Mining Sector in Latin America recent trends and pending challenges in Resources Governance

Jean Acquatella Ph.D Economic Affairs Officer, Natural Resources Division U.N ECLAC, Santiago, Chile UNEP, ECLAC, Min. Environment Chile–High Level Seminar 25 May 2014,

Contents 1. Mining sector trends in Latin America – –

Mining sector response to the 2003-2013 metals price cycle Mining rents and private investment in exploration and development.

2. State participation in Mining sector Rents during 1990-2013 -

Analysis of State’s participation in mining rents. Resource governance challenges.

3. Resources governance challenges to leverage Mining sector contribution to post-2015 development goals. – – – – –

Need to improve progressiveness during up-cycles. Review and improve existing Mining taxation instruments ( RRT, windfall taxation, avoid fiscal competition through strengthened regional integration) Improved public investment and use of resource rents ( resource rent long term investment and stabilization funds, with specific uses?) Increased transparency and accountability of rent generation and investment. Local development impact and managing of socio-environmental conflicts.

In Latin America the productive structure remains concentrated in primary sectors LATIN AMERICA AND THE CARIBBEAN: EXPORT STRUCTURE BY TECHNOLOGY INTENSITY, 1981-2010 a (Percentages of the total)

Source: ECLAC, on the basis of United Nations Commodity Trade Database (COMTRADE). Cuba and Haiti not included. Data for Antigua and Barbuda refer only to 2007, and data for the Bolivarian Republic of Venezuela only to 2008; data for Honduras do not include 2008; data for Belize, Dominican Republic, Saint Kitts and Nevis, Saint Lucia, Suriname and Grenada (exports only) do not include 2009. a

Resource Export Dependence (2007 peak year for mineral/oil prices before global financial crisis)

Fiscal Dependence on Resource Revenues

Oil/Gas and Metals price cycle 2003-2011 PRIMARY COMMODITY PRICE INDEX, 2003-2011 (January 2003=1) 500

450

400

350

300

250

200

150

100

50

0

Petróleo, gas natural y carbón

Metales

Performance differs between Oil/Gas and Mining sectors in terms of % State appropriation of rents, investment and production dynamics in response to the price cycle.

Mining Sector : Economic Rent Refined cooper prices London Metals Exchange and average production costs LAC * ( USD cents per lb.) 400

International Price

350

Net profits (appropriated by mining industry)

300

250

Tax payments (appropriated by States) Factor payments beyond extraction phase

200

(labor, sale costs, debt service.) Extraction Cost At mine head.

150

100 50,000 45,000

50

40,000 35,000

0

30,000

1990

1992

1994

1996

1998

Precio Cu (BML)

2000

2002

2004

2006

2008

Costo de producción (promedio América Latina)**

2010 25,000 20,000 15,000 10,000 5,000

*

Source : based on data from COCHILCO Average production costs refers to direct and indirect mining costs, interest payments and depreciation , minus proceeds from sale of indirect products, (C3, according to Brook Hunt terminology), ** Costs for period 1992-1996 reflect only Chile.. ** World Bank ( WDI) World Development Indicators Database Mineral Rent ( % GDP)

0

Mining sector Economic Rent for selected countries (Millions US$, year 2009)**

LAC region is where Mining rents increase the most globally Estimated Mining Sector rent: 0.54% PIB regional avg. 1990-2003, Almost cuadrupled to 2.08 % PIB regional avg. 2004-2009 100,000 90,000

RENTA DEL SECTOR MINERO EN LAS PRINCIPALES REGIONES MINERAS, 1990-2009 (En millones de US$ de 2005)

LAC

80,000 70,000 60,000 50,000

LAC

40,000 30,000 20,000 10,000 0 1990-1992

1999-2001

2003-2005

2007-2009

Norteamérica Este y el Pacífico* Latina y el Caribe Fuente: Comisión Económica para América LatinaAsia y el del Caribe (CEPAL), sobre la base de America información del Banco Mundial, World Development Indicators. Estadística: Mineral Rent ( % GDP) definida como precio internacional – costo unitario de producción para canasta de 10 minerales. Nota: *El dato del año 2009 de Asia del Este y el Pacífico corresponde al año 2006.

Mining sector profitability in LAC reached unprecedented historic levels AMÉRICA LATINA Y EL CARIBE: RENTABILIDAD SOBRE ACTIVOS DE LAS 500 MAYORES EMPRESAS DE LA REGIÓN, 2010 (En porcentajes) 30.0

25.0

20.0

15.0

10.0

5.0

0.0

Mining Profit / Assets ratio far exceeds profitability indicators of all other economic sectors in the region ( 2010 data) Fuente: Comisión Económica para América Latina y el Caribe (CEPAL), sobre la base de información estadística de América Economía, diciembre 2011 (http://www.americaeconomia.com/).

Mining sector growth in LAC driven by private investment in exploration and development 2003 – 2012 Global exploration investment cuadrupled from 2.2 to 10.7 Billion USD 2003-2010; and doubled from 10.7 to 21.5 Billion USD between 2010-2012

LAC region has consistently captured the largest share (approx. 25%) of this investment.

Fuente: CEPAL 2013, “Recursos naturales: situación y tendencias para una agenda de desarrollo regional en ALC” .Presentado en Reunión CELAC, 27 enero 2014.

Mexico, Peru, Chile and Brasil account for 75% of total LAC mining investment 2010-2012

Fuente: CEPAL 2013, “Recursos naturales: situación y tendencias para una agenda de desarrollo regional en ALC” .Presentado en Reunión CELAC, 27 enero 2014.

Regional share (%) in total world investment in Mining Exploration

2000

2010

2012 MM US$

5.7%

11.0%

10.5% $

Latin America

29.5%

32.0%

28.6% $ 210.0

North America

12.6%

15.3%

19.9% $ 146.0

Oceania

18.6%

14.4%

16.5% $ 121.0

Africa

18.6%

14.2%

14.4% $ 106.0

Asia

15.0%

13.0%

10.2% $

Total

100.0%

99.9%

Investment by Region

Europe

Total [MMUS$]

$

86.0 $ 562.0

100.0%

$

735.0

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures, and data from Trends in Worldwide Exploration

77.0

75.0

FDI flows reinforce specialization in Natural Resource Sectors, particularly in South America w/o Brazil.

Political concern towards primary sector concentration and its implication for long term development trajectory AMÉRICA LATINA Y EL CARIBE: SECTORES DE DESTINO DE LA INVERSIÓN EXTRANJERA DIRECTA SEGÚN REGIÓN, 2007-2012 (En porcentajes) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2007-2011

2012 Brasil

2007-2011

2012

América del Sur (sin Brasil)

Recursos Naturales

Manufacturas

2007-2011

2012

México, Centroamérica y el Caribe

Servicios

Fuente: Comisión Económica para América Latina y el Caribe (CEPAL), sobre la base de cifras preliminares y estimaciones oficiales al 29 de abril de 2013.

LAC Mining Exports growth during 2004-2012 is highly concentrated in ore and metal concentrates, rather than higher value added metal manufactures and refined metals ALC: evolución de las exportaciones de minerales primarios y manufacturas de minerales a, 1990-2011 (En millones de dólares de 2005) 90.000 80.000 70.000 60.000 50.000 40.000 30.000 20.000 10.000 0 1990

1995

2000

2005

2010

2011

Menas y concentrados de metales (28)

Metales no ferrosos refinados (68)

Acero y productos derivados (67)

Manufactura de metales y no metales (66 y 69)

Fuente: CEPAL 2013, “Recursos naturales: situación y tendencias para una agenda de desarrollo regional en ALC” .Presentado en Reunión CELAC, 27 enero 2014.

País

Argentina Bolivia Brasil Chile (GMP-10+CODELCO)

MINING SECTOR RENTS (% GDP)

OIL& GAS RENTS (% GDP)

19902003 0.05 x8 0.30 0.64 x4

20042009 0.48 2.28 2.24

19902003 3.30 6.32 1.03

20042009 9.85 x428.87 x3 3.06

x3 17.29

0.31

0.28

6.47

Chile (sólo minería privada GMP-10) Colombia Ecuador Guatemala1/ Guyana Honduras Jamaica México Nicaragua Perú República Dominicana Suriname Venezuela, RB América Latina Australia Canadá Estados Unidos Sudáfrica

0.17 0.01 n.d. 5.62 0.25 3.43 0.14 0.07 0.79 0.69 7.26 0.32 0.54 1.17 0.2 0.0 0.9

x5 0.91 x3 x2 x9

0.03 n.d. 5.34 0.69 1.67 0.34 0.63 7.16

1.96 5.07 x4 0.83 2.08 4.12 0.69 0.08 2.47

4.97 x.4 7.11 13.00 x2 24.22 0.54 1.08

4.83

x.5 7.71

1.61

1.99

4.08 26.89 3.61

x231.00 7.11

Fuente: Elaborado sobre la base de datos de COMTRADE, UNCTAD, Banco mundial y CEPAL.

MINING FISCAL REVENUE (% total Fiscal revenue)

OIL& GAS FISCAL REVENUE (% total Fiscal revenue)

Estimated Mining Sector rent: 1990-2003 2004-2009 regional avg. 1990-2003, Almost quatripled to n.d. 2.2 11.5 27.4 2.08 % GDP regional avg. 2004-2009 8.2 9.0

199020040.54% GDP 2003 2009

8.1

35.1

1.4

13.1

Estimated Oil/Gas Sector rent: 0.9 2.1 9.4 14.2 3.61% GDP regional 30.7 avg. 1990-2003, 29.4 n.d. Doubles0.3to 7.11 % GDP 0.05 0.5 regional avg. 2004-2009

2.9

13.4

30.0

35.8

4.4

3.8

56.3

44.9

Fiscal revenue increased everywhere, but critical question is: How did the State’s share in total Resource Rent generated evolved during up-cycle after 2004??

País

Argentina Bolivia Brasil Chile (GMP-10+CODELCO)

MINING SECTOR RENTS (% GDP) 19902003 0.05 0.30 0.64

20042009 0.48 2.28 2.24

OIL& GAS RENTS (% GDP) 19902003 3.30 6.32 1.03

20042009 9.85 28.87 3.06

19902003

20042009

n.d.

2.2

OIL& GAS FISCAL REVENUE (% total Fiscal revenue) 1990-2003 11.5 8.2

2004-2009

x2.5 =

27.4 9.0

x1.5 =

14.2 29.4

=

6.47

17.29

0.31

0.28

Chile (sólo minería privada GMP-10)

Colombia Ecuador Guatemala1/ Guyana Honduras Jamaica México Nicaragua Perú República Dominicana Suriname Venezuela, RB América Latina Australia Canadá Estados Unidos Sudáfrica

MINING FISCAL REVENUE (% total Fiscal revenue)

0.17 0.01 n.d. 5.62 0.25 3.43 0.14 0.07 0.79

0.91 0.03 n.d. 5.34 0.69 1.67 0.34 0.63 7.16

0.69 7.26 0.32 0.54 1.17 0.2 0.0 0.9

1.96 5.07 0.83 2.08 4.12 0.69 0.08 2.47

x4

4.97 13.00 0.54

7.11 24.22 1.08

8.1

x4

35.1

1.4

x9

13.1

0.9

X2

2.1

n.d. 0.05

4.83

7.71

1.61

1.99

4.08 26.89 3.61

31.00 7.11

x2

Fuente: Elaborado sobre la base de datos de COMTRADE, UNCTAD, Banco mundial y CEPAL.

9.4 30.7

0.3

x10

0.5 30.0

2.9

x4

13.4

=

35.8

4.4

=

3.8

56.3

-0.2

44.9

Perverse Fiscal competition among mining countries: 1980 – 1990 reduction in mining corporate income tax rates

2003 – 2012 Minerals price cycle breaks the previous 1980-2000 trend of falling real prices for metals

Contents 1. Mining sector trends in Latin America – –

Mining sector response to the 2003-2013 metals price cycle Mining rents and private investment in exploration and development.

2. State participation in Mining sector Rents during 1990-2013 -

Analysis of State’s participation in mining rents.

Analysis of State participation in Mining and Oil/Gas sector Rents during the 2003-2012 price cycle. Contrast between Mining and Oil/Gas sector performance and Fiscal regimes. • Need to increase progressivity of Mining taxation regimes. • Need to strengthen fiscal capacity in smaller countries with incipient but emerging mining ( Guatemala, Honduras etc.) • Manage tensions between maintaining dynamic exploration & development investment and strengthened sectoral fiscal regimes. • Increased regional integration to avoid fiscal competition.

Chile Taxes and fiscal payments by Mining Companies compared with Total national Tax revenue*, and estimated total Mining Sector Rent each year (in millions of USD) 40,000

Estimated Mining Sector Rent

35,000 30,000 25,000 20,000

Total national Tax revenue

Mining Fiscal receipts

15,000

35%

10,000 5,000

8% >

0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Ingresos tributarios totales (Gobierno central) Rentas mineras totales Tributación y aportes totales de la minería (sin impuesto específico) Impuesto específico declarado por GMP-10

Fuente: Elaboración propia sobre la base de datos de COCHILCO, CEPAL, Banco Mundial, FMI y Banco Central de Chile. Notas: * Los ingresos tributarios son del Gobierno Central. Los datos fueron tomados de CEPAL y del Banco de Chile. ** La tributación y aportes totales de la minera incluye los dividendos de CODELCO y los excedentes de ENAMI.

Chile Taxes and fiscal payments by Mining Companies as percentage of total Mining Sector Rent each year (%) 45%

TOTAL

40%

35.7%

35%

CODELCO

30%

22.1%

25% 20%

GMP-10

13.6%

15% 10%

0 1998

1999

2000

2001

Ingresos tributarios

2002

2003

2004

Tributación minera total

2005

2006

2007

Rentas mineras

2008

2009

2010

Regalías

Fuente: Elaboración propia sobre la base de datos de Superintendencia Nacional de Administración Tributaria (SUNAT), Banco Mundial y FMI. Notas: * Los ingresos tributarios son los del Gobierno Central. Incluyen: Impuestos a la renta, a la producción y consumo, a la importación y otros ingresos como impuesto a las transacciones financieras, temporal a los activos netos, a las acciones del Estado, etc. ** Los impuestos pagados por las empresas mineras incluyen el 100% del impuesto a la renta minera.

Peru Taxes and fiscal payments by Mining Companies as percentage of total Mining Sector Rent each year (%) 40

35% 35

29% 30

25

20

19.5% 15

10

5

0 2004

2005

2006

Tributación + Regalías

2007 Tributación

2008

2009

Regalías

• State rent appropriation has been decreasing from 35% in 2004 to 19.5% en 2009. • Fiscal contribution from Mining Companies during peak price year ( 2007) reached 29% of sector rent. • In 2007 the contribution of Mining to total Fiscal Revenue in Perú peaked at 19.4%.

Peru Taxes and fiscal payments by Mining Companies as percentage of total Central Govt. Revenues (%) 25

20

15

10

5

13.4% 3%< 0 1998

1999

2000

2001

2002

2003

Tributación + Regalías

2004

2005

Tributación

2006

2007

2008

2009

2010

Regalías

Fuente: Elaboración propia sobre la base de datos de Superintendencia Nacional de Administración Tributaria (SUNAT) y FMI. Nota:

Guatemala Taxes and other fiscal revenue paid by Marlin Gold Mine, relative to Mining Sector rent. absolute values (US$ millions each year) 400

350

300

250

200

150

100

50

0 2005

2006 Rentas mineras totales

2007

2008

Impuestos sobre la Renta

2009

2010

Regalías Gob/Mun

Fuente: Elaboración propia sobre la base de datos de http://goldcorpguatemala.com/, Instituto de Desarrollo Global y Medio Ambiente, FMI y World Bureau of Metal Statistics.

Mining : State appropriation of sector rent 1990-2003 vs. 2004-2010 State participation in sector rents, and fiscal contribution of mining as % of total fiscal revenue

País

Bolivia (datos CEPAL) Bolivia (datos PIEB) Bolivia (sin COMIBOL, datos PIEB) Chile (cobre, GMP-10+CODELCO)

State participation (%) Mining sector rent (anual avg. for period) Before 2004 (*)

2004-2009

Total period

(*)

21.8

35.7

(*) 57.7 34.6 32.1

Chile (CODELCO with dividends)

17.1

22.1

Chile (10 largest private mining GMP-10)

3.9

13.6

Colombia Guatemala Honduras

48.9

37.1 12.2 10.0

Perú Australia (minería metálica) Canadá 10 largest Mining multinationals Taxes paid globally (% gross rents.)

10.3

(*) 17.9

27.4 26.1

33.6

Fiscal contribution Mining Sector (%) total fiscal revenues (anual avg. for period) Before 2004 0,9

2004-2009

Total Period

3,0

8.2

37.5

2,6 2.2 1.3 23.0

21.0

6.6

30.4

18.7

11.1

1.5

14.3

8.0

0.4 10.1

1.9 10.1

0.05

0.4 0.5

(*)

2.9

14.2

20.2 38,6 33.2

Fuente: Elaborado sobre la base de datos de COMTRADE, Banco mundial y CEPAL. Calculado como el promedio de los porcentajes de participación anuales (utilizando precios nominales). Los datos PIEB para Bolivia se tomaron del estudio de Rolando Jordán (PIEB, 2010). (*) No se pudo calcular el porcentaje de participación en estos períodos por errores estadísticos.

Mining fiscal receipts increase in absolute terms. However as % of total estimated Mining Rents their heterogenous behaviour does not reflect progressive State participation in mining sectorrents during the latest price cycle.

Mining fiscal receipts increase in absolute terms. However as % of total estimated Mining Rents their heterogenous behaviour does not reflect progressive State participation in mining sectorrents during the latest price cycle. Renta mineraf (% del PIB)

País

Ingresos fiscales por Minería

Ingresos fiscales por Minería

Ingresos fiscales por Minería

(% del PIB)

(% de ingresos fiscales totales)

(% de renta minera)

g

h

g

h

2000-20032004-20092010-20122000-2003 2004-2009 2010-20122000-2003 2004-2009 2010-20122000-2003g2004-2009h 2010-2012i Argentina a Bolivia

0.1

0.4

0.6

0.0

0.2

0.1

0.0

0.6

0.9

0.1

2.4

4.9

0.1

0.6

1.3

0.5

2.2

4.2

Minería Privada

-

-

-

0.1

0.6

1.0

0.4

1.9

3.4

0.0 -

35.8

21.7

27.1

24.5

23.6

20.2

COMIBOL

-

-

-

0.0

0.1

0.2

0.0

0.3

0.7

8.9

3.5

4.3

Brasil

0.9

2.3

2.6

0.1

0.1

0.2

0.3

0.5

0.8

7.8

6.4

9.3

6.5

17.3

16.7

0.9

6.2

4.3

4.3

25.8

19.4

14.4

35.7

25.9

-

-

-

0.7

3.8

2.4

3.5

16.0

10.6

11.6

22.2

14.1

0.2

2.3

2.0

0.8

9.7

8.8

2.8

13.5

11.7

Colombia (Minería + Carbón) Colombia (Minería)

0.3

1.9

2.3

0.2

0.4

0.4

0.6

1.6

1.6

23.3

22.9

15.7

0.3

0.9

0.9

0.1

0.2

0.1

0.2

0.6

0.4

23.3

17.7

11.2

Colombia (Carbón)

0.0

1.0

1.5

0.1

0.3

0.3

0.4

1.0

1.2

-

27.4

18.4

Ecuador Guatemala

0.0

0.0

0.0

-

-

-

-

-

-

-

-

-

0.0

0.3

0.9

-

0.0

0.1

10.8

7.4

14.6

0.0

0.0

0.0

0.9 -

12.2

4.2

0.4 -

-

Guyana

-

0.0

0.0

0.0

Honduras

0.1

0.7

0.8

-

-

-

-

-

-

-

-

-

Jamaica a

1.6

1.8

1.4

-

-

-

-

-

-

-

-

-

0.1

0.4

0.9

0.1

0.1

0.1

0.3

0.8

1.5

-

-

Chile (GMP-10+CODELCO+ENAMI) b

Chile (Codelco + ENAMI) b

Chile (GMP-10)

e

a

a

e

México

Nicaragua Perú

a

0.1

0.4

0.8

-

0.4

7.5

9.0

1.5 -

1.5 -

1.0 -

8.6 -

8.3 -

-

29.5

15.3

-

-

-

43.7 -

20.4 -

17.2 -

-

-

-

República Dominicana

0.6

1.8

0.4

0.2 -

Suriname

3.4

5.0

9.3

-

-

-

-

-

-

América Latina Australia ( m in. m etalica)

0.6

2.1

2.6

-

-

-

-

-

-

1.5

4.2

7

26.2 36.0

ae

Canadá

0.2

0.5

0.2

Estados Unidos

0

0.1

0.15

Sudáfrica a

0.8

2.5

4

Fuente: CEPAL 2013, “Recursos naturales: situación y tendencias para una agenda de desarrollo regional en ALC” .Presentado en Reunión CELAC, 27 enero 2014.

Mining Sector 2004-2012 •

Rents multiply x 4

•

State appropriation < 33% (benchmark int’l)

•

Guatemala, Honduras < 13% of total rent appropriated by State

•

Private concesion regimes, State participation the exception.

•

Use of traditional fiscal instruments ( corporate income tax and royalties)

Need to introduce PROGRESSIVE INSTRUMENTS i.e. Resource Rent Taxes (RRT) etc.

•

Price cycle generates investment boom, growing production.

•

Rising energy costs. Price prospects?

•

POLICY CHALLENGE: How to achieve more progressive fiscal regimes?

•

Efficient public investment of resource rents?

Oil&Gas sector

• Rents multiply x 2 • State appropriation 45-65% • Apprent “Regressivity” of rent appropriation during boom??? • State Oil companies are the rule. • Use of progressive fiscal instruments for rent capture ( windfall taxes, contratos PSC, participación directa)

• Price cycle does not generate investment boom • Decreasing production /consumption ratios and reserves • Rising production costs. • POLICY CHALLENGE: How to mobilize required investment to meet growing energy demand??? Regional integration? • Shale gas development?

PROSPECTS and UNCERTAINTIES: Int’l Metal Prices and Energy Costs???? 2015 – 2030 Scenarios: Persistence of commodity price cycle? New scenario determines need to introduce progressive fiscal instruments ( RRT, windfall taxation, etc.) and improved tax administration.

???

Uncertainties 1. Correction of expectations and rationalization of announced investments projects – – – –

Cost increases, in particular energy costs. Expectations of downward adjustments in world metal prices. Impact of European financial crisis. Increasing number of socio-environmental conflicts.

2. Social impact of increased rents? – – – –

Earmarked use of Mining and Oil/Gas fiscal receipts? Indirect: Improved fiscal balances enable increased social spending? Indirect: Improved macroeconomic stability, debt reduction? vs. currency appreciation? Increased investment in Mining and Oil/Gas associated with increasing socio/environmental conflicts in the region.

Contents 1. Mining sector trends in Latin America – –

Mining sector response to the 2003-2013 metals price cycle Mining rents and private investment in exploration and development.

2. State participation in Mining sector Rents during 1990-2013 -

Analysis of State’s participation in mining rents. Resource governance challenges.

3. Resources governance challenges to leverage Mining sector contribution to post-2015 development goals. – – – – –

Need to improve progressiveness during up-cycles. Review and improve existing Mining taxation instruments ( RRT, windfall taxation, avoid fiscal competition through strengthened regional integration) Improved public investment and use of resource rents ( resource rent long term investment and stabilization funds, with specific uses?) Increased transparency and accountability of rent generation and investment. Local development impact and managing of socio-environmental conflicts.

Y = α f(K, L, Nnr, Nre, S)

Weak Sustainability Criteria requires non decreasing “National Capital” in its broadest sense.

∆Y = α [∆K + ∆H + ∆Nnr + ∆Nnr +∆S ]

National Income (welfare)

$

∆H + ∆N + ∆S ∆α technological change resources efficiency

time

Major regional challenges to strengthen Resources Governance to maximize resource sector’s contribution to the post-2015 development agenda. •

Strengthen State capacity to update existing fiscal regimes in order to achieve more progressive taxation of resource rents, in particularly during upward “price cycles”. Need for concerted regional effort among countries to avoid fiscal competition.

•

Institutionalize mechanisms to ensure efficient public investment of resource rent revenues into human capital ( education), infrastructure, technology development and innovation), isolating them from political pressure to use them as current expenditure. Resource rents are not substitutes for national tax regimes.

•

Develop Transparency and public information disclosure mechanisms on Resource Rent revenue payments and their use by governments.

•

Develop long-term State Policy for strategic economic diversification and structural change towards gradual decoupling of national dependence of resource sectors. Strengthen State capacity to manage and resolve increasing socio-environmental conflicts related

•

Oil prices rise, but investment in drilling activity falls. Production/consumption ratio and reserves fall. Oil Price boom, but production costs also rise. Price WTI -Cost investment - - Costo operation -- . --

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Mundo

ALC

Mundo

ALC

Mundo

ALC

Mundo

ALC

Mundo

0

ALC

0

Mundo

500

ALC

50

Mundo

1000

ALC

100

Mundo

1500

ALC

150

Mundo

2000

ALC

200

Mundo

2500

ALC

250

Mundo

3000

2010

Upstream investment lag in LAC is worrisome and jeopardizes the region net exporting position as supplier of oil & gas in world markets. Fuentes: Baker and Hughes 2012, BP 2011, AIE 2011, IHS CERA 2012 Nota: Datos sin escala

Oil drills in activitiy

3500

300

ALC

Indice 2000=100

350

World drilling activity rises in response to price boom, not so in LAC ( exceptions Brazil and Colombia)

Net Fiscal position has historically been a deficit: -Low saving rate -Low tax burden

2005 - 2009

Back to business as usual after 2009? 2005 - 2009

Lower tax burden relative to other regions.

Within Lat. America resource exporters tend to lower tax burdens.

Strength and Quality of Fiscal Institutions correlated with performance: •State participation in Resource Rents •Positive socio-economic and local impact from public investment of resource rents •Positive use of resource based Stabilization/Invesment Funds

Trinidad & Tobago 2007

National

Heritage and Stabilization Fund.

Increasing socio-environmental conflicts to project development

Economic sector impacted 3%3% 2%2% AGRICULTURA PESCA GANADERIA 90%

COMERCIO TURISMO

Elaborado con la información del Observatorio de Conflictos Socio-Ambientales en América Latina (OLCA)

Renewable energy and Hydroelectric development trends in Latin America and the Caribbean

South America ( UNASUR ): Renewable Energy shares in 2010 South America

World average

Hidroelectricity

11%

2%

Biomass

17%

8%

other renewables (wind, solar)

3%

2%

31%

12%

Natural gas

24%

23%

Oil

41%

33%

Coal

3%

26%

68%

82%

1%

6%

Total renewable

Total fossil energy Nuclear

South America

World

Hidroelectricity has been loosing share in power generation since the 1990s Participación (%) de la hidro en la oferta total de electricidad en Am érica Latina 100 80 60 40

87.2

74.6

65.1

63.0

1990

2000

2008

20 0 1980 Source: IEA – OECD Stat.

Source: Own elaboration based on statistical data from SIEE ( OLADE ) and IEA database.

Power sector policy reforms undertaken during 1990s have: Reduced the number of Large Hidro Projects ( State sponsored) Have favored project economies for smaller, less risky private thermal generation projects CO2/KWh in power generation 1970 - 2010 700 600

gr. CO2 / Kwh

500 400 300 200

??

100

Post – reform ’90s

0 1970

1975

1980

1985 ALC

1990

1995

2000

2005

OECD Europe

Source: IEA – OECD Stat database. Emissions from fuel combustion 2010

Elaboración: J. Acquatella, H. Altomonte . CEPAL con información de Agencia Internacional de Energía,

Natural Resources contribution to LAC regional development agenda: Emphasis in strengthened governance of Resource Sectors.

2013

Thank you very much!!!! ANNEXES

Jean Acquatella Ph.D. Energy and Natural Resources Unit United Nations ECLAC Economic Commission for Latin America and the Caribbean Santiago, Chile. [email protected]

Increasing socio-environmental conflicts to project development

Economic sector impacted 3%3% 2%2% AGRICULTURA PESCA GANADERIA 90%

COMERCIO TURISMO

Elaborado con la información del Observatorio de Conflictos Socio-Ambientales en América Latina (OLCA)