Letter From Chile

Letter From Chile

Neoliberalism has produced an eco-crisis.


A few weeks ago, Latin American trade ministers met in Quito, Ecuador, for what was expected to be a decisive negotiating round for the Free Trade Area of the Americas (FTAA), a far-reaching economic integration agreement involving every country in the Western Hemisphere except Cuba. The FTAA, like the North American Free Trade Agreement (NAFTA), is aimed not just at lowering tariff and nontariff barriers to trade but also at enshrining rules on investment, services, government procurement and a host of other issues, locking into place many of the neoliberal market reforms. Now, with the election in Brazil of Luiz Inácio Lula da Silva, who has said the proposal amounts to the “annexation” of Brazil by the United States, the fate of the FTAA, due to be signed in January 2005, appears less than certain. Da Silva pledges to keep Brazil in the talks but has made it clear that his government will demand significant changes. A leftward shift in politics throughout much of the region, precipitated in part by the failed economic prescriptions of the IMF and its “Washington Consensus” in Latin American countries like Argentina, is putting further strains on the FTAA negotiations.

Despite a growing uneasiness in official thinking about the hemispheric trade accord, one area in which Latin American leaders continue to show no sign of challenging the United States is the environment. Many Latin American countries, including Brazil, still continue to argue against including any environmental constraints in trade accords, on the grounds that such commitments can be used as a form of protectionism. They also argue that they can’t afford to boost environmental controls, or that economic growth and poverty reduction are more important than sustaining ecosystems.

To be sure, there is also growing opposition among Latin American nations to investment rules such as NAFTA’s Chapter 11, which effectively gives transnationals the power to target and invalidate national environmental laws. Take Alicia Frohmann, one of Chile’s chief trade negotiators, who told me in an interview that “to expose ourselves to the kind of demands by US investors like what has happened with NAFTA, where the investors say regulatory changes have been tantamount to indirect expropriation and have demanded huge compensation involving many millions of dollars–well, that would be very difficult for Chile.” And most governments and environmentalists agree on one thing, a NAFTA-style environmental side agreement is not the answer to environmental concerns.

Still, it is not difficult to visualize the ecological future of Latin America in an FTAA-governed world: It is likely to look a lot like Chile, the recognized champion of neoliberalism in the hemisphere. Chile, which is expected to sign on to a bilateral free-trade agreement with the United States before the end of this year, boasts an economy heavily geared toward ever-increasing exports of natural resource commodities: More than 80 percent of its exports are unprocessed or slightly processed minerals, fruit, fish and wood. Meanwhile, taxes are set low to help attract investment, environmental enforcement is lax, government accountability to ordinary citizens a sham and the approval of environmental impact studies for any foreign investment project virtually guaranteed. The mix is attractive to the private sector, but obviously worrisome for citizens, the environment and public health.

“If I am an executive of a foreign mining company,” said Marcel Claude, founder of the Santiago sustainable development think tank Terram Foundation, “and I don’t have to pay taxes and they give me the copper like it’s a gift, and I also have low worker salaries and don’t have to comply with environmental regulations, I applaud this model. But if I am a typical Chilenito, and the investor comes here and pays low salaries, contaminates the water [and] destroys the environment, I don’t feel any benefits from this investment.”

As they rush to exploit and export their natural-resource wealth, Latin American governments have not put in place the safeguards needed to protect workers and the environment. Rather, environmental and public health problems typically have worsened as companies scurry for a comparative advantage in international trade. As one example, Chilean farmers last year imported 18,752 tons of agri-chemicals like pesticides and herbicides, more than twice the amount of 1990. Thirty-seven types of those agri-chemicals are on the United Nations’ list of prohibited or severely restricted pesticides. In some cases countries have even rolled back pesticide protections at the behest of industry. “It is very common that a pesticide banned or severely restricted in the United States can be easily bought over the counter in Chile and other Latin American countries,” says Douglas Murray, a leading expert on pesticide use in Latin America. “What is most striking is how little things have improved in the region despite the awareness of the problem over the past twenty or thirty years.”

Chile’s salmon farming sector provides another telling tale about the impact of expanding trade. Since 1990 Chilean farmed-salmon exports have grown tenfold, to more than 200,000 tons a year. The industry is now the world’s second-largest exporter after Norway, with more than sixty foreign and national companies operating on Chilean rivers, lakes and coastline. But while the average salmon company rakes in as gross earnings about 74 percent of its revenues after labor costs, little is paid to society for the multitude of eco-problems it provokes, like the high levels of water pollution underneath salmon pens, overuse of antibiotics, slaughter of sea lions and overfishing to supply the fishmeal needed to feed the salmon.

The State of Alaska, in an effort to protect its sellers of wild salmon from the threat of cheap Chilean imports, which currently account for nearly 50 percent of the salmon consumed in the United States, is lobbying for new trade rules that require what it calls a “level playing field for environmental regulations, both in promulgation and enforcement.” Chile, Alaskan officials say, is engaging in a form of social and ecological dumping that is made possible by lower labor costs and lower environmental costs stemming in large measure from chronically lax enforcement. Doris Soto, a marine ecologist at Chile’s Southern University, agrees that Chilean agencies don’t have enough people or willpower to monitor and enforce the regulations that do exist. “Government agencies here more often look the other way,” says Soto.

The story of timber is similar. The Chilean forestry industry has replaced most of central Chile’s globally rare temperate rainforest with perhaps one of the more visible symbols of the underside of the global economy–monotonous row upon row of nonnative pine and eucalyptus trees. A 1995 Central Bank of Chile report warned that within twenty to thirty years all of Chile’s original native forests will be destroyed if the current methods of timber exploitation don’t change. Attempts at a native forest protection law have been bogged down in the Chilean Congress for the past ten years.

According to a UN report this year on globalization in Latin America, the Chilean-style neoliberal economic reforms that have taken hold elsewhere in the region have led to similar outcomes. The report warned that low public spending on environmental management (which rarely tops 3 percent of national budgets), attributed in part to budget deficits and high debt obligations to foreign lenders, will make countries powerless to “prevent a steady decline in the quality of their environment and natural resources.” The report also noted with concern the ludicrous trend toward tax competition, in which governments hand out tax relief to attract investment in natural-resource extraction.

A series of events over the past few months pitting environmental groups against Chilean wood and salmon exporters shows how perverse nations can become when they pin their economic fortunes on global trade. Recently environmental groups from Chile, Canada and the United States placed a full- page ad in the New York Times calling attention to the wholesale destruction of Chile’s native forests and announced a global campaign to convince consumers and businesses to buy Chilean wood only from companies whose operations are certified as ecologically sustainable. Timber executives, worried about the implications for their $2 billion annual foreign sales (wood is Chile’s third-largest export), angrily denounced the environmentalists as “antipatriotic” and “liars.” The government’s economy and agriculture ministers leapt to their defense, assuring the media that Chilean forestry companies do in fact comply with environmental laws and that native forests are not at risk.

A recent screening in five US and Canadian cities of a documentary exposing the environmental damage and poor labor conditions of Chile’s farmed salmon export industry provoked a similarly loud backlash. One Chilean congressman described the makers of the video, the Terram Foundation, as “eco-terrorists,” and said that he would seek to have them prosecuted for committing an “economic crime.” And salmon industry executives, like their forestry counterparts, successfully persuaded high-level government officials to launch a spirited public defense on their behalf. Santiago’s El Mercurio, the nation’s largest and oldest newspaper, and considered to be in the pocket of the conservative right, published an editorial questioning the motives of the environmental groups and accusing them of spreading “distorted and false” information. The editorial further urged the creation of “a new type of penal code that prevents and punishes, as a type of crime, these defamatory campaigns.” Meantime, in an ominous throwback to tactics prevalent in the Pinochet dictatorship era, the offices of two Santiago-based environmental groups were broken into; computers and information stored on hard drives were stolen. These incidents, however, received no attention.

The close cooperation between the government and the private sector in Chile to cover up proven environmental damage for the sake of maintaining international market share demonstrates clearly the need for counterbalancing international environmental safeguards. What is happening in Chile is taking root all over Latin America: Eco-crises and unsustainable natural-resource exploitation are spinning out of control and are bound to magnify many times over in a hemisphere-wide free-trade zone. Even if governments get around to addressing the environmental issues associated with an FTAA, considering the institutions at that table, any solutions agreed upon are likely to be piecemeal at best. Meaningful citizen participation in the FTAA, or any bilateral free-trade talk, for that matter, is paramount. Latin American leaders would be well advised as well to do battle for the development paradigm with the greatest long-term chance of success for all stakeholders: an ecologically sustainable and restorative society.

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