Natural Resources are the Common Goods of Humanity

20 July 2008 by CADTM


Controlling the use of natural resources is one of the major concerns of all governments. However, large quantities of these natural resources are found in countries of the South (oil, metals, diamond, timber, etc.) and thus attract the great powers, such as the US, the EU or China, who have an imperative need for them to feed their economies. The consequences are often tragic for people in the Global South, who cannot benefit from their own resources. For instance the Democratic Republic of the Congo is often called a ’geological scandal’ because of the contrast between its incredible mineral riches and the fact that over 70% of the Congolese population suffer from malnutrition. Does uranium in the Niger subsoil benefit the Nigerian people or Areva –a French corporation-?

The looting of natural resources, with the complicity of leaders of the South and the North, backed by international donors such as the World Bank World Bank
WB
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

and the IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org
, is to the benefit of Western multinationals. The keystone of the whole system is the loans which have been handed out since 1960-1970 by large private banks and the World Bank in order to get hold of these resources as cheaply as possible. While issues of human development were ignored by the creditors, the explosion of debt accumulation by countries of the South would coincide, at the turn of the eighties, with a brutal rise in interest rates Interest rates When A lends money to B, B repays the amount lent by A (the capital) as well as a supplementary sum known as interest, so that A has an interest in agreeing to this financial operation. The interest is determined by the interest rate, which may be high or low. To take a very simple example: if A borrows 100 million dollars for 10 years at a fixed interest rate of 5%, the first year he will repay a tenth of the capital initially borrowed (10 million dollars) plus 5% of the capital owed, i.e. 5 million dollars, that is a total of 15 million dollars. In the second year, he will again repay 10% of the capital borrowed, but the 5% now only applies to the remaining 90 million dollars still due, i.e. 4.5 million dollars, or a total of 14.5 million dollars. And so on, until the tenth year when he will repay the last 10 million dollars, plus 5% of that remaining 10 million dollars, i.e. 0.5 million dollars, giving a total of 10.5 million dollars. Over 10 years, the total amount repaid will come to 127.5 million dollars. The repayment of the capital is not usually made in equal instalments. In the initial years, the repayment concerns mainly the interest, and the proportion of capital repaid increases over the years. In this case, if repayments are stopped, the capital still due is higher…

The nominal interest rate is the rate at which the loan is contracted. The real interest rate is the nominal rate reduced by the rate of inflation.
, combined with the collapse of prices of raw materials, and finally the debt crisis. The consequences have proved to be dramatic, with IMF-imposed Structural Adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.

Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).

IMF : http://www.worldbank.org/
Programs, along with free-market economies, massive privatisations, enormous reductions in government budgets for health, education, etc., worsening of the standard of living, etc.

However, talking about “a curse of natural resources” is not appropriate here, because it clouds the deliberate strategy to monopolise these resources and the key role of the IMF and the World Bank. In fact, meagre debt reductions have been granted in exchange for the strict application of measures elaborated by their ultraliberal experts, measures which include massive privatisations in strategic sectors of the economy, the renouncing of any control whatsoever over the movement of capital, the opening up of the market, putting small local producers in direct competition with large international firms. The winners have been the same for years. Their names are Total, Exxon Mobile, BP, Shell, Bouygues, Bolloré, Aréva et al.

This global social injustice has, since the year 2000, led certain public authorities in Latin America to take control of their own natural resources. For example, water has been re-nationalised in Bolivia, Argentina and Uruguay, and oil reserves have been partly nationalised in Venezuela, Bolivia and Ecuador. Each time the European Union and the United States protested vigorously and their leaders unhesitatingly transformed themselves into sales reps for the large companies who in fact helped them get into power in the first place… Thus, the exploitation of natural resources of the South ultimately benefits the shareholders of the major corporations of the most industrialised countries, leaving no scope for development in the South. This goes against the rights of peoples to self-determination, in contravention of the major juridical texts such as the UN Charter.

In Latin America, recovering control of these common goods Common goods In economics, common goods are characterized by being collectively owned, as opposed to either privately or publicly owned. In philosophy, the term denotes what is shared by the members of one community, whether a town or indeed all humanity, from a juridical, political or moral standpoint. , which had been privatised under orders from the IMF and the World Bank, was only possible because of the considerable mobilisation of the people. The social struggle and political victory in Bolivia and Venezuela are symbolic of this turnaround of the situation in the people’s favour. After fifteen years of neoliberalism imposed on Bolivia by the international financial institutions with, since 1985, the laying-off of 23 000 public sector miners, 5 000 private sector workers and 18 000 civil servants, the Bolivian people gave the rest of the world a master class in public mobilisation for the defence of common goods. First, in 2000 in Cochabamba, the Bolivian social movements demanded the rights to water, and the US multinational Bechel had to pack up and leave. In 2005 in El Alto, the French multinational Suez was thrown out by the public authorities of the country, under pressure from the people who have managed to recover the management of their water resources from the private companies. During this time, the Bolivian president, Gonzalo Sanchez de Lozada had been forced to stand down following the people’s struggle for the public control of gas, which had led to the death of tens of people through the violent repression of riots. This is the context in which, at the end of 2005, Evo Morales became the first indigenous president of Bolivia. With the backing of the whole population, who had voted in a referendum on 18 July 2004, Morales signed a decree on the 1st of May 2006, nationalising the hydrocarbon reserves and targeting 26 foreign multinationals. This decree is not only legitimate, it is also perfectly legal.

Venezuela is also an interesting case since the decisions of the president Hugo Chavez over energy resources are also the direct result of the people’s mobilisation. The State of Venezuela took control of the oil company PDVSA, which led to the aborted April 2002 coup by the US-backed capitalist class. It was thanks to a popular uprising that Chavez was brought back to power two days after the putsch.

These nationalisations, although roundly denounced by the western leaders and the media, are in fact quite simply the application of international law. Since UN Resolution 1803 of 14 December 1962 concerning the permanent sovereignty of States over natural resources, numerous legal documents have reaffirmed the right of public authorities to take all measures necessary to ensure the well being of the population. The right to nationalise is even an international legal obligation, in virtue of the “Declaration on the Right to Development” adopted by the UN General Assembly on 8 December 1986 – a seminal text which the CADTM wants to highlight. The right of public authorities over the extraction, management and commercialisation of natural resources is thus inherent to State sovereignty, and the sovereignty of States is the basis of international law. The court actions taken by the multinationals before the ICSID ICSID The International Centre for the Settlement of Investment Disputes (ICSID) is a World Bank arbitration mechanism for resolving disputes that may arise between States and foreign investors. It was established in 1965 when the Washington Convention of that year entered into force.

Contrary to some opinions defending the fact that ICSID mechanism has been widely accepted in the American hemisphere, many States in the region continue to keep their distance: Canada, Cuba, Mexico and Dominican Republic are not party to the Convention. In the case of Mexico, this attitude is rated by specialists as “wise and rebellious”. We must also recall that the following Caribbean States remain outside the ICSID jurisdiction: Antigua and Barbuda, Belize, Dominica (Commonwealth of) and Suriname. In South America, Brazil has not ratified (or even signed) the ICSID convention and the 6th most powerful world economy seems to show no special interest in doing so.

In the case of Costa Rica, access to ICSID system is extremely interesting: Costa Rica signed the ICSID Convention in September, 1981 but didn’t ratify it until 12 years later, in 1993. We read in a memorandum of GCAB (Global Committee of Argentina Bondholders) that Costa Rica`s decision resulted from direct United States pressure due to the Santa Elena expropriation case, which was decided in 2000 :
"In the 1990s, following the expropriation of property owned allegedly by an American investor, Costa Rica refused to submit the dispute to ICSID arbitration. The American investor invoked the Helms Amendment and delayed a $ 175 million loan from the Inter-American Development Bank to Costa Rica. Costa Rica consented to the ICSID proceedings, and the American investor ultimately recovered U.S. $ 16 million”.

https://icsid.worldbank.org/apps/ICSIDWEB/Pages/default.aspx
(International Centre for Settlement of Investment Disputes – the World Bank tribunal) are of little consequence since the sovereign decisions taken by the Bolivian and Venezuelan governments are legal.

Bolivia also set the example by leaving the ICSID on 2 May 2007, rightly arguing that the organisation is simultaneously judge and party, since it is a branch of the World Bank. Bolivia is thus a member no more and the new Constitution, which will be put to referendum this year, has a provision, in Article 135, stipulating that all companies operating in Bolivia must be subjected to the sovereignty, laws and authorities of the Republic. A good example to follow…

Evo Morales declared on 26 January 2006: “We have to nationalise our natural resources and set up a new economic system. (…) It is not a question of nationalising for its own sake, be it our natural gas, oil, mineral or forest resources, we have to industrialise them” and he did it, which proves that, in spite of strong resistance, it really is possible to overcome the stranglehold of the IMF and the World Bank.

An enlightened path that must not be abandoned. It is in the interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. of the governments of the South to carry out debt audits to determine which debts are illegal and odious so as to repudiate them. Income from the extraction of natural resources should never be used to repay such debts. Together developing countries can invent new systems of mutual help and exchange, so that benefits from the exploitation of natural resources serve the people of the countries concerned. The mission statement of the Bank of the South, the future alternative to the World Bank, should make it possible to finance regional integration projects in the seven Latin American countries involved in this project, which would provide them with the means to extract, process and sell the natural resources while protecting the environment of these countries.

Public powers of the countries of the South have the inalienable right of property and exploitation over their natural resources to the benefit of their populations, which is vital to finally build a socially just and environmentally sustainable economic model. However, political will is needed to improve the living conditions and the elaboration of a logic based on the realisation of the fundamental human rights. The common goods must not be abandoned to a handful of millionaires while hundreds of millions of individuals do not have access to basic needs and services. The authors of human rights violations, like those who loot natural resources to the benefit of a handful, must now answer for their unjust acts.




The authors are Solange Koné, Damien Millet, José Mukadi, Victor Nzuzi, Salissou Oubandoma, Aminata Touré Barry, Ajit Muricken, Eric Toussaint and Renaud Vivien (CADTM), all members of the international CADTM network (Comité pour l’Annulation de la Dette du Tiers Monde – Committee for the Abolition of Thrid World Debt) in Belgium, Ivory Coast, France, India, Mali, Niger and in the Democratic Republic of the Congo. See www.cadtm.org

Translated by Elizabeth Anne, Christine Pagnoulle and Diren Valayden

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