continuity of reprimarization with economies dominated by agro-exports and mining and oil instead of the possibility of both Brazil and Argentina forging new ground in the pursuit of a truly new developmentalism.
6. Conclusions
This paper, though reflecting preliminary research, presented evidence regarding the tendency of reprimarization in Argentina and Brazil and the implications for the environment and development. As argued, the reprimarization tendency was made possible given the decline of manufacturing industry, followed by the surge in commodity prices associated with the growth of China. Clearly, the increasing hegemony of TNCs and the imposition of the rules of the WTO have also been fundamental.
The implications of reprimarization for the environment were examined for Argentina and Brazil. In the case of the Brazilian Amazon, it was shown that the problems of deforestation, pollution and social disruption were clearly linked to the expansion of lumber, cattle, soy and mining. Moreover, the expansion of genetically modified soy and the increased usage of pesticides, especially glyphosate, were evaluated for both Argentina and Brazil, recognizing a number of public health issues. In addition to these health problems, there are concerns over the medium term regarding soil erosion and a depleting of the soil’s nutrients given the intensive use of toxic chemicals in agriculture, not to mention concerns for food production for local populations, not just exports. Lastly, the range of socio-environmental problems associated with mining were briefly discussed. The major concerns are with respect to air, water and soil pollution, in addition to the socio-environmental impacts of hydroelectric dams, promoted primarily for the high levels of electricity needed for mining, and often leading to major displacement of local and indigenous populations. There is a growing resistance in Latin America by communities to many of these problems, including expropriation, toxic spills, mud slides or pollution for workers and communities, although often with mixed results.
In the last section, the claims of a new developmentalism model were questioned and the prospects for development in the near future evaluated. Unfortunately, the possibilities of an alternative development strategy seem unlikely in the near future given the WTO, the hegemony of TNCs, the emergent TCC, and their commitment to reprimarization in both Argentina and Brazil. Moreover, the swing to the right with the newly elected government of Macri in Argentina and the reactionary technical coup détat bringing Temer to power in Brazil, suggest an alternative development strategy is much less likely in the short term.
Footnotes
Declaration of Conflicting Interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author(s) received no financial support for the research, authorship, and/or publication of this article.
1
Due to space limitations, a number of issues and discussions were either removed or reduced compared to the original presented at the ASSA 2016. Moreover, as this is preliminary research, this article is not as coherent or complete as it will be eventually.
2
3
For further discussion of deindustrialization and reprimarization in Brazil, see our article in RRPE: Trindade et al, 2016.
4
6
For more on reprimarization in Latin America, especially for mining, see Cooney and Sacher, 2015.
8
See Aranda, 2015.
9
See footnote 3 above.