Inter Press Service » Trade & Investment Turning the World Downside Up Tue, 13 Oct 2015 11:15:33 +0000 en-US hourly 1 Opinion: International Tax Cooperation Crucial for Development Wed, 07 Oct 2015 16:25:40 +0000 Jomo Kwame Sundaram Jomo Kwame Sundaram. Credit: FAO

Jomo Kwame Sundaram. Credit: FAO

By Jomo Kwame Sundaram
ROME, Oct 7 2015 (IPS)

It has become clear that the South, including the least developed countries, has little reason to expect any real progress to the almost half century old commitment to transfer 0.7 percent of developed countries’ income to developing countries. But to add insult to injury, developing countries have, once again, been denied full participation in inter-governmental discussions to enhance overall as well as national tax capacities.

The ability to pursue development policies depends crucially on available fiscal space, which relies mostly on domestic revenues, especially taxes. However, tax revenues in most low- and lower middle-income developing countries are low. The average tax-GDP ratios in low-income and lower-middle income countries are around 15 and 19 per cent respectively, compared to the OECD average of around 34 per cent.

Although non-tax revenues may add significantly to total revenues in some countries, these ratios are typically low even in countries with considerable non-petroleum mineral resource extraction activity. Therefore, low- and lower-middle-income countries should take steps to increase their revenues after considering various options for doing so.
This is necessary because the main approach in recent decades has been to increase tax rates only if unavoidable. It was presumed that lower rates would ensure better compliance with tax laws, and thus raise revenue.

The prevailing tax wisdom also favoured broadening the tax base, even when taxation capacities are modest. Thus, indirect taxation has tended to increase while direct taxation of corporations and individuals has tended to decline. The latter was supposed to be good for investment and growth although the empirical support for this presumption is dubious.

In the vast majority of countries in sub-Saharan Africa and Latin America, the tax to GDP ratio has actually stagnated or declined, as international trade taxes accounted for the largest share of tax revenue. As tariffs and export duties declined with trade liberalization, the share of trade taxes has fallen.

Unfortunately, other taxes have not grown to compensate for the lower trade taxes. There is an urgent need to reverse this trend, with greater commitment to revenue generation in order to improve social protection, create employment and otherwise contribute to sustained economic recovery.

For many developing countries, total tax revenues were mainly from three sources: domestic taxes on goods and services (general sales tax, excises), foreign trade taxes (mostly import duties) and direct taxes (mostly from corporations, rather than individuals). Wealth and property taxes as well as social security contributions continue to make modest contributions.

For rich countries, however, income taxes (mostly from individuals) make the largest contribution (around 34 per cent), with consumption taxes at the around the same level, with social insurance contributions accounting for 26 per cent of total tax revenue and trade taxes quite insignificant.

With their different economic circumstances, it does not make sense for developing countries to simply emulate developed economies in trying to generate revenue. Even among developing countries, no one size fits all.

And certainly not for all time, as tax systems must evolve with changing economic circumstances. A key question is: which taxes are most likely to meet the requirements of effective collection, buoyancy and stability?

Globalization and Tax Evasion

Revenue losses due to globalization need to be addressed. There are three main reasons for revenue losses:

First, capital movements increase opportunities for tax evasion because of the limited capacity that any tax authority has to check the overseas incomes of its residents; evasion is easier as some governments and financial institutions systematically facilitate the concealment of relevant tax information from home tax authorities.

Where dividends, interest, royalties and management fees are not taxed in the country in which they are paid, they more easily escape notice in the countries where the beneficiaries live. There have been large non-resident aliens’ bank deposits in some countries like the US that impose no taxes on interest from such deposits.

Second, avoidance (not evasion) may increase, given international differences in tax rules and rates, because of the choice of tax regime that international-tax-treatment of enterprise income commonly offers. This is more likely for taxation of profits from corporations’ international operations. Transfer pricing for goods, services and resources – moving among branches or subsidiaries of a company – provides opportunities for shifting income to minimize tax liability.

Third, international competition for inward foreign direct investment may lead governments to reduce tax rates and increase concessions for foreign investors. Income tax rates have fallen sharply since the 1980s. The tax rates that governments can impose are thus constrained by international competition. They are reluctant to raise rates or to tax dividend and interest income for fear of capital flight. Yet, it has long been known that direct-tax concessions have little or no effect in diverting international investment, let alone in attracting such flows. Hence, such tax concessions constitute an unnecessary loss of revenue.

Beggar-thy-neighbour policies have led to revenue losses for many developing countries in a race-to-the-bottom also involving labour and environmental standards, which in turn erodes the prospects for balanced, inclusive and sustainable development.

Finance ministries and tax authorities in developing countries need to cooperate among themselves and with their developed economies counterparts in the Organisation for Economic Co-operation and Development (OECD) to learn from one another and to close existing loopholes in their mutual interest. With the huge and growing size of public debts and the real and imagined fiscal constraints to sustained global economic recovery, inclusive international tax cooperation is more urgent than ever.

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The Spectre of Jobless Growth in India Fri, 02 Oct 2015 12:21:48 +0000 N Chandra Mohan

N Chandra Mohan, is an economics and business commentator

By N Chandra Mohan
NEW DELHI, Oct 2 2015 (IPS)

India faces a serious challenge of dealing with joblessness despite statistically being the world’s fastest growing economy. The spread, depth and intensity of the problem, especially among the educated youth, is not reflected the latest unemployment number of 4.9 per cent in 2013-14. This estimate captures the chronically unemployed – those who sought or were available for work for the major part of the year – but it rarely figures in public discourse as the rate is relatively low and stable over time. Another reason is that the economy continues to generate employment opportunities even if they are largely casual or temporary in the informal sector.

N Chandra Mohan

N Chandra Mohan

A better description of the reality is jobless growth. An adequate number of jobs is not being created despite economic growth accelerating to 6.9 per cent in 2013-14. In other words, growth is not employment-intensive enough, as evidenced by the fact that the state government of Uttar Pradesh recently received 2.3 million applications for 368 job openings as peons. What’s more, these job seekers included 250 PhD candidates, 25,000 post graduates and 152,000 graduates. In Chhattisgarh, 75,000 people applied for 30 job openings as peons, some of whom were post graduates and engineers. These bleak employment prospects are observed in other states as well.

An important characteristic of the chronically unemployed – highlighted in all the five-yearly surveys of the National Sample Survey Organisation (NSSO) – is the concentration among the educated youth. Three-quarters of those without work on a long-term basis were observed to be fresh entrants to the labour force who are 15-29 years of age. Nothing much has changed over the years in this regard. If anything, this trend has worsened. In NSSO’s survey for 2011-12, four-fifths of those chronically employed were fresh entrants. The applicants for the posts of peons are from the ranks of educated youth.

Why are the long-term unemployed concentrated in this segment? Educated youth prefer to wait for better opportunities, unlike the poor who take up whatever is available. Supply-side factors like population and labour force growth also ensure that the share of the youth cohort is bound to be high among the fresh entrants. With rising enrolment in institutions of higher education, most of the new entrants are also educated. Attendance in institutions of higher education, corresponding to graduation and above among [DSJ1] those 20-24 years of age recorded the highest rates of growth according to the NSSO. Higher unemployment among the youth and among the educated thus are two sides of the same coin.

A growing reserve army of unemployed youth portends serious strains on the country’s social fabric. As the electorate that swept the Narendra Modi-led Bharatiya Janata Party (BJP) into power in May 2014 is predominantly young ­ from villages and small towns ­ the government must expeditiously address the challenge of jobless growth. This threatens to turn India’s demographic dividend of having a young population into a curse. Such voters are likely to expect employment opportunities to be generated immediately. Currently, there are only two million jobs being created annually, which are inadequate to absorb the 12 million young people who seek work every year.

Tackling jobless growth cannot be done through quick fixes. It is not only about labour reform. It is not possible to address the problem without developing skills that industry wants. India presents a paradox of skill shortages despite a situation of labour surplus. Around 15 percent of India’s trucks are idle due to a shortage of drivers. The steel industry is short of metallurgists. The healthcare sector is short of paramedics and technicians. The booming construction sector has a shortage of civil engineers. These skill mismatches must be met by stepping up enrolment in industrial training, vocational institutes and public-funded institutions of higher learning.

Creating more productive jobs over the near term thus is a big policy challenge for the National Democratic Alliance (NDA) government. As expectations are high, it must deliver soon on its promises, especially to the youth that has voted it to power with such a commanding majority. Consider the consequences if the shift of population away from agriculture gathers momentum and the trend of jobless growth persists in India’s manufacturing sector. If fewer jobs are created outside agriculture, more will be forced to stay in this sector, increasing the pressure on land and lowering incomes. Income inequalities will worsen while the growing ranks of jobless youth will turn restive.

The growing frustration has already spilled out onto the streets of Gujarat with the relatively well-off Patel community demanding backward caste reservation for education and jobs. The fresh entrants to the towns and cities who are looking for work are unlikely to be satisfied with the quality of employment that is on offer in urban India. Most of the jobs being generated are in the construction sector outside the purview of labour legislation or trade unionism. Employment in large factories, where work conditions are better protected, is sluggish. Equally unacceptable are temporary or causal odd-jobbing in the informal sector. In this dismal milieu, the lowly job of a peon has had many takers.

But the vast majority of the chronically unemployed are unlikely to be satisfied with such job openings. The NDA government must deliver on its flagship programmes like Make in India to generate meaningful employment opportunities. The absolute number of the educated unemployed will only keep rising due to the growth of the youth cohort among the fresh entrants to the labour force. To absorb them gainfully, labour-intensive manufacturing like textiles has to be re-vitalised. Greenfield investments to set up factories in other industries like automobiles also must be incentivised.

Lowering the official 4.9 percent rate of chronic unemployment may not seem like an urgent matter. After all, if you look at such figures the problem appears much worse elsewhere in the world, especially in Spain and Greece. Further, Brazil and Russia are deep in recession and unemployment has hit 7.5 per cent and 5.3 per cent respectively. In South Africa, joblessness is as high as 25 per cent. By contrast, the rate of unemployment in India may appear manageable. But to really think so would be a terrible mistake as the spectre of jobless growth haunts India.

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Mexican Government Depends More and More on Private Business Partners Mon, 28 Sep 2015 16:07:20 +0000 Emilio Godoy The Mexican government has increasingly turned to public–private partnerships (PPPs) to build energy industry infrastructure. The photo shows a gas pipeline belonging to Mexico’s state oil company, Pemex. Credit: Courtesy of Pemex

The Mexican government has increasingly turned to public–private partnerships (PPPs) to build energy industry infrastructure. The photo shows a gas pipeline belonging to Mexico’s state oil company, Pemex. Credit: Courtesy of Pemex

By Emilio Godoy
MEXICO CITY, Sep 28 2015 (IPS)

The Mexican government has increasingly turned to public–private partnerships (PPPs) to build infrastructure in the energy industry and other areas. But critics say this system operates under a cloak of opacity and is plagued by the discretional use of funds.

As the 2013 energy reform, which opened the industry to national and international private capital, is implemented, PPPs have become more and more frequent.

In the case of the state oil company Pemex, “it doesn’t form alliances with just anyone, only with corporate giants. It doesn’t talk much about those deals. They’re very hard to track,” said Omar Escamilla, a researcher on fossil fuels with the non-governmental Project on Organising, Development, Education, and Research (PODER).

The analyst told IPS that “The PPPs are formed with companies registered in tax havens, which makes it difficult for the Mexican justice system to hold them accountable or request reports on how the funds are used.”

“What is worrisome is who the partnerships are formed with, where the capital comes from, and what is the history of those companies,” he said.“The PPPs are formed with companies registered in tax havens, which makes it difficult for the Mexican justice system to hold them accountable or request reports on how the funds are used.”-- Omar Escamilla

The Law on Public–Private Partnerships, in effect since 2012 and amended in 2014, regulates long-term contractual arrangements by the public sector for the provision of services that use infrastructure partially or totally provided by the private sector.

The law requires that the contracts be put out to tender, and gives the state the power to declare the works of public utility and to expropriate land, while setting a minimum timeframe of 40 years for the contracts.

Mexico is in seventh place among developing countries in terms of the number of PPPs. In Latin America, only Brazil uses this scheme more frequently. The largest number of PPPs has involved the construction of roads, although they are also used in the construction of hospitals, prisons, airports, railroads and the energy industry.

According to the World Bank, “PPPs are typically medium to long term arrangements between the public and private sectors whereby some of the service obligations of the public sector are provided by the private sector, with clear agreement on shared objectives for delivery of public infrastructure and/ or public services.”

PPPs are seen as improving the equation between quality and prices for services, transferring risks to the private sector, improving incentives for efficient production, reducing public spending, and transferring debt to the private sector.

But critics say they bind governments to payments under lengthy contracts. They also argue that they can bring down spending on public services, mask the true extent of the public debt, disguise the privatisation of public services, and drive up costs.

At the federal level, Mexico has 29 PPPs, while different states have a combined total of 20.

The energy reform approved in December 2013, the biggest transformation of the industry in the last eight decades, opened up oil exploration, extraction, refining, transportation, distribution and sale of oil and its by-products to local and foreign private investment.

In the last 20 years, Pemex has turned to PPPs to build oil industry infrastructure, as a way to get around the legal and economic limitations of a state monopoly, says the study “Analysis of the business structure in Mexico’s oil industry,” published by PODER in June.

For example, in 1996 Pemex and the U.S.-based Sempra Energy formed a partnership to create Gasoductos de Chihuahua, which became the biggest player in Mexico’s natural gas industry, because it controls nine companies by means of two joint ventures and seven partner companies, all of which form part of Pemex’s organisational chart.

With the aim of developing three mature fields in the southern state of Tabasco, PMI Campos Maduros Sanma, a subsidiary of Pemex, formed a partnership in 2011 with the subsidiaries in Mexico of the private trasnational corporations Petrofac Limited (UK) and Schlumberger Limited (U.S.).

In 2013, Pemex transferred the Planta Clorados III petrochemical complex, one of the national petrochemical industry’s most important assets, to the local firm Mexichem, creating the company Petroquímica Mexicana de Vinilo. In the joint venture, Mexichem controls 55.1 percent of the shares and Pemex holds the rest.

Another case is Gasoductos de Chihuahua, the company that will be responsible for the operation and maintenance of the Los Ramones pipeline, the biggest investment in infrastructure for transporting gas in half a century, with a capacity to transport 3.5 billion cubic feet of natural gas a day over a distance of 900 km.

The pipeline will link central Mexico with the U.S. border in the north.

The gas pipelines that the Mexican government is building to provide gas industry infrastructure are actually the biggest business scheme for the private sector to form ties with Pemex in the natural gas industry, says the Poder report.

The Comisión Federal de Electricidad, a state power company, has followed a similar strategy with the construction and operation of wind power farms in the southern states of Oaxaca and Chiapas.

“Oversight, accountability and transparency are pending tasks, to carry out a comprehensive review of these mechanisms,” Arturo Oropeza, a professor at the National Autonomous University of Mexico’s Economic Research Institute, told IPS.

“There has been a lack of instruments for this, as well as a lack of an integral vision for understanding what happened. What is needed is a sectoral evaluation,” he said.

“Evaluating the environment for public-private partnerships in Latin America and the Caribbean”, published in April, lists Mexico among the countries with the best conditions for PPPs.

The list, which assessed 19 countries in the region based on 19 indicators involving electricity, transportation and water infrastructure, classified Mexico as the best-placed in terms of investment climate and worst in terms of the domestic context.

The report was produced by the Inter-American Development Bank; its private financing arm, the Multilateral Investment Fund; and the Intelligence Unit of the British magazine The Economist.

It states that issues like transparency represent a challenge to the development of more PPPs.

The report mentions the lack of significant independent oversight of compliance with contracts, and says the largest projects have been granted through direct negotiations in cases where there was only one interested party, even though the law requires that they be put out to tender.

Chile headed the list, with nearly 77 points out of a possible 100, followed by Brazil (75); Peru (70.5) and Mexico (nearly 68). Nicaragua, Argentina and Venezuela tailed the list.

Mexico has earmarked some 300 billion dollars for PPPs over the next three years.

In Escamilla’s view, the outlook in Mexico is not promising, given the increased use of PPPs.

“It’s important to generate frameworks for oversight and operability. PPPs should be held accountable with regard to how the partner was chosen, their profile, their history of bribes and fraudulent payments….And if these criteria are not met, the option is to look for other partners,” he said.

Edited by Estrella Gutiérrez/Translated by Stephanie Wildes

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Opinion: Dance with the Dragon Fri, 18 Sep 2015 16:00:17 +0000 N Chandra Mohan N Chandra Mohan

N Chandra Mohan

By N Chandra Mohan
NEW DELHI, Sep 18 2015 (IPS)

Prime Minister Narendra Modi had a meeting with India Inc. to discuss the global economic crisis and how the country can seize the emerging opportunities. The National Democratic Alliance (NDA) government does believe this crisis is indeed an opportunity as the economy’s fundamentals remain strong.

India is also considered the best performing economy globally. However, instead of providing suggestions, industrialists outlined their worries, ranging from higher taxes to protecting domestic industries like steel from dumping. One consequence of this meeting was a defensive response by India in slapping a safeguards duty on specific steel imports from China, among other countries.

The government, for its part, does not have any ideas either beyond basking in the glow of self-satisfaction that India has overtaken China in growth.

With a new base year and methodology for computing the gross domestic product, the economy has the stride of an Asian tiger than a sluggish elephant! Growth in the current financial year is 7 per cent, a pace that is a tad higher than that of the Chinese economy. Instead of engaging with the dragon and creating interdependencies that is a win-win situation for ‘Chindia’, the fact of being ahead in the growth sweepstakes is the all-important issue that has occasioned a sense of triumphalism.

India now has the opportunity to “take the baton of global growth” from China, stated the minister of state for finance. “The world needs other engines to carry the growth process” added finance minister, Arun Jaitley.

What these ministers conveniently overlook is that a slowdown in China has greater global consequences than a statistical uptick in India’s pace of expansion. The prospects of the world economy would deteriorate dramatically if the deceleration in China’s growth gathers momentum. If a country that accounted for 40 percent of global growth last year cannot expand as fast as it did in earlier decades, it can trigger a global recession by itself.

The Indian economy also cannot keep expanding at the current rate indefinitely. A burst of acceleration is often followed by an equally sharp deceleration. India has experienced 17 years of accelerated expansion from 1993 to 2010. China’s example is a singular one as it has expanded at a super-rapid rate for more than three decades.

The big question is not if, but when the slowdown kicks in. Having enjoyed robust expansion, the law of averages is bound to assert itself. There is thus a strong probability that India’s growth also will brake sharply like China’s according to US economists Lant Pritchett and Lawrence Summers.

For such reasons, there are mutual advantages if India gets closer to China. India Inc. must take a long-term view of the engagement. Former Prime Minister Manmohan Singh firmly believed that this process of coming together of the two countries represented an ‘international public good’ when the spectre of recession haunts the global economy. “It is a historic necessity for the two great neighbours to work together. There will be areas of competition, and there will be areas for cooperation. There is enough space in the world for both countries to continue to grow and address the developmental aspirations of their peoples,” argued Singh way back in 2008.

China’s problems can, in fact, be a huge gain for India’s Make in India programme as it has a lot of investible resources while we have the requirement. The big problem is that India Inc. is very hesitant about Chinese investments. The dragon has run out of surplus labour and wages are fast rising. Some of its labour-intensive industries like textiles have begun to shift out to lower wage economies like Vietnam and Bangladesh. This is a huge opportunity that can be leveraged by India. The PM’s India Inc. meeting only threw up a suggestion that China extends six-month credit to companies, whereas in India companies struggle even for 15-day credit.

India Inc. harbours a defensive mindset about China. Although it is India’s most important trading partner — bilateral trade volumes have risen to 70.6 billion dollars — there is unease over China’s trade surpluses that have ballooned to 37.8 billion dollars in 2014.

Industry’s concern is that the surge in Chinese exports affects Indian manufacturing; that it cannot compete as the latter’s pricing mechanism is opaque with massive subsidies. The yuan is also devalued, sending ripple effects across all emerging countries, including India. This translates into a targeted flood of Chinese goods into India, resulting in huge surpluses year after year.

There are no prizes for guessing that India’s huge trade imbalance deters a closer truck with China. India’s position appears more akin to a Third World country that exports raw materials like iron ore and cotton while importing manufactured goods. While mining, textiles and clothing make up a large chunk of our exports, China exports a range of electrical and other types of machinery to India like automatic data processing machines and transmission apparatus for radio and telephony. India must diversify its exports as intermediates, parts and components for regional and global supply chains are becoming more and more important in China’s imports.

Despite the problems they face in India, Chinese investments have been rising since January 2015 when equity inflows were up to 159 million dollars. They rose to 275 million dollars in February and 203 million dollarsin May. Some of these are by Alibaba and Huawei in the technology space.

The Dalian Wanda Group plans huge investments in retail properties and industrial townships. Two Chinese industrial parks are coming up in Maharashtra and Gujarat. This flurry of interest has been especially marked after India launched its flagship programme to encourage domestic manufacturing last year.

Attracting more such investments to help build India’s industrial sector is the best way to take advantage of the current world-wide crisis, regardless of its spread, depth and severity. The Chinese (including the Japanese and South Koreans) can help modernize our railways, build power facilities, highways and dedicated freight corridors. The wrong way is to get defensive by protecting Indian industry against Chinese goods through safeguard duties.

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service.

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Activists Say Fracking Fails to ‘Keep Pennsylvania Beautiful’ Thu, 17 Sep 2015 21:12:59 +0000 Emilio Godoy Activist Ray Kimble has turned his home in Dimock Township, Pennsylvania into a symbol of opposition to fracking. Credit: Emilio Godoy/IPS

Activist Ray Kimble has turned his home in Dimock Township, Pennsylvania into a symbol of opposition to fracking. Credit: Emilio Godoy/IPS

By Emilio Godoy
MONTROSE, Pennsylvania, USA , Sep 17 2015 (IPS)

U.S. activist Vera Scroggins has been sued five times by the oil industry, and since October 2013 she has faced a restraining order banning her from any properties owned or leased by one of the biggest players in Pennsylvania’s natural gas rush, Cabot Oil & Gas Corporation.

“I feel like a half-citizen, because corporations can do whatever they want and citizens can’t. Corporations have broken environmental laws and keep working,” the retired real estate agent, who is a mother of three and grandmother of two, told IPS.

Since 2008 Scroggins, with the Shaleshock Media network of artists and media activists, has been fighting hydraulic fracturing or “fracking”, the technique used to produce shale gas, in the rural community of Montrose, Pennsylvania, population 1,600.

In Montrose, which is in Susquehanna County, there are some 1,100 wells in 600 gasfields, as well as 43 compressor stations, which help the transportation process of natural gas from one location to another.“There is polluted water, flow-back water, the transformation of rural areas damaged by the operation of wells. There are quite a few long-term legal and financial liabilities to ensure that that legacy is properly addressed.” -- Tyson Slocum

This infrastructure, owned by seven companies, is near homes and schools.

The Marcellus shale formation stretches across the northeastern U.S. state of Pennsylvania. It is one of the large shale gas deposits that have led to the United States being dubbed “Frackistan”.

Fracking involves the massive pumping of water, chemicals and sand at high pressure into a well, which opens and extends fractures in the shale rock deep below the surface, to release the natural gas trapped there on a massive scale. The technique is considered damaging to health and the environment.

Fracking generates enormous volumes of liquid waste that must be treated for reuse, as well as emissions of methane, a greenhouse gas that is far more potent than carbon dioxide, the most important cause of global warming.

“The wells pollute the water and the methane escapes into the air. Many people don’t know what’s going on, they don’t have information. I don’t feel safe with how fracking has been done,” said Scroggins, who lives in Montrose with her husband, a retired teacher. There is a gas well just one kilometre from their home.

Fracking, with its tall steel drilling rigs, has modified the local landscape, along with the constant traffic of trucks hauling soil, sand and water.

Activists complain that the development of industry in rural areas like Montrose is ruining the countryside, while the accumulation of methane can lead to explosions or respiratory ailments among local residents.

Shale drilling rig in Montrose, Pennsylvania. Many rural areas in this northeastern state have seen their lives disrupted by the development of shale gas and the controversial fracking technique used to produce it. Credit: Emilio Godoy/IPS

Shale drilling rig in Montrose, Pennsylvania. Many rural areas in this northeastern state have seen their lives disrupted by the development of shale gas and the controversial fracking technique used to produce it. Credit: Emilio Godoy/IPS

In its Annual Energy Outlook 2015, the U.S. Energy Information Administration (EIA) reported that about 11.34 trillion cubic feet of dry natural gas was produced directly from shale gas in the United States in 2013 – about 47 percent of total U.S. dry natural gas production that year.

And about 4.2 million barrels per day of crude oil were produced directly from shale oil or tight oil resources in the United States in 2014 – 49 percent of total U.S. crude oil production.

Oil is the main source of energy in the United States, accounting for 36 percent of the total, followed by natural gas (27 percent), and coal (19 percent).

In Pennsylvania, gas production soared from 9,757 cubic feet in 2008 to 3.05 million in 2013.

In this state, the site of the first U.S. oil boom, 9,200 wells have been drilled, and over 16,000 permits for fracking have been granted.

The United States is the country that is most heavily exploiting shale gas and oil at a commercial level.

Fracking was given a boost in 2005, when the Energy Policy Act exempted the technique from seven major federal environmental laws, ranging from protecting clean water and air to preventing the release of toxic substances and chemicals into the environment.

With that backing, the industry unleashed a flood of lawsuits seeking to dismantle local and state environmental, health and contractual regulations adverse to its interests.

In the case of Pennsylvania, the state legislature approved the Oil and Gas Act (Act 13) in September 2012, which restricted local governments’ ability to zone and regulate natural gas drilling and required municipalities to allow oil and gas development in all zoning areas.

But city councils, local residents and environmental organisations fought the law, and in 2013 the Pennsylvania Supreme Court struck down sections of it, saying they were unconstitutional and violated citizens’ environmental rights. This allowed local communities to once again apply zoning rules in granting permits for shale gas production.

Along the side of the road, the traveller constantly sees signs reading Keep Pennsylvania Beautiful. But what is happening in rural areas does not seem to be in line with the slogan.

Ray Kimble, a 59-year-old mechanic, has experienced that contradiction in Dimock Township, where he lives. He told IPS that in his community, which is near Montrose, the water has been polluted since 2009 by drilling and fracking operations.

“They have damaged the town. We don’t want them here,” said Kimble, who added that he has a chronic cough and his ankles are swollen from contact with toxic waste while he worked for the industry as a driver.

Now he refuses to drink the tapwater and dedicates his time to carrying clean water to families affected by the contamination.

Dimock, population 1,500, was featured in the prize-winning documentary “Gasland” by U.S. filmmaker Josh Fox, which exposed the damage caused by fracking and helped spawn the first lawsuits against the shale gas industry, which were settled out of court.

Kimble’s house is just over 150 metres from a gas well.

“There are short-term profits with shale gas, but what happens when the wells dry up and the waste is left?” activist Tyson Slocum remarked to IPS.

“There is polluted water, flow-back water, the transformation of rural areas damaged by the operation of wells. There are quite a few long-term legal and financial liabilities to ensure that that legacy is properly addressed,” said Slocum, the director of the Energy Programme of Public Citizen, a consumer interest group that has provided advice to people affected by fracking.

The industry is now facing the sharp drop in international oil prices, the credit crunch, and growing public opposition to fracking.

In the last eight months, some 400 towns and cities in 28 states have adopted vetoes or moratoriums on fracking. The most far-reaching decisions were taken in the states of Vermont, the first to ban fracking, in 2012, and New York, which did so in December.

“Why don’t they build a well besides a politician’s home? Citizens don’t want them near our houses,” said Scroggins.

“I hope there won’t be a major leak, because it will be devastating. But the industry doesn’t acknowledge it has done something bad,” the activist added.

Slocum says the states have bowed to the industry’s interests. “The balance between profits and public health has been vilified, the debate on jobs and economic benefits is secondary,” he said.

Edited by Estrella Gutiérrez/Translated by Stephanie Wildes

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Opinion: Brazil’s Crisis is a Blessing and a Curse Thu, 17 Sep 2015 08:08:51 +0000 Tarso Genro Tarso Genro

Tarso Genro

By Tarso Genro
PORTO ALEGRE, Sep 17 2015 (IPS)

The Lula development model that lifted 35 million people out of poverty and raised living standards for another 20 million people during the governments of President Luiz Inácio Lula da Silva (2003-2011) has run its course.

This has come at a time when the global financial system is in crisis and is seeking economic recovery and profits by manipulating the interest rates paid by indebted countries, leaving their governments without much leeway to find alternative ways of meeting their commitments.

The current fiscal crisis in Brazil has emerged from these two historical situations.

The Lula model, underpinned by high commodity prices, drove social inclusion and increased the purchasing power of wage earners. It also promoted enormous investment in social housing and public education, embarked on a policy of diversified international relations, and made large investments in infrastructure.

It was a period of intense social dialogue among a wide spectrum of participants that went from bankers to landless peasants.

The model became exhausted, not because it failed, but because in fulfilling its goals it created new social demands.

The Lula governments reformed the class structure in Brazil, and now a large proportion of the population aspires to continue its upward mobility and improvement in their quality of life. This will be possible only through a further reduction of the country’s tremendous social inequalities, because the only way to grow the economy without increasing debt is to expand demand in the great mass domestic market in this country of 204 million people, a large proportion of whom are under-consuming according to the standards of advanced capitalism.

Brazil also possesses unexplored sources of wealth, the most obvious of which is its huge offshore oil reserves.

Some have blamed the present political crisis on corruption. Actually, it would be true to say that the crisis has been aggravated as a result of corruption cases initiated in the state apparatus decades ago. These were never before investigated effectively and independently, and they finally came to light during the governments of Lula and President Dilma Rousseff. Corruption emerged from criminal power systems embedded in the state during governments prior to those of the Workers’ Party (PT – Partido dos Trabalhadores). These were used by part of the PT for its own benefit and to maintain its power.

But it is important to remember that the discovery of these corrupt systems was possible because of the strengthening of organs for control and investigation, which occurred primarily under the Lula governments. Although the PT shared, along with all the other parties, in the corruption of the state and the political system, it is also true that corruption was never fought as hard as it was during the PT governments.

The crisis may therefore be seen as “blessed” because, after Brazil recovers from it, there will be a new anti-corruption consciousness in the country among political and business elites. Ultimately, if the PT wishes to survive as the proponent of a democratic and egalitarian utopia, it will have to undertake a profound organizational, programmatic, ethical and political reform.

The political crisis in Brazil cannot be fully understood without taking into account two vital factors in our history.

First, the period since the 1988 constitution is the longest democratic era in the country’s history. Although it arose from a pact with the military regime, it set the country on a course toward social democracy, which at the time was in reverse internationally because of pressure from neoliberal reforms.

Second, Brazilian society continues to have yawning social and economic inequalities, the consequences of the policies of an elite characterized by a colonial and slave-owning culture and opposed to any type of income redistribution through the state, which it views as an interloper trying to appropriate its private wealth.

These two factors gave rise to the current crisis as factions have struggled for power and to define the development model and reform of the political system that will take shape in the next government period.

At the center of the process is the following critical question: Will the model of state and society that is being restructured within the framework of the global crisis come closer to the European social model (adapted to Brazilian conditions)? Or will it generate a society where the population is divided into one-third extremely poor, one-third relatively poor and only one-third fully included – with all the ingredients for upheavals such as states of emergency and periods of authoritarianism.

What will be contested in Brazil in the coming decades, therefore, is not the implementation of a socialist or “post-capitalist” system, for which there is no existing paradigm, but whether there will be a national democratic project with greater or less social cohesion, with greater or less inequality and poverty.

The possibility of social democracy began to be constructed during the Lula governments and continued during the first Rousseff government (2011-2015). However in her second term, which began in January 2015, Rousseff was forced by internal political circumstances (the system of party alliances) and the international situation (the global economic crisis) to abandon that direction and to adopt monetary policies demanded by the liberal and neoliberal opposition.

She did this without consulting her own party base or the social and parliamentary forces that support her with increasing dissatisfaction. This is the impasse that characterizes Brazilian politics today and is motivating part of the opposition to attempt to remove the president by “lawful means,” as happened to former Paraguayan President Fernando Lugo, impeached and ousted in 2012 by parliament.

But the crisis is “cursed” on two accounts. On the one hand, never has so much hatred been unleashed against the segment of society represented by the PT and other left wing parties, opening wounds that will be difficult to heal.

For any incoming government calling itself left wing but acting in centrist and social democratic ways, unless it can rapidly respond to real demands it will be violently destabilized by disappointed mass movements, by the mass media and by conservative or falsely social democratic parties.

On the other hand, the ferocious campaign against the PT governments has itself created economic instability that has benefited the rent-extracting sector, increased the wealth of the rich and impoverished the rest of society. According to reliable sources, “large fortunes have grown again in the first half of 2015″, implying that the social deficit has increased as state functions have been reduced.

It is still too soon to predict the future of the PT and the Rousseff government. But it is certain that the losers in the political demonization and fascist radicalization promoted by dominant media outlets against the PT and the left are Brazilian democracy and the working population, who may experience a serious reversal of their social gains and their political participation.

There will be regrettable excesses during this period of judging the old systems of illegal financing of parties and of corruption, driven by contests for the upper hand between state institutions, and by the political manipulations instigated by the major media outlets against Lula and the PT.

Translated by Valerie Dee

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service.

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Is Good Governance Good For Development? Mon, 14 Sep 2015 15:43:23 +0000 Jomo Kwame Sundaram Jomo Kwame Sundaram. Credit: FAO

Jomo Kwame Sundaram. Credit: FAO

By Jomo Kwame Sundaram
ROME, Sep 14 2015 (IPS)

Many well-meaning people who would like better governance have been misled into insisting on so-called ‘good governance’ reforms, with the expectation that this would lead to development.

There is no clear or systematic evidence that good governance – as an approach — is necessary for development. However, the evidence favours the converse: governance improves with development.

No one is advocating bad governance, or corruption, or however one wants to define whatever good governance is meant to address. Nor is anyone saying that governance does not matter.

Clearly, no one is opposed to good governance in the sense of governance that is good. On the contrary, everyone wants to improve governance in many aspects of human affairs.

When the policy prescriptions of the conventional wisdom of the last three decades did not result in sustained development, good governance reforms became the great hope. After all, the statistical correlation between good governance indicators and economic performance has long fuelled hope that good governance would bring development.

Thus, good governance became a convenient way to explain away the failure of the development economics orthodoxy of the last two decades of the 20th century — when Latin America lost more than a decade, and Sub-Saharan Africa a quarter century due to enforcement of the so-called ‘Washington Consensus’!

Market liberalization was supposed to be the necessary complement of freedom and democracy — following the late Friedrich Hayek and Milton Friedman, both Nobel laureates in economics with considerable name recognition.

Thus, good governance was touted as the great miracle cure for development failure and corruption, usually simplistically attributed to big government. After all, who favours corruption, red-tape or ineptitude?

These were easy targets, and when conventional analysis could not explain development failures and corruption, bureaucracy, bad governance and governance failure could conveniently be blamed.

But unfortunately, all good things in life do not necessarily go together. And while most people want democracy, or want to see an end to corruption, development does not necessarily follow. And that is the problem.

Unfortunately, unrealistic expectations have been created by presuming that good governance reforms are necessary for development. When good governance reforms are imposed as aid conditionalities, recipient developing country governments often end up mimicking donor expectations.

And when you have well over a hundred good governance indicators, reforms become so wide-ranging, impossible to achieve, beyond the means of most developing countries and, worst of all, a major distraction from needed development efforts.

To make things worse, many ostensible good governance solutions favour particular vested interests, with grossly unfair consequences. Also, many good governance reforms have had unexpected, if not perverse outcomes, sometimes worsening governance problems, e.g. when decentralization and devolution have led to powerful local political patrons — which some call ‘cacique’ democracy.

So, let us improve governance by all means. But let us not overload the governance reform agenda unnecessarily. As Harvard Professor Merilee Grindle has put it, we need ‘good enough’ governance — meaning we must prioritize, and strategically.

There is no systematic evidence that the much touted good governance reforms are necessary for development. We cannot presume that the advocates of good governance have been always right about how best to improve governance.

Take the claims about the ostensible necessity to strengthen property rights.

In reality, the tragedy of the commons is not inevitable, and strengthened property rights are not the only solution. The late, much maligned Nobel laureate Elinor Ostrom showed that human societies have long coped with ecological, resource and other constraints with a variety of arrangements other than by strengthening property rights.

As governance improves with development, let us prioritize development-enhancing governance reforms, or developmental governance. A pragmatic approach to improving governance cannot be dogmatic, pre-conceived, and one-size-fits-all, where one has the solution even before one knows the problem.

Identify the major constraints, analyse, and then address them, perhaps sequentially. Draw from relevant experiences, lessons learned. Do not presume there are best practices regardless of context. We need to be humble, not presumptuous, and that is never easy for those of us deemed experts.

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Is Modi Making in India? Sat, 12 Sep 2015 13:11:35 +0000 N Chandra Mohan N Chandra Mohan

N Chandra Mohan

By N Chandra Mohan
New Delhi, Sep 12 2015 (IPS)

Prime Minister Narendra Modi’s ‘Make in India’ programme is inspired by the East Asian manufacturing export success story of development. Earlier, when he was chief minister of the state of Gujarat, he expressed an ambition of modeling the state on South Korea.

Whether he succeeded in doing so is far from obvious. Now, as Prime Minister of India from May 2014, whether he can replicate the success story of South Korea and China at the national level, is equally far from obvious. East Asian countries succeeded when global trade was booming. Can a similar outward-oriented strategy get going now when global trade winds are adverse as they were in the 1930s?

The world economy is likely to grow by 3.3 percent this year, not far from the rough rule of thumb indicating a recession. Only 63-odd countries are set to grow by four percent or more ! Half of these are in Africa and close to a third are in Asia.

The advanced countries are afflicted by secular stagnation. This is an extremely uncertain environment to launch an export drive. As the world economy cannot accommodate another export-led China, India’s central bank governor Raghuram Rajan suggested ‘Make in India’ ought to be re-oriented to ‘Make for India’, that is more dependent on the vast domestic market than relying on incentivized exports alone!

The Prime Minister flagged off ‘Make in India’ in his extempore Independence Day address from the ramparts of the Red Fort on August 15, 2014. He openly welcomed foreign investors to come and set up facilities in this country and talked of encouraging export-oriented manufacturing.

The National Democratic Alliance (NDA) government, in its maiden budget, also indicated a desire to attract big-ticket foreign direct investment in infrastructure like railways, power and highways. Modi has expressed a vsion of building a diamond quadrilateral of bullet trains connecting major metropolises on the Tokaido Shinkansen model and dedicated industrial corridors.

Does this add up to an East Asian model? Not quite.

The South Korea miracle did not happen democratically, but under strong-arm dictators. And the State played a huge role in providing cheap credit to South Korean big business.

More importantly, there are preconditions at the level of human development that do not obtain in India. Forget the poor track-record on Millennium Development Goals (MDGs).

Before take-off, South Korea saw huge investments in education that improved literacy and schooling. Land reforms were in place to ensure unlimited labour to work in the export units.

As the bulk of India’s workforce has low levels of education or none at all, can it attempt this trajectory?

Modi, for his part, wants to boost the manufacturing sector in a big way and make India a global hub. The previous United Progressive Alliance (UPA) government also sought to improve the competitiveness of manufacturing, but was a miserable failure.

The share of manufacturing in the nation’s output of goods and services has stagnated at 15-16 percent. The ground for serious concern is that this sector is not absorbing the millions who stream out from the farms and head to towns and cities for work. Neither can the services sector, for that matter. There is no alternative to taking up casual and temporary jobs in the vast low-paying informal sector.

What has been the response to ‘Make in India’? In the nine months since it was formally launched, the ones most enthusiastic about it are investors from East Asian countries like Japan, South Korea and China! Japan’s Softbank, India’s Bharti Enterprises and Taiwan-based Foxconn announced a joint venture to invest 20 billion dollars in renewal energy projects.

Foxconn, the world’s largest contract manufacturer, is also scouting locales to set up 10-12 facilities in India by 2020 according to its chairmanTerry Gou and has announced plans to invest five billion dollars in Maharashtra. China’s smartphone giant Xiaomi has launched its made-in-India handset.

The foreign investor response is most discernible in automobiles. South Korea’s auto giant Hyundai Motor Co. is considering a third auto plant after Modi’s visit to that country to pitch for foreign direct investment to boost local production.

Mercedes Benz is doubling its assembly capacity to 20,000 units. Ford is planning to ship its India-made EcoSport to the US in October 2017. The leader, Maruti Suzuki India Ltd, is building its third factory in Gujarat. Addressing auto component suppliers, Suzuki’s chairman, Osamu Suzuki, suggested that Make in India should really be a Quality in India programme! Honda Motor Co, too, is expanding one of its plants.

Auto India has acquired critical size with the presence of most global auto giants and strong domestic players. This has, in turn, catalysed a thriving auto component industry. Domestic players, including component manufacturers, have forayed abroad and acquire prestigious brands like Jaguar Land Rover and Ssangyong. While the market for small cars is booming, it is interesting that even Audi and Daimler Benz are witnessing bullish sales. India is already a base for the global plans of Japanese motorcycle manufacturers.

However, foreign direct investment alone cannot make this flagship programme work as it constitutes only a miniscule 3.9 percent of fixed investments in plant and equipment. It needs the full-fledged participation of India Inc, leading segments of which prefer to invest more outside than domestically. The 16 billion dollars auto giant Mahindra prefers to incubate its latest offering, the GenZe electric scooter, entirely in the US!

The warrant for an all-American product is that “we really felt that India didn’t have the start-up atmosphere…” stated Anand Mahindra, chairman, in a candidd interview to the Financial Times.

Mahindra’s move forcefully underscores the challenges prime minister Modi faces in pushing for ‘Make in India’. There must be broader agreement on what it means. Is ‘Make in India’ compatible with design, manufacturing and assembly being done elsewhere in the world in a supply chain-driven globalized economy?

To incentivize India Inc, the NDA government also must cut red tape and radically improve the conditions for doing business. Above all, raising the threshold levels of human development is imperative to kick-start manufacturing in the country. This path need not be an East Asian one but one Made in India.

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G20 Finance Ministers Committed to Sustainable Development Wed, 09 Sep 2015 22:32:33 +0000 Jaya Ramachandran The Finance Ministers and Central Bank Governors of the G20. Credit: TCMB/cc by 2.0

The Finance Ministers and Central Bank Governors of the G20. Credit: TCMB/cc by 2.0

By Jaya Ramachandran
BERLIN, Sep 9 2015 (IPS)

Finance ministers and central bank governors of the world’s 20 major economies, accounting for 66 percent of world population, have pledged to “promote an enabling global economic environment for developing countries as they pursue their sustainable development agendas”.

In this context, they are looking forward to “a successful outcome” of the U.N. Summit in New York for the adoption of the 2030 Agenda for Sustainable Development. The summit will be held from Sep. 25 to 27 in New York as a high-level plenary meeting of the General Assembly of the world body.

The G20, meeting in Turkey’s capital Ankara on Sep. 4-5, reviewed ongoing economic developments, their respective growth prospects, and recent volatility in financial markets and its underlying economic conditions. They welcomed “the strengthening economic activity in some economies” but said that global growth was falling short of their expectations.

To remedy the situation, they vowed to take decisive action to keep the economic recovery on track and expressed confidence that the global economic recovery would gain speed. With this in view, they would continue to monitor developments, assess spillovers and address emerging risks as needed to foster confidence and financial stability.

The G20 welcomed “the positive outcomes of the Addis Ababa Conference on Financing for Development (FFD)”. In support of these, they aim to scale up their technical assistance efforts to help developing countries build necessary institutional capacity, particularly in the areas specified in the Addis Ababa Action Agenda.

The agreement was reached by the 193 U.N. Member States attending the Conference, following negotiations under the leadership of Ethiopian Foreign Minister Tedros Adhanom Ghebreyesus.

U.N. Secretary-General Ban Ki-moon said: “This agreement is a critical step forward in building a sustainable future for all. It provides a global framework for financing sustainable development.”

He added, “The results here in Addis Ababa give us the foundation of a revitalized global partnership for sustainable development that will leave no one behind.”

The G20 includes 19 individual countries – Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom and the United States – along with the European Union (EU). The EU is represented by the European Commission and by the European Central Bank.

The Group was founded in 1999 with the aim of studying, reviewing, and promoting high-level discussion of policy issues pertaining to the promotion of international financial stability.

It seeks to address issues that go beyond the responsibilities of any one organisation. Collectively, the G20 economies account for around 85 percent of the gross world product (GWP), 80 percent of world trade (or, if excluding EU intra-trade, 75 percent), and two-thirds of the world population. The G20 heads of government or heads of state have periodically conferred at summits since their initial meeting in 2008.

The G20 are responsible for 84 percent fossil fuel emissions worldwide. To support the climate change agenda of 2015, they welcomed the Climate Finance Study Group (CFSG) report, took note of the inventory on climate funds developed by the OECD (Organisation for Economic Cooperation and Development), and the toolkit developed by the OECD and the GEF (Global Environment Facility) to enhance access to adaptation finance by the low income and developing countries, especially those that are particularly vulnerable to the adverse effects of climate change.

While recognising developed countries’ ongoing efforts, they called on them to continue to scale up climate finance in line with their commitments.

“We are working together to reach a positive and balanced outcome at the 21st Conference of Parties of the UNFCCC (COP 21). Based on the outcomes and towards the objectives of the COP21, CFSG will continue its work in 2016 by following the principles, provisions and objectives of the UNFCCC,” they added.

UNFCC is the United Nations Framework Convention on Climate Change that emerged from the Earth Summit in June 1992 in Rio, Brazil, which is currently the only international climate policy treaty with broad legitimacy, due in part to its virtually universal membership.

The CFSG was established by Finance Ministers, in April 2012, and was welcomed by leaders in the Los Cabos Summit, in Jun 2012, with a view “to consider ways to effectively mobilize resources taking into account the objectives, provisions and  principles of the UNFCCC”.

In November 2012, Finance Ministers agreed to “continue working towards building a better understanding of the underlying issues among G20 members taking into account the objectives, provisions and principles of the UNFCCC”, and also recognised that the “UNFCCC is the forum for climate change negotiations and decision making at the international level”.

Following the mandate of the group, and building on the CFSG 2013 Report, the Group identified four areas to be studied in 2014, namely: (a) Financing for adaptation; (b) Alternative sources and approaches to enhance climate finance and its effectiveness; (c) Enabling environments, in developing and developed countries, to facilitate the mobilization and effective deployment of climate finance; (d) Examining the role of relevant financial institutions and MDBs in mobilizing climate finance.

This report aims to present to the G20 Finance Ministers and Leaders a range of non-exhaustive policy options (“toolbox”) for voluntary consideration, related to these four areas, and to suggest further work on other important issues on climate finance.

The G20 said they were “deeply disappointed” with the continued delay in progressing the 2010 International Monetary Fund (IMF) Quota and Governance Reforms. In their view, their earliest implementation is essential for the credibility, legitimacy and effectiveness of the Fund and “remains our highest priority”.

As part of continuing efforts to promote market confidence and business integrity, G20 Finance Ministers also endorsed a new set of G20/OECD corporate governance principles.

The G20/OECD Principles of Corporate Governance provide recommendations for national policymakers on shareholder rights, executive remuneration, financial disclosure, the behaviour of institutional investors and how stock markets should function.

Sound corporate governance is seen as an essential element for promoting capital-market based financing and unlocking investment, which are keys to boosting long-term economic growth.

“In today’s global and highly interconnected world of business and finance, creating trust is something that we need to do together,” OECD Secretary-General Angel Gurría said during a presentation of the new Principles with Turkish Deputy Prime Minister Cevdet Yilmaz,‎ who chaired the G20 finance ministers meeting.

Edited by Kitty Stapp

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Young Cubans Look Forward to Greater Openness to Technology Wed, 09 Sep 2015 18:48:31 +0000 Ivet Gonzalez A group of people outside the medical library in the central Havana neighourhood of El Vedado, where Wi-Fi connection is now available. It is one of the 35 hotspots opened by the government telecoms monopoly around the country. Credit: Jorge Luis Baños/IPS

A group of people outside the medical library in the central Havana neighourhood of El Vedado, where Wi-Fi connection is now available. It is one of the 35 hotspots opened by the government telecoms monopoly around the country. Credit: Jorge Luis Baños/IPS

By Ivet González
HAVANA, Sep 9 2015 (IPS)

Young people in Cuba are anxiously awaiting an acceleration of the informatisation of society, which is apparently moving ahead at the same pace as the current reform process, “without haste, but without pause,” according to the authorities.

“Where I would really like to have Internet is at home,” Beatriz Seijas told IPS, sitting in the entrance to a building on Avenida 23, a street in downtown Havana better known as La Rampa, where the state telecoms monopoly ETECSA opened one of the 35 new Wi-Fi access points around the country in July.

Seijas said she came to try the connection here, for two dollars an hour. “As a Cuban, I had never connected to the Internet by telephone or tablet,” said the 19-year-old university student.

“Connecting to the Internet is just a normal thing to do,” said the young woman, who despite the technological and connectivity problems in this Caribbean island nation, sees the new information and communication technologies (ICTs) as a natural part of life, like many of her peers around the world.

Today six out of seven people across the globe have a cell phone and more than 3.0 billion of the world’s 7.1 billion people use the Internet, according to the United Nations, although there is a large gap in ICT access – another reflection of global poverty and inequality.

Digital natives is a term used to refer to people born after 1980, who had access to computers, video games, the Internet, and mobile phones from a young age.

Young people, who represent 26 percent of Cuba’s 11.2 million people, are the main voices calling for greater openness to ICTs.

Internet parlour at the University of Camagüey in eastern Cuba, where the first social network developed entirely in this country, Dreamcatchers, was born. Credit: Jorge Luis Baños/IPS

Internet parlour at the University of Camagüey in eastern Cuba, where the first social network developed entirely in this country, Dreamcatchers, was born. Credit: Jorge Luis Baños/IPS

The International Telecommunications Union (ITU) ranks Cuba 125th out of 166 countries in telecommunications development.

The U.N. agency estimated that only 3.4 percent of Cuban households had private but state-regulated Internet connections in 2013, most of them via dial-up modems and a small proportion through DSL service, which is limited to certain professions, such as journalists and artists.

In June, ETECSA reported that there were more than three million cell phones in the country.

In 2013, Cuba’s national statistics office ONEI registered 2,923,000 users of the Internet and the country’s state-controlled intranet, where a limited number of international and local sites can be accessed.

Thaw in telecommunications

For decades, Cuba cited financial problems as well as the U.S. embargo to explain the limited availability of Internet in this socialist nation.

But things should change with the thaw between the two countries, which led to the reopening of embassies on Jul. 20.

Google executives offered the Cuban government a detailed plan to provide faster Internet, and U.S. officials suggested opening the sector to several foreign investors.

Other U.S. companies that have presented proposals to the government of Raúl Castro are Netflix, Apple, Amazon and Airbnb. In addition, IDT reached an agreement with ETECSA in February to offer direct telephone services between the two countries.

In a Jul. 6 online forum in the local media, the Communist Youth Union stated that “more than 60 percent of the people online in Cuba are young people,” without specifying whether they were referring to the Internet or the intranet.

“The prices are not affordable, but people make the effort. I’ve seen that demand outstrips offer,” said Seijas, who uses her allowance to surf the web for fun.

In 2013 Cuba expanded connectivity, opening 118 public Internet cafés, but at a cost that was unaffordable to the average Cuban: between 4.50 and 6.00 dollars an hour.

Until then the Internet was available only in certain government institutions, schools and Young Computer Club community centres, as well as to tourists in hotels.

In 2014, mobile phone email service was made available.

The 35 Wi-Fi hotspots created by ETECSA are on sidewalks and in parks in 16 cities around the island, and up to 50 or 100 users can log on simultaneously at a speed of one megabit a second.

But although the price of surfing the net for one hour at the 35 public spaces with Wi-Fi is two dollars, down from 4.50 in the state-owned Internet parlours, that is still prohibitive in a country where over five million people earn a public sector salary averaging 23 dollars a month.

The demand is driven by a segment of the population who are earning more in the growing number of private businesses, receive remittances from family members abroad, or have better-paid jobs in foreign companies.

It is also fuelled by people’s hunger for new things or the search for higher speed Internet.

Although they can log on at the University of Camagüey, a young professor, José Carlos Hernández, and students Merín Machado and Dany Avilés told IPS that they sometimes pay the 4.50 dollars an hour rate at the cybercafé in the city of Camagüey, 578 km east of Havana.

The team maintains the social network Dreamcatchers, which emerged in 2012 as the first one totally developed by young Cubans – computer science students and professors from the University of Camagüey. The network, which now has 15,000 users, “bolsters research and development in the university community,” explained the 21-year-old Avilés.

Also available over Cuba’s intranet, Dreamcatchers promotes itself as a collaborative social network based on ideas, which brings together “like-minded people,” the computer science student said. It offers a messaging and chat platform and a page for sharing ideas.

The three young people said they were sure there would soon be more Internet access in Cuba which, they stressed, would be a very positive thing for their project.

The socialist government faces the commitment to reach the International Telecommunications Union’s target of 50 percent household Internet coverage and 60 percent cell-phone coverage by 2020 in developing countries.

To meet this and other international goals, early this year the authorities launched a plan to expand computer use in Cuban society and boost the social use of the web in sectors like health, education and science, increase access in public site like cyber salons and parks, and lastly provide access at home.

The programme’s aims include: developing the country’s fixed and mobile telecoms infrastructure, using Wi-Fi and optic fibre to bring in broadband, reducing Internet costs, and fostering e-commerce and the computer industry.

Authorities in Cuba, which has been caught in the grip of economic crisis for over 20 years, have not specified the funds to be allotted to the plan. But they did say it was backed by China and Russia.

The ICT sector does not form part of the package of business opportunities presented in 2014 with the aim of attracting 8.7 billion dollars in foreign investment.

Based on these announcements, experts anticipate that Cuba plans to continue to regulate public access to the Internet along the lines of China and Russia, whose governments exert control over the web.

Edited by Estrella Gutiérrez/Translated by Stephanie Wildes

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Opinion: A Call for Public Participation in National Budget Processes Wed, 09 Sep 2015 18:01:42 +0000 Amitabh Mukhopadhyay

Amitabh Mukhopadhyay is the former Auditor General of India and Joint Secretary of the Parliamentary Financial Committee.

By Amitabh Mukhopadhyay
NEW DELHI, Sep 9 2015 (IPS)

After forming governments, authorising them to tax us and to spend on our collective needs, do we remain watchful about our money? No, we don’t. Not even when we know governments borrow from money markets on the strength of the tax fund created, often beyond our means to repay. Why?

Because we get little information on budget formulation, approval and implementation, governments keep them under a veil of secrecy. A government budget is a major macroeconomic intervention in the ever-widening circulation of goods, services, technologies and money in the economy.Public finances can become more buoyant if the confidence of taxpayers and donors in the efficiency and effectiveness of government spending is raised.

Sensitiveness of various sections of public opinion to what and who is taxed along with for whom benefits accrue from the spending matters to governments. While the rich and powerful are consulted by government and even get privileged ‘leaks’ on the coming budget facilitating their jostling and huckstering to get maximum tax concessions from it, commoners are left to chew on its bare bones.

The Open Budget Partnership (OBP) of NGOs across 102 countries has started making a difference to this Kafkaesque scenario. Advocacy efforts of OBP to enable participation of people in the budget process accented a demand for transparency. The partnership helped to survey budgetary practices of these countries biennially since 2006.

The Open Budget Survey 2015 released this week tells us that though the situation has improved, there are still large gaps in the amount of budget information that governments are sharing. The average OB Index score of the 102 countries surveyed in 2015 is 45 out of 100.

A large majority of the countries assessed — 78 countries, in which 68 percent of the world’s population live — provide insufficient budget information. These have OBI scores ranging from 40 to 60. Interestingly, the Survey says the hydrocarbon revenue-dependent countries (those with scores of 40 or below) performed the worst, though they have higher average incomes than the countries with scores between 40 and 60.

The good news is that increases in budget transparency have been especially robust among some of the countries that provided the least budget information in the past. A significant number of countries have seen dramatic improvements, occasioned by pressure from both inside and outside the country.

The Survey, 2015 also captures the strength of the two formal oversight institutions, the legislature and the supreme audit institution. The results indicate that legislatures of only 36 countries have adequate strength to execute their responsibilities. In the remaining 66 countries, they do not.

This is because these legislatures are either not provided with enough time to review the budget proposal before it has to be passed or, like in 55 countries in the Survey, the legislatures lack the expertise to help them analyse budgets in quick-time. Worse still, in a majority of the 102 countries, after the budget is passed, legislative oversight can be easily skirted by various stratagems of the executive branch.

Apparently, as many as 43 countries, supreme audit institutions tasked to audit government revenues and expenditure are unable to perform their functions adequately due to lack of resources. What is deplorable, however, is that in most countries, the quality assurance systems for supreme audit institution reports fail to exist or are deficient.

In short, we simply can’t rest assured that robust oversight procedures are in place and we needn’t bother personally. The degree to which opportunities for public participation in the budget process are present in different countries varies widely.

Among the countries surveyed in 2015, the average score for participation is an abysmal 25 out of 100. Only 19 out of 102 countries allow the public to testify in both of the two key hearings — one, on the macroeconomic framework of the budget and the second on the individual budgets of administrative units, such as health and education.

Financing the ambitious sustainable development goals which the United Nations will shortly adopt will not be easy. Most observers are sceptical about generating much required additional money from the private sector, through tax reforms, and through a crackdown on illicit financial flows and corruption. Woefully inadequate national budgets and aid would most likely remain the mainstay for implementing the SDGs.

Public finances can become more buoyant if the confidence of taxpayers and donors in the efficiency and effectiveness of government spending is raised. There’s overwhelming evidence from many countries that public participation in the national budget processes makes a difference.

We require governments to create spaces for public participation. Mutually reinforcing engagement of a wide range of actors can build the political will for them to do so. That’s why you and I must step in.

Edited by Kitty Stapp

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Opinion: From Inequality to Inclusion Tue, 08 Sep 2015 16:57:54 +0000 Jomo Kwame Sundaram Jomo Kwame Sundaram. Credit: FAO

Jomo Kwame Sundaram. Credit: FAO

By Jomo Kwame Sundaram
ROME, Sep 8 2015 (IPS)

Recent years have seen a remarkable resurgence of interest in economic inequality, thanks primarily to growing recognition of some of its economic, social, cultural and political consequences in the wake of Western economic stagnation.

The unexpectedly enthusiastic reception for last year’s publication of Thomas Piketty’s “Capital in the Twenty-First Century” underscores this sea change.New thinking on social protection recognises that most of the poor and vulnerable in developing countries are outside the formal economy, with almost four-fifths of the poor living in the countryside.

Piketty has correctly renewed attention to the connections between the functional and household/individual distributions of income as well as to wealth inequality. Clearly, the distribution of wealth (capital, real property) is the major determinant of the functional distribution of income.

And by textbook economics’ definition, profit maximisation involves capturing economic rents of some kind – from finance, monopolistic intellectual property rights (IPRs), ‘competitive advantage’, producer surplus, etc., presumably thanks to successful rent-seeking, by influencing legislation, regulation, public policy, public opinion and consumer preferences.

As is understandable and the norm, Piketty’s focus is on inequality at the national level, rather than at the global level. But Branko Milanovic and others have shown that about two-thirds of overall world interpersonal or inter-household inequality is accounted for by inter-country inequality, with the remaining third due to what may be termed class and other intra-national inequalities.

International inequality

There are many competing explanations for international inequalities. Historical differences in capital accumulation, including public investments, and productivity are commonly invoked to explain different economic capacities, capabilities and incomes.

But frequently unsustainable foreign investments also lead to significant net outflows, greatly diminishing the net benefits from additional economic capacities. Financial flows to the settler colonies from the late 19th century were exceptional in this regard. Generally, a small share of foreign direct investment actually enhances economic capacities, instead mainly contributing to acquisitions and mergers.

Financial globalisation in recent decades, especially capital market flows, have not ensured sustained net flows from capital-rich to capital-poor economies, but has instead worsened financial volatility and instability, increasing the frequency of crises with traumatic effects for the real economy, and growth sustainability.

Contrary to the conventional wisdom that international trade lifts all boats, it has generally favoured the richer countries at the expense of their poorer counterparts. For well over a century, except during some notable periods and some rare minerals more recently, the prices of primary commodities have declined against manufactures.

This has been especially true of tropical agriculture compared to temperate products, as productivity gains have accrued to consumers more than to producers. In recent decades, cut-throat competition has meant a similar fate for developing country manufactured exports compared to the large marketing margins of manufactures from developed economies.

Social protection

As the deadline for the Millennium Development Goals approaches, the call to address inequality as a crucial challenge for development has emerged as an issue to be addressed in the post-2015 development framework.

Inequality gradually came back into development debates after the United Nations, the World Bank and the IMF focused flagship publications on this issue a decade ago, with the publication of the UN 2005 Report on the World Social Situation entitled The Inequality Predicament, the World Development Report 2006, and the 2007 World Economic Outlook on Globalization and Inequality.

The ongoing effects of the global financial and economic crisis since 2008 have reinforced recognition that inequality has been slowing not only human development, but also economic recovery. But this has not led to any fundamental change in economic policy thinking or a major commitment to redress inequality at the global or even national level, except perhaps by improving taxation.

Instead, it has led to a consensus to establish a global social protection floor, recognising not only that poverty and hunger in the world will not be eliminated by more of the same economic policies, especially with the currently dim prospects for sustained economic and employment recovery and growth.

Historically, the welfare state emerged in developed countries to address deprivations in the formal economy – retirees, retrenched workers, military veterans and mothers among others. Social protection and other fiscal interventions do not fundamentally challenge wealth or income distribution, and current thinking is mindful of the potentially unsustainable burden of a welfare state.

New thinking on social protection recognises that most of the poor and vulnerable in developing countries are outside the formal economy, with almost four-fifths of the poor living in the countryside. The new interventions thus seek to accelerate the transition from protection to production, for greater resilience and self-reliance.

Edited by Kitty Stapp

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Q&A: “We Must Put Everything Aside and Just Focus on Water” Fri, 04 Sep 2015 21:18:56 +0000 Stella Paul The Water Man of India, Rajendra Singh, has spent 35 years reviving water bodies and bringing water to villages across India. Credit: Stella Paul/IPS

The Water Man of India, Rajendra Singh, has spent 35 years reviving water bodies and bringing water to villages across India. Credit: Stella Paul/IPS

By Stella Paul
STOCKHOLM, Sep 4 2015 (IPS)

Globally, more than 748 million people do not have access to safe drinking water. That is more than double the population of the entire United States.

United Nations data suggests that 1.8 billion people – that is 500 million more than the population of China – drink water that is faecally contaminated. Every year, over two million people die due to a lack of clean water.

"I am a seed of hope. I never lose hope. I restore what has been damaged – this is the philosophy of my life." -- Rajendra Singh, winner of the 2015 Stockholm Water Prize
According to the latest World Water Development Report, demand for water could rise by 55 percent by 2050, an increase driven primarily by the manufacturing sector.

As the international community shifts its poverty eradication framework from the Millennium Development Goals (MDGs) to its highly ambitious sustainable development agenda, the issue of water has never been more critical.

Between the din of policymakers trapped in endless high-level debates and scores of citizens feeling the pinch of drought, thirst and water transmitted illness – some sources say that 5,000 children die every day as a result of water-borne disease – a few voices are making themselves heard, lending clarity to one of the world’s most complex and urgent problems.

Among them is Rajendra Singh, the winner of this year’s prestigious Stockholm Water Prize, sometimes referred to as “the Nobel Prize for water”, for his 35-year-long commitment to water management and conservation.

Singh himself has been affectionately nicknamed the ‘Water Man of India’ and is credited with reviving an ancient rainwater harvesting technique that has breathed new life into several rivers and returned clean, running water to over 1,200 villages in his home state of Rajasthan, located in the north-east of the country.

With its massive rivers and their countless tributaries making up one of the most complex freshwater systems in the world, India provides an excellent case study in water management.

Over 150 million people in this country of 1.2 billion currently live without access to fresh water, compounding widespread poverty and raising serious questions about energy, environmental degradation and sustainable development.

On the sidelines of the recently concluded World Water Week 2015, IPS correspondent Stella Paul sat down with the renowned Indian water activist to hear his views on the future of this scarce and incredibly precious resource.

Excerpts from the interview follow.

Q: You always say, “We do not need new policies. We need water action”. What do you really mean by that?

A: Let me speak of India.

In India, there is no dearth of policies and acts; there are many [laws] regarding water conservation, water management and water use. But these policies and acts are not executed properly, which is why there is no concrete action. Now we need to start clear, community-driven, decentralized work on water. And the role of the government in [this type of] water management is very important: providing adequate resources to communities and creating an environment that is conducive to taking action.

There should be joint action between the government and the community for water management. We need four things for that: water literacy, water conservation, water management and efficient use of water.

Q: You say the government should create the environment and provide the resources for water action. It is often thought that ‘resources’ means ‘money’, which comes from the private sector. How do you respond to that?

A: Change never comes from the private sector’s money. For real change, we need the government and the community. What we need is not corporatization, but communitization of democracy. If [the] corporate [sector] does everything, then, where is the democracy?

In Rajasthan, we have many corporations, but we also have a water parliament. We maintained the community’s rights here. We maintained a democratic environment. People rose up here. Wherever people rose for their rights, those robbing society had to run away. Corporations are here and they are here to stay – but it is important to see that they do not loot the people and that they do not pollute the system.

Q: We are entering the era of the Sustainable Development Goals (SDGs). In regards to water, what must the government do differently, compared to what it did during the MDGs?

A: Life, livelihood and dignity – all of these three are linked to water. In the SDG era, we have to give the highest priority to water. We have to put everything aside for a while and just focus on water. We shouldn’t get tangled [up in] projects, indicators and the LFAs (Logical Framework Approach), but stay focused on actual work.

Today there is massive encroachment of water bodies. To prevent this encroachment, we must conduct identification, demarcation and notification of the water bodies. In many cases, due to erosion, there is a lot of silt in the water and since there is no clear title of the water body, the real estate lobby encroaches upon it.

Encroachment on the river is a problem that is found across India, Pakistan, Nepal, Bangladesh and other regions as well. Poverty in the [Asian] region is a result of a water crisis, because of disrupting people’s water rights. If we end this, we can make the entire region water adequate.

For instance, the [2005] National Rural Employment Guarantee Act (NREGA) was originally created to revive and reshape the country’s water system. The then Minister of Agriculture in India, Raghunath Singh, came to us, saw my work and decided to design a programme through which action can be taken in regards to water.

The same should be done again. NREGA should be mandated to focus only on water.

Q: You were on the board of Mission Clean Ganga [the third-largest river in India]. Can the river be ever truly revived?

A: It’s difficult but not impossible. But the government is only engaging with engineers, technicians etc. The government has not engaged with the sons and daughters of the Ganga – the people. If the government truly involves people in the Clean Ganga Mission, it can take a maximum of 10 years to revive the river.

In fact, any of the country’s dead rivers – the Musi River, the Mithi River, etc – can be revived in 10-15 years. What we need is the political will of the government and the participation of common people.

I am a seed of hope. I never lose hope. I restore what has been damaged – this is the philosophy of my life.

Edited by Kanya D’Almeida

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Crisis in Brazil Hampers Infrastructure under Construction Fri, 04 Sep 2015 17:02:53 +0000 Mario Osava The South Atlantic Shipyard is the biggest in Suape Port, in the Northeast Brazilian state of Pernambuco, where oil tankers have been built after a slow start that threatened to put an end to the project. Credit: Mario Osava/IPS

The South Atlantic Shipyard is the biggest in Suape Port, in the Northeast Brazilian state of Pernambuco, where oil tankers have been built after a slow start that threatened to put an end to the project. Credit: Mario Osava/IPS

By Mario Osava
RIO DE JANEIRO, Sep 4 2015 (IPS)

Besides suffering from macroeconomic imbalances, like a drop in GDP, a high inflation rate and a large public deficit, Brazil is experiencing heavy losses as many oil industry and logistical works grind to a halt.

Much of the infrastructure under construction is part of a cycle that is coming to an end, of rising demand for and prices of raw materials.

China’s economic slowdown has had an especially big impact on iron ore, the price of which has plunged more than 60 percent since 2013. This will hinder the viability of several iron deposits in Brazil, as well as two railways under construction in the Northeast, which now have an uncertain future.

The West-East Integration Railway (FIOL), designed to cross the state of Bahia, connecting soy-producing areas with the coast, depends on the start of operations in an iron mine in Caetité, 380 km as the crow flies from the port city of Ilheus.

A similar situation is now faced by the Transnordestina railway farther north, which is to link another mining and agricultural area to two ports. “But the mine doesn’t even exist there yet,” said Newton de Castro, a professor at the Federal University of Rio de Janeiro.

“Low-grade iron ore is pushed out of the market when demand goes down, affecting the railroads that transport it,” de Castro, an engineer with a PhD in transport systems, told IPS. He criticised “badly designed projects” that have mushroomed in Brazil in recent years to fill a gap in infrastructure.

Doubts about the viability of the Caetité mine have undermined the construction of Porto Sul, the port that is the endpoint of the Fiol railway. Construction of the megaport has not yet begun, and work on the railroad has stalled, and it was left out of the government plan for the expansion of transport routes.

More progress has been made on the Transnordestina line, which benefits from the existence of two port destinations that are also industrial complexes: Suape in the Northeast state of Pernambuco and Pecém in one of the country’s northernmost states, Ceará.

But the deposit of iron and other minerals that it was built to serve has been abandoned since its owner Eike Batista, once known as the richest person in Brazil, went bankrupt.

Another major infrastructure project, the expansion of the Carajás railroad by the country’s biggest mining company, Vale, is on a better footing. “It will transport excellent quality mineral and the cost will be low, because it involves expanding already-existing infrastructure,” Castro said.

The new reality of lower demand and prices “will push out of the market mines that are more costly to operate, and small mining companies,” favouring the predominance of big firms like Vale, the British-Australian Rio Tinto and the British Anglo American.

Brazil is the world’s second-largest producer and exporter of iron ore after Australia, and Vale is the world’s single largest producer of the mineral, the chief market for which is China.

The expansion in the size and number of ports along Brazil’s coastline will also be hampered by the drop in activity in the mining industry, as well as by the oil crisis caused by the drop in prices and especially the scandal that has hit the state-run oil company, Petrobras.

The drastic cutback in Petrobras’ investments has hurt the government’s strategy to develop a strong shipbuilding industry based on dozens of shipyards along the Brazilian coastline producing boats, offshore platforms and other oil exploration and drilling equipment for deepwater oil industry operations.

The Carajás railroad, which links the region where large new iron deposits belonging to Vale were found, with the port of Ponta Madeira in the Northeast city of São Luis, as it passes by a small town in the state of Maranhão. The railway network is going to be expanded and upgraded as part of a project that has not been hurt by the current crisis. Credit: Mario Osava/IPS

The Carajás railroad, which links the region where large new iron deposits belonging to Vale were found, with the port of Ponta Madeira in the Northeast city of São Luis, as it passes by a small town in the state of Maranhão. The railway network is going to be expanded and upgraded as part of a project that has not been hurt by the current crisis. Credit: Mario Osava/IPS

The crisis triggered the dismissal of tens of thousands of workers and the suspension of work in many shipyards and their port areas. One company alone, Enseada, hired to produce six drillships for Petrobras by 2020 for a cost of 4.8 billion dollars, has laid off nearly all of its 7,000 workers since 2014.

The company’s plant is only 82 percent complete. This and other white elephants represent an enormous waste of resources, which are not likely to be recovered.

“The programme was built on unrealistic foundations; the crisis has penalised investments that were misguided or badly designed,” said Adriano Pires, an economist who specialises in energy planning and is the director of the Brazilian Infrastructure Centre, a consultancy.

Most of the oil discovered in Brazil lies deep below the seabed off the Atlantic coast. The enthusiasm for creating a national industry for oil drilling equipment emerged after the 2006 discovery of large amounts of oil under a thick layer of salt, known as the pre-salt layer, more than 5,000 metres below the surface.

The difficulties of tapping into that newfound wealth make technology, ships, and large, complex equipment necessary. The administration of Luiz Inácio Lula da Silva (2003-2010) launched a strategy to develop the pre-salt reserves, in which Petrobras played a dominant role.

The government also set national content standards averaging 60 percent for the equipment used, to drive local production. And shipyards began to mushroom.

“It was an illusion. Reserving market encouraged waste not efficiency, besides favouring corruption,” Pires told IPS.

“Recovery will be slow and difficult; everything will have to be revised, and it will require a government with credibility, unlike the current one,” said the expert, an outspoken opponent of the centre-left government of President Dilma Rousseff, in power since Jan. 1, 2011. “It will require a regulatory framework that offers legal security, to attract investment.”

Oil and infrastructure are the sectors that can fuel recovery of economic growth, to overcome the recession that has hit Brazil since last year, he said.

Among analysts there are even doubts about the economic feasibility of exploiting the pre-salt oil reserves at the current prices, which stand below 50 dollars a barrel. “That is not evaluated on the basis of today’s prices, but looking at long-term prices, and I estimate that prices will go back up to 60 or 70 dollars a barrel within five years,” Pires said.

By contrast with the oil, mining and railway industries, the power industry has escaped the wave of frustrated infrastructure projects.

“In Brazil there is repressed demand, and that requires an expansion of the power grid in the long term – a need that doesn’t disappear because of recession or two years of economic slowdown. At the most, some goals could be postponed,” said André Lucena a professor of planning at the Federal University of Rio de Janeiro.

In this country of 202 million people, “per capita consumption of electricity is low in comparison to developed countries, which is why it tends to grow, for example with the incorporation of new electric and electronic equipment in homes,” he told IPS. For that reason, new hydroelectric and thermal plants will never be useless.

Moreover, a stable power supply requires a surplus: “some idle capacity forms part of the system’s operating mechanism, it’s beneficial,” he said.

On a daily basis there are “consumption peaks” that the system must deal with to avoid blackouts. The generation and distribution of electricity cannot be based on average usage.

In Brazil, hydropower plays a predominant role – it is inexpensive and operates as long as there is water. It represents nearly two-third of the country’s installed capacity.

Thermal plants, fired by oil, natural gas or coal, produce more expensive electricity, and are only used when there is not enough hydropower. “They are built to be idle most of the time, but they’re not useless,” said Lucena.

Edited by Estrella Gutiérrez/Translated by Stephanie Wildes

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CORRECTION/Who Will Pay the Price for Australia’s Climate Change Policies? Wed, 02 Sep 2015 21:43:34 +0000 Neena Bhandari Australia has set a target to cut emissions by 26 to 28 percent of 2005 levels by 2030 but aggressive coal mining could hamper those plans. Credit: Neena Bhandari/IPS

Australia has set a target to cut emissions by 26 to 28 percent of 2005 levels by 2030 but aggressive coal mining could hamper those plans. Credit: Neena Bhandari/IPS

By Neena Bhandari
SYDNEY, Sep 2 2015 (IPS)

Rowan Foley has spent many years as a ranger and park manager, caring for Uluru–Kata Tjuta National Park Aboriginal lands in the spiritual heart of Australia’s Red Centre in the Northern Territory. He has been observing the effects of soaring temperatures and extreme weather events on his people, residing in some of the hottest regions of the country.

“There are hotter and more frequent fires. Salt water intrusion is leading to less fresh water. This is impacting on indigenous traditional owners of the land, who have contributed the least to global warming,” says Foley, who belongs to the Wondunna clan of the Badtjala people, Traditional Owners of Fraser Island and Hervey Bay in the state of Queensland.

“Australia’s target does not reflect any recognition that the impacts [of climate change] are already being felt by our Indigenous people and Pacific Island neighbours nor the sense of urgency that grips so many of these communities." -- Negaya Chorley, head of advocacy at Caritas Australia
Australia, the driest inhabited continent, is on an average likely to experience more global warming than the rest of the world. Increasing drought, floods, heatwaves and bushfires are already impacting on the country’s environment and economy, further disadvantaging Indigenous Aboriginal and Torres Strait Islanders and the most vulnerable in remote and island communities.

“The Coconut Islands in the Torres Strait are under threat from sea level rise. [For Indigenous people], their culture and heritage are tied to the island and they would have nowhere to go. We are also seeing spikes in heat related deaths,” says Kellie Caught, climate change national manager for the World Wildlife Fund-Australia.

Deaths from heatwaves are projected to double over the next 40 years in Australian cities and sea levels are projected to continue to rise through the 21st century at a rate faster than over the past four decades, according to a recent report by the independent organisation Climate Council.

To support the sustainable development of Aboriginal lands by combining traditional practices and business needs, Foley launched the Aboriginal Carbon Fund, a national not-for-profit company, in partnership with Caritas Australia, five years ago.

For thousands of years, Indigenous people have traditionally managed the land in the savannah regions of tropical northern Australia by making small fires in winter. This prevents uncontrolled late-season fires from destroying the land and also reduces the amount of carbon produced by wildfires in the atmosphere.

The Fund has set up a programme whereby farmers and land managers undertake carbon farming, which allows them to earn carbon credits by reducing greenhouse gas emissions, or capture carbon in vegetation and soils.

These credits are then sold to organisations and businesses wishing to offset their own emissions. Payment for carbon credits is helping create sustainable livelihoods in remote communities.

“Carbon farming is an agribusiness and we urgently need a development package to support this industry,” says Foley, the Fund’s general manager.

Similarly, civil society advocates say that being one of the sunniest and windiest countries in the world, Australia has huge potential for solar power and wind energy.

But the country’s Liberal-National coalition has slashed renewable energy targets and repealed carbon and mining taxes.

“Our government has gone to extreme lengths to repeal or undermine climate and clean energy policy,” Tom Swann, a researcher with the Canberra-based The Australia Institute, told IPS. “If Australia succeeds in its plans to double its exports in the next 10 years, the world loses in its plans to tackle climate change.

“More coal mines mean lower coal prices, less renewable energy and more climate impacts. Indeed, meeting the two-degrees centigrade target, to which Australia has signed up, means 95 percent of Australia’s coal must stay in the ground, but Prime Minister Tony Abbott says he can think of ‘few things more damaging to our future’,” Swann added.

Coal is Australia's second-largest export, generating over 200 billion dollars in foreign sales. Credit: Neena Bhandari/IPS

Coal is Australia’s second-largest export, generating over 200 billion dollars in foreign sales. Credit: Neena Bhandari/IPS

Coal is Australia’s second largest export and this year it is forecast to generate 346 billion Australian dollars (253 billion U.S. dollars) in foreign sales, according to Australia’s Department of Industry and Science. Australia exports 80 percent of the coal it mines and currently meets three-quarters of the country’s electricity needs from burning coal.

A survey by The Climate Institute released on Aug. 10 showed 84 percent of Australians prefer solar amongst their top three energy sources, followed by wind at 69 percent.

Australia has set a target to cut emissions by 26 to 28 percent of 2005 levels by 2030 (equivalent to a 19 percent cut on 2000 levels).

WWF’s Caught says, “The Australian Government’s pollution reduction target is woefully inadequate and not consistent with limiting warming below two degrees centigrade. If all countries matched Australia’s targets the world would be on track for a 3-4 degree centigrade warming. The target puts Australia at the back of the pack on international action.”

The United States and the European Union proposals will mean emission reductions of around 2.8 percent a year whereas Australia’s proposals will yield a 1.8 percent reduction, according to the World Resources Institute (WRI).

Environment groups argue that it is economically feasible for Australia to move to a low carbon economy.

“The Government’s draft 2030 target is estimated to reduce GDP growth by 0.2-0.3 percent over the next 15 years,” Caught told IPS.

“With a stronger 45 percent target, it would only reduce growth by 0.5-0.7 per cent over the same time. Our GDP would make up that small difference in growth in just a few months.”

Community sector organisations are especially concerned that people experiencing poverty and inequality will be hardest hit by sea level rise inundating low-lying coastal areas, reducing crop yields and forcing migration of millions of people; and they would be the least able to adapt.

“Australia’s target does not reflect any recognition that the impacts are already being felt by our Indigenous people and Pacific Island neighbours nor the sense of urgency that grips so many of these communities,” says Negaya Chorley, head of advocacy at Caritas Australia, an international aid and development agency of the Catholic Church.

“Given this denialism, our government is in no way ready or prepared to take in and support people and whole communities that will be forced to migrate due to the impacts of climate change.”

World Health Organisation (WHO) figures estimate a third of the global burden of disease is caused by environmental factors and children under five bear more than 40 percent of that burden, even though they represent just 10 percent of the world’s population. They are more at risk from waterborne diseases and more likely to be impacted by air pollution.

Save the Children Campaigns Manager, Tim Norton, told IPS, “Wealthier nations such as Australia must scale up its contribution to international climate finance, such as The Green Climate Fund, to 400 million Australian dollars [285 million U.S. dollars], independent of its aid budget.

“This provides the best opportunity for Australia to actively contribute to mitigating the impacts of climate change on vulnerable communities in the developing world. It also allows nations to transition to low-emission clean economies without the need of fossil fuels.”

Australia scores highest with 26.6 tonnes of CO2 equivalent (tCO2e) emissions per capita, contributing 1.3 percent of global emissions, according to 2011 data from the WRI, even though it has a relatively small population of 23.8 million people.

A 2015 poll conducted by the Lowy Institute of International Policy recorded the third consecutive rise in Australians’ concern about global warming, with 63 percent saying the government should commit to significant emissions reductions so that other countries will be encouraged to do the same at the Conference of States Parties (COP-21) to the U.N. Framework Convention on Climate Change in Paris this December.

*The story that moved on Sep. 2 incorrectly attributed the following quote to Australian Council of Social Service (ACOSS) Chief Executive Officer Cassandra Goldie: “We need new measures to shift from dirty coal to renewable energy, including a commitment from all parties to at least 50 percent renewable energy by 2030.”

Edited by Kanya D’Almeida

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Local Development, the Key to Legitimising Amazon Hydropower Dams Mon, 31 Aug 2015 21:23:00 +0000 Mario Osava The Altamira water treatment plant is practically inactive because the sewer pipes installed 10 months ago in this city of 140,000 people have not been connected to the homes and businesses. Altamira is 50 km from the Belo Monte hydroelectric dam in Brazil’s Amazon jungle region. Credit. Mario Osava/IPS

The Altamira water treatment plant is practically inactive because the sewer pipes installed 10 months ago in this city of 140,000 people have not been connected to the homes and businesses. Altamira is 50 km from the Belo Monte hydroelectric dam in Brazil’s Amazon jungle region. Credit. Mario Osava/IPS

By Mario Osava
ALTAMIRA, Brazil, Aug 31 2015 (IPS)

In the case of the Belo Monte hydroelectric dam in Brazil, the projects aimed at mitigating the social impacts have been delayed. But in other cases, infrastructure such as hospitals and water and sewage pipes could improve the image of the hydropower plants on Brazil’s Amazon rainforest rivers, turning them into a factor of effective local development.

Under construction since 2011 on the Xingú river, Belo Monte has dedicated an unprecedented amount of funds to compensating for the impacts of the dam, through its Basic Environmental Project (PBA), which has a budget of 900 million dollars at the current exchange rate.

To that is added a novel 140-million-dollar Sustainable Regional Development Plan (PDRS), aimed at driving public policies and improving the lives of the population of the dam’s area of influence, made up of 11 municipalities in the northern state of Pará.

These funds amount to 12.8 percent of the cost of the giant dam on the middle stretch of the Xingú river, one of the Amazon river’s major tributaries. If distributed per person, each one of the slightly more than 400,000 inhabitants of these 11 municipalities would receive 2,500 dollars.

But the funds invested by the company building the Belo Monte hydropower plant, Norte Energía, have not silenced the complaints and protests which, although they have come from small groups, undermine the claim that hydropower dams are the best energy solution for this electricity-hungry country.

“The slow pace at which the company carries out its compensatory actions is inverse to the speed at which it is building the hydropower plant,” complained the Altamira Defence Forum, an umbrella group of 22 organisations opposed to the dam.

The most visible delay has involved sanitation works in Altamira, the main city in the area surrounding the dam, home to one-third of the local population. Installed 10 months ago, the sewage and water pipes are not yet functioning, leaving the water and wastewater treatment plants partially idle.

The problem is that the pipes were not connected to the local homes and businesses, a task that has been caught up in stalled negotiations between Norte Energía, the city government and the Pará sanitation company, even after the company expressed a willingness to shoulder the costs.

“In addition, the storm drainage system was left out of the plans; the city government didn’t include it in the requirements and conditions set for the company,” the head of the Live, Produce and Preserve Foundation, João Batista Pereira, told IPS.

Part of one of the 18 big turbines that will generate electricity in the main Belo Monte plant, ready to be inserted into one of the big circular metal holes built in the giant dam in the Brazilian Amazon. Credit: Mario Osava/IPS

Part of one of the 18 big turbines that will generate electricity in the main Belo Monte plant, ready to be inserted into one of the big circular metal holes built in the giant dam in the Brazilian Amazon. Credit: Mario Osava/IPS

The lack of storm drains is especially destructive for cities in the Amazon rainforest, where torrential rains are frequent.

The works and services included in the PBA respond to requirements of the Brazilian Environment Institute, the national environmental authority. Incompliance with these requisites could supposedly bring work on the dam to a halt. But the rules are subject to flexible interpretations, as recent experience has shown.

Pereira is one of the leaders of the PDRS, a “democratic and participative” programme where decisions on investments are reached by an administrative committee made up of 15 members of society and 15 representatives of the municipal, state and national governments.

The projects can be proposed by any local organisation that operates in the four areas covered by the plan: land tenure regularisation and environmental affairs, infrastructure, sustainable production, and social inclusion.

In these areas and some projects that the company finances, such as the Cacauway chocolate factory that processes the growing local production of cacao, the PDRS is distinct from the PBA, which addresses the immediate needs of people affected by the dam, such as indigenous people, fisherpersons or families displaced by the reservoirs.

The PBA’s activities were defined by the environmental impact study produced by researchers prior to the dam concession tender. Hospitals and clinics were built or refurbished to compensate the municipalities for the rise in demand for health services, while 4,100 housing units were built for relocated families.

These are responses to the immediate needs of affected individuals, groups or institutions, without integral or lasting planning. The only one responsible for implementation is the company holding the concession, even though they involve tasks that pertain to the public sector.

“The confusion between public and private is natural,” José Anchieta, the director of socioenvironmental affairs in Norte Energía, told IPS.

The delay in compensatory programmes generated chaos, the Altamira Defence Forum complains. Many of the initiatives were supposed to be carried out prior to construction of the hydropower plant.

The hospitals and health clinics were not delivered by Norte Energía until now, when construction of the dam is winding down. But they were most needed two years ago, when the floating migrant worker population in the region peaked as a result of work on the dam. The same is true for schools and urban development works.

This mistiming led to serious problems for the local indigenous population. The institutions protecting this segment of the population were not strengthened. On the contrary, the local presence of the National Indigenous Foundation (FUNAI), the government agency in charge of indigenous affairs, was weakened during the construction of the dam, and the overall absence of the state was accentuated.

From 2010 to 2012 an “emergency plan” distributed processed foods and other goods to indigenous villages. This led to an abrupt change in habits, driving up child malnutrition and infant mortality among indigenous communities, which only recently began to be provided with housing, schools and equipment and inputs to enable them to return to agricultural production.

Bridge under construction on a road at the entrance to the city of Altamira, in Brazil’s Amazon region. The delay in building the bridge has hindered the reurbanisation of the low-lying parts of the city that will be partially flooded when the Belo Monte dam reservoir is filled. Credit: Mario Osava/IPS

Bridge under construction on a road at the entrance to the city of Altamira, in Brazil’s Amazon region. The delay in building the bridge has hindered the reurbanisation of the low-lying parts of the city that will be partially flooded when the Belo Monte dam reservoir is filled. Credit: Mario Osava/IPS

The PBA and PDRS also have different timeframes. The former is to end before the reservoirs are filled, which is to be completed by the end of this year. The latter, meanwhile, involves a 20-year action plan.

The company’s social programmes are also “an important sphere of debate, definition of projects and redefinition of public policies, which should become permanent by being transformed into an institute or foundation,” said Pereira, defending “the adoption of their democratic administration by other development agencies.”

The question is of concern to Brazil’s National Economic and Social Development Bank (BNDES), which has financed 78 percent of the cost of the construction of Belo Monte.

Besides providing a team to accompany the PDRS, it promoted a study to organise its projects and ideas in an “initiatives file” and a Territorial Development Agenda (TDA) in the Xingú basin.

But this planning and promotion effort to bring about real development has come late, when it is difficult to neutralise the negative effects, which will stand in the way of the construction of new hydropower dams in the Amazon, even with the promise of a TDA.

Belo Monte has also highlighted the dilemmas and challenges of power generation, currently dramatised by severe drought in much of Brazil.

Belo Monte, which will be the second-largest hydropower plant in Brazil and the third-largest in the world, producing 11,233 MW, will aggravate the seasonal drop in hydropower in the second half of each year, once it becomes fully operational in 2019.

That is because the Xingú has the biggest seasonal variation in flow. From 19,816 cubic metres per second in April, the month with the strongest flow, it plummets to 1,065 cubic metres in September, the height of the dry season. This was the average between 1931 and 2003, according to the state-run Eletrobras, Latin America’s biggest power utility company.

There is probably no worse choice of river for building a run-of-the-river power station, whose reservoirs do not accumulate water for the dry months. Belo Monte will represent 12 percent of the country’s total hydropower generation, which means the effect of the plunge in electricity will be enormous, fuelling demand for energy from the dirtier and most costly thermal plants.

One alternative would have been a reservoir 2.5 times bigger, which would have flooded two indigenous territories – something that is banned by the constitution.

Another would have been the construction of four to six dams upstream, to regularise the water flow in the river, as projected by the original plan in the 1980s which was ruled out due to the outcry against it.

Edited by Estrella Gutiérrez

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OECD Urges Further Reforms for an Inclusive South Africa Sat, 29 Aug 2015 14:42:44 +0000 Jaya Ramachandran By Jaya Ramachandran
PARIS, Aug 29 2015 (IPS)

While lauding South Africa for impressive social progress over the past two decades, a new study has asked the country to build on the successes achieved and reduce inequality further.

The latest OECD Economic Survey of South Africa by the 34-nation Organisation for Economic Cooperation and Development (OECD) says: “South Africa has made impressive social progress over the past two decades, lifting millions of people out of poverty and broadening access to essential services like water, electricity and sanitation. Now is the time to build on these successes to reduce inequality further, create badly needed jobs and ensure stronger, sustainable and more inclusive growth for all.”

The survey, released in Pretoria, the capital of South Africa, by OECD Secretary-General Angel Gurría and South African Finance Minister Nhlanhla Nene, notes that prudent macroeconomic policies have secured the confidence of financial markets.

However, economic growth has been too slow and further measures are needed to overcome infrastructure bottlenecks, strengthen the business environment, improve labour markets and ensure future spending needs can be financed.

“The National Development Plan sets the direction for reforms needed for a strong and inclusive country. Our survey provides targeted recommendations to reach these objectives,” said Gurría.

“Millions of young South Africans are eager to work, and their potential must not be wasted. Their future is precious enough to justify tough reforms and hard spending choices,” he added.

According to the survey, improving infrastructure will be essential for boosting future growth and living standards while, given the large needs, prioritisation and cost effectiveness will be crucial.

The OECD noted out that the most immediate priority is to secure additional electricity generation capacity by opening the market to independent producers. Opening electricity and transport will require strong and independent regulators to protect households and firms.

The organisation pointed out that improving the regulatory environment would promote entrepreneurship and growth opportunities for small and medium enterprises (SMEs), which offer the greatest potential for creating jobs and future growth. Reducing barriers to entry, cutting red tape and promoting competition, will be essential.

According to the survey, labour market reforms can raise employment and incomes. Establishing a public employment service as a one-stop shop for job seekers would make it easier for people to find jobs, and for employers to find the right workers.

Costly industrial actions have held back the economy without delivering major gains to workers. The OECD suggests an increased role for mediation and arbitration in order to reduce conflict and provide better outcomes for workers and employers.

The survey pleads for “a high degree of public sector efficiency, prioritisation of spending and a strong revenue base” with a view to meeting public spending needs for infrastructure and the social safety net.

It argues that the South African tax system “is well designed and well administered, but there is scope to broaden key tax bases by reducing deductions, credits and exemptions.  Such tax reform would solidify public finances and make the tax system fairer.”

Edited by Phil Harris   

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Opinion: A Farewell to Arms that Fuel Atrocities is Within Our Grasp Thu, 27 Aug 2015 19:09:41 +0000 Marek Marczynski The recent destruction of this 2,000-year-old temple – the temple of Baal-Shamin in Palmyra, Syria – is yet another grim example of how the armed group calling itself the Islamic State (IS) uses conventional weapons to further its agenda – but what has fuelled the growing IS firepower? Photo credit: Bernard Gagnon/CC BY-SA 3.0

The recent destruction of this 2,000-year-old temple – the temple of Baal-Shamin in Palmyra, Syria – is yet another grim example of how the armed group calling itself the Islamic State (IS) uses conventional weapons to further its agenda – but what has fuelled the growing IS firepower? Photo credit: Bernard Gagnon/CC BY-SA 3.0

By Marek Marczynski
CANCUN, Mexico, Aug 27 2015 (IPS)

The recent explosions that apparently destroyed a 2,000-year-old temple in the ancient city of Palmyra in Syria were yet another grim example of how the armed group calling itself the Islamic State (IS) uses conventional weapons to further its agenda.

But what has fuelled the growing IS firepower? The answer lies in recent history – arms flows to the Middle East dating back as far as the 1970s have played a role.

Marek Marczynski

Marek Marczynski

After taking control of Mosul, Iraq’s second largest city, in June 2014, IS fighters paraded a windfall of mainly U.S.-manufactured weapons and military vehicles which had been sold or given to the Iraqi armed forces.

At the end of last year, Conflict Armament Research published an analysis of ammunition used by IS in northern Iraq and Syria. The 1,730 cartridges surveyed had been manufactured in 21 different countries, with more than 80 percent from China, the former Soviet Union, the United States, Russia and Serbia.

More recent research commissioned by Amnesty International also found that while IS has some ammunition produced as recently as 2014, a large percentage of the arms they are using are Soviet/Warsaw Pact-era small arms and light weapons, armoured vehicles and artillery dating back to the 1970s and 80s.

Scenarios like these give military strategists and foreign policy buffs sleepless nights. But for many civilians in war-ravaged Iraq and Syria, they are part of a real-life nightmare. These arms, now captured by or illicitly traded to IS and other armed groups, have facilitated summary killings, enforced disappearances, rape and torture, and other serious human rights abuses amid a conflict that has forced millions to become internally displaced or to seek refuge in neighbouring countries.“It is a damning indictment of the poorly regulated global arms trade that weapons and munitions licensed by governments for export can so easily fall into the hands of human rights abusers … But world leaders have yet to learn their lesson”

It is a damning indictment of the poorly regulated global arms trade that weapons and munitions licensed by governments for export can so easily fall into the hands of human rights abusers.

What is even worse is that this is a case of history repeating itself. But world leaders have yet to learn their lesson.

For many, the 1991 Gulf War in Iraq drove home the dangers of an international arms trade lacking in adequate checks and balances.

When the dust settled after the conflict that ensued when Iraqi President Saddam Hussein’s powerful armed forces invaded neighbouring Kuwait, it was revealed that his country was awash with arms supplied by all five Permanent Members of the U.N. Security Council.

Perversely, several of them had also armed Iran in the previous decade, fuelling an eight-year war with Iraq that resulted in hundreds of thousands of civilian deaths.

Now, the same states are once more pouring weapons into the region, often with wholly inadequate protections against diversion and illicit traffic.

This week, those states are among more than 100 countries represented in Cancún, Mexico, for the first Conference of States Parties to the Arms Trade Treaty (ATT), which entered into force last December. This Aug. 24-27 meeting is crucial because it is due to lay down firm rules and procedures for the treaty’s implementation.

The participation of civil society in this and future ATT conferences is important to prevent potentially life-threatening decisions to take place out of the public sight. Transparency of the ATT reporting process, among other measures, will need to be front and centre, as it will certainly mean the difference between having meaningful checks and balances that can end up saving lives or a weakened treaty that gathers dust as states carry on business as usual in the massive conventional arms trade.

A trade shrouded in secrecy and worth tens of billions of dollars, it claims upwards of half a million lives and countless injuries every year, while putting millions more at risk of war crimes, crimes against humanity and other serious human rights violations.

The ATT includes a number of robust rules to stop the flow of arms to countries when it is known they would be used for further atrocities. 

The treaty has swiftly won widespread support from the international community, including five of the top 10 arms exporters – France, Germany, Italy, Spain and the United Kingdom.

The United States, by far the largest arms producer and exporter, is among 58 additional countries that have signed but not yet ratified the treaty. However, other major arms producers like China, Canada and Russia have so far resisted signing or ratifying.

One of the ATT’s objectives is “to prevent and eradicate the illicit trade in conventional arms and prevent their diversion”, so governments have a responsibility to take measures to prevent situations where their arms deals lead to human rights abuses.

Having rigorous controls in place will help ensure that states can no longer simply open the floodgates of arms into a country in conflict or whose government routinely uses arms to repress peoples’ human rights.

The more states get on board the treaty, and the more robust and transparent the checks and balances are, the more it will bring about change in the murky waters of the international arms trade. It will force governments to be more discerning about who they do business with.

The international community has so far failed the people of Syria and Iraq, but the ATT provides governments with a historic opportunity to take a critical step towards protecting civilians from such horrors in the future. They should grab this opportunity with both hands.

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

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Opinion: How Will Wall Street Greet the Pope? Thu, 27 Aug 2015 09:14:17 +0000 Hazel Henderson

Hazel Henderson, author of 'Mapping the Global Transition to the Solar Age' and other books, is President of Ethical Markets Media (USA and Brazil), Certified B Corporation

By Hazel Henderson
ST. AUGUSTINE, Florida, Aug 27 2015 (IPS)

Millions in the New York City area are excited about Pope Francis’ visit on Sep. 25 to address the U.N. General Assembly as worldwide consensus grows on the need to shift global investments from fossil fuels to clean, efficient, renewable energy in the UN’s Sustainable Development Goals (SDGs) scheduled to replace the expiring Millennium Development Goals (MDGs). 

Private investments worldwide in the clean energy transition now total 6.22 trillion dollars while successful U.S. students’ divestment networks have forced over 30 college endowments to divest.  Over 200 institutions have divested worldwide, including the U.S. cities of Minneapolis and Seattle, Oxford in the United Kingdom and Dunedin in New Zealand.

Hazel Henderson

Hazel Henderson

The Episcopal Church and the Church of England, in a faith-based consortium, are calling on Pope Francis to urge divestment for all religious and civic groups.  Islamic Climate Change Symposium leaders cited the Quran earlier this month in calling 1.6 billion Muslims to act in phasing out fossil fuels by 2050.

Backlash from traditional Wall Streeters has joined some U.S. Catholic organisations with millions still invested in fossil energy, fracking and oil sands.  The U.S. Conference of Catholic Bishops (USCCB) has guidelines against investing in abortion, contraception, pornography, tobacco and war but is silent on energy stocks.

Reuters reports that Catholic dioceses in Boston, Baltimore, Toledo and much of Minnesota in the United States have millions of dollars in oil and gas stocks, making up between 5-10 percent of their holdings.  It has been reported that Chicago’s Archbishop Blasé Cupich, appointed by Pope Francis, will re-examine over 100 million dollars in fossil fuel investments.

Wall Street is also re-examining its positions on fossil fuels.  A survey of asset managers in Institutional Investor, July 2015, found that 77 percent expected the carbon-divestiture movement to continue and gain momentum.  Yet, Exxon Mobil CEO Rex Tillerson has claimed that the models on climate change “aren’t that good” and has no plans to invest in renewable energy.

Recently, many large companies have been calling for and budgeting for carbon pricing – favoured by most economists.  Britain’s BG Group, BP, Italy’s ENI, Shell, Norway’s Statoil and France’s Total sent an open letter to world governments and the United Nations in June asking them to accelerate carbon pricing schemes.The U.S. Conference of Catholic Bishops (USCCB) has guidelines against investing in abortion, contraception, pornography, tobacco and war but is silent on energy stocks

The ethical investing movement now accounts for one-sixth of all holdings on Wall Street and the U.N. Principles of Responsible Investing counts signatory institutions with 59 trillion dollars in assets under management.

Hybrid approaches include venture philanthropy and “impact” investing, while a recent CFA Institute survey found almost three quarters of investment professionals use environmental, social and governance information in their investment decisions.

Against this backdrop, Timothy Smith, pioneer founder of the Interfaith Council on Corporate Responsibility (ICCR) and now Senior Vice-President of Walden Asset Management, says that the “visit of the Pope in the wake of his prophetic Encyclical on climate is a clarion call – to ramp up our efforts to combat climate change with concrete actions,” adding that “it’s not the Pope’s job to present a specific game plan for Americans.  That is our job.”

Through ICCR, religious investors have worked for two decades on these issues.  Firms like Walden, Ceres and others have joined up to combat climate change, promoting efficiency and renewable resources.  All this new activity within the climate debate provides the greatest challenge yet to business-as-usual capitalism.

Many financiers in the global casino still see themselves as “masters of the universe” because they control capital flows, most investments, pension funds, influence monetary policies, capture politicians and regulators, while funding friendly academics and think tanks.

The recent jitters of stock markets have again revealed their fragility and the increasing turbulence and volatility caused by computerized algorithms accounting for over half of all activity.  High-frequency trading (HFT), “flash crashes”, are continuing with little regulation.  Foundations are crumbling from these many new challenges as small investors flee. 

Crowdfunding, peer-to-peer lending, local and cryptocurrencies, credit unions and cooperative enterprises are flowering along with hybrid start-ups in the “shareconomy” – AirBnB, Uber, Lyft, Task Rabbit and the growth of farmers markets, swap sites for tools, clothes and second-hand exchanges.

Many reformers of capitalism try to change its culture, of short term gain and speculative trading.  The U.N. Inquiry into the Design of a Sustainable Financial System will release its report to the General Assembly on Sep. 25, with global research on current practices and potential reforms.

A promising new effort to mobilise U.S. public opinion is JUSTCapital, founded by luminaries Deepak Chopra, Arianna Huffington and hedge fund philanthropist Paul Tudor Jones.  CEO Martin Whittaker says: “We are addressing some of the core questions affecting capitalism and corporations in the 21st century.  We are applying policy, research and surveys to define ‘just business behaviour’ in the eye of the public, using this definition to evaluate and rank the performance of the largest publicly traded American companies.”

While such caring financiers are quietly exploring reforms, the biggest threat is the fragility of global market structures from automation, algorithms, HFT and artificial intelligence which financiers still believe they can control.

Yet these same computers can now run markets more efficiently than humans.  Matching and trading buy and sell orders in transparent computerised black boxes makes human traders redundant, as well as reducing insider trading, speculating, front-running, naked short-selling, fixing interest rates and today’s widespread greed and corruption.

Capitalism’s greatest challenge is its reliance on rollercoaster national money systems and currencies.  Central bankers and governments’ tools fail along with economic theories as social movements are now aware of money-printing and the politics of money creation and credit-allocation, revealed in all its favouritism and inequalities.

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

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Plant in Chile Opens South America’s Doors to Geothermal Energy Wed, 26 Aug 2015 15:44:20 +0000 Marianela Jarroud The El Tatio geyser field in the northern Chilean region of Antofagasta. Geothermal energy comes from the earth’s internal heat, and the steam is delivered to a turbine, which powers a generator. Credit: Marianela Jarroud/IPS

The El Tatio geyser field in the northern Chilean region of Antofagasta. Geothermal energy comes from the earth’s internal heat, and the steam is delivered to a turbine, which powers a generator. Credit: Marianela Jarroud/IPS

By Marianela Jarroud
OLLAGÜE, Chile, Aug 26 2015 (IPS)

Chile, a land of volcanoes and geysers, has started building South America’s first geothermal plant, which would open a door to this kind of renewable energy in this country that depends largely on fossil fuels.

The Cerro Pabellón geothermal project is “immensely important for the Chilean state, which started geothermal exploration and drilling over 40 years ago,” but no initiative had taken concrete shape until now, Marcelo Tokman, general manager of the state oil company, ENAP, told IPS.

Located in the rural municipality of Ollagüe, 1,380 km north of Santiago, in the Andes highlands in the region of Antofagasta, Cerro Pabellón “will not only be the first geothermal plant in Chile and South America, but will also be the first in the world to be built at 4,500 metres above sea level,” Tokman added.

The Italian company Enel Green Power has a 51 percent stake in the project and ENAP owns 49 percent. The plant consists of two units of 24 MW each for a total gross installed capacity of 48 MW in the first phase, but with the advantage of being able to generate electricity around-the-clock.

That makes it equivalent, in terms of annual generating capacity, to a 200-MW solar or wind power plant.

The first stage would enter into operation in the first quarter of 2017 and a year later another 24 MW would be added. But the plant could be generating around 100 MW in the medium term, on 136 hectares of land.

Tokman said that once the plant is fully operational, it will be able to produce some 340 megatwatt-hours (MWh) a year that would go into the national power grid and would meet the consumption needs of 154,000 households in this country of 17.6 million people.

He also said it would avoid over 155,000 tons of carbon dioxide emissions a year, by reducing fossil fuel consumption.

The Atacama desert, the most arid in the world, has a large part of Chile’s geothermal potential and is the location of the first South American plant to tap into this source of energy. Credit: Marianela Jarroud/IPS

The Atacama desert, the most arid in the world, has a large part of Chile’s geothermal potential and is the location of the first South American plant to tap into this source of energy. Credit: Marianela Jarroud/IPS

Sixty million dollars were invested in the exploratory phase, and an estimated 320 million dollars more will go into the plant and the construction of a 73-km power line.

Geothermal energy is obtained by tapping underground reservoirs of heat, generally near volcanoes, geysers or other hotspots on the surface of the earth. If well-managed, the geothermal reservoirs can produce clean energy indefinitely. The steam generated is delivered to a turbine, which powers a generator.

Advances in South America

Brazil has the world’s two largest freshwater reserves: the Guarani and Alter do Chão aquifers. But it does not have geothermal potential, according to a 1984 study, which is currently being revised. Geothermal energy is included in an agreement with Germany to search for alternative sources.

Six South American countries form part of the Pacific Ring of Fire, a string of volcanoes and sites of seismic activity with virgin territory for geothermal exploration: Argentina, Bolivia, Chile, Colombia, Ecuador and Peru.

In 1988, Argentina built Copahue I, an experimental geothermal plant constructed with Japanese capital, which supplied 0.67 MW but stopped operating. Currently, the country’s energy projects include the construction of the Copahue II geothermal plant in the hot springs of Copahue in the southern province of Neuquén, which would generate 100 MW.

In Peru, a preliminary study by the Japan International Cooperation Agency and the Ministry of Energy and Mines found in 2013 that the country has 3,000 MWh of geothermal potential. But so far there are no plans for geothermal plants.

In February, Bolivian President Evo Morales announced that starting in 2019 the country would begin to export electricity to neighbouring countries, from the Laguna Colorada geothermal plant. The project, financed by Japan, will consist of two stages, of 50 MW each.

The Philippines is home to three of the world’s 10 biggest geothermal plants, followed by the United States and Indonesia, with two each, and Italy, Mexico and Iceland, with one each.

Studies indicate that Chile is one of the countries with the greatest geothermal potential in Latin America.

This long, narrow country, which forms part of the Pacific Ring of Fire, stretches 4,270 km along the Andes mountains, the earth’s largest volcanic chain.

Environmentalists say geothermal energy has a relatively low impact, as long as questions of scale and location are respected.

“Geothermal is an unconventional renewable energy source to the extent that it is carried out in accordance with territorial and cultural needs. The energy source in and of itself does not guarantee social and environmental sustainability,” land surveyor Lucio Cuenca, director of the Santiago-based Latin American Observatory on Environmental Conflicts, told IPS.

Respecting these parameters, geothermal energy “is a very good alternative for this country,” he said.

In the case of the Cerro Pabellón plant, the surrounding communities form part of the Alto El Loa nature reserve, made up of the villages and communities of Caspana, Ayquina, Turi, Chiu Chiu, Cupo, Valle de Lasana, Taira and Ollagüe, which have a combined total population of just over 1,000, most of them Atacameño and Quechua indigenous people.

The Alto El Loa Indigenous Peoples Council got ENAP and ENEL to sign a series of agreements for the implementation of social development projects in the local communities in compensation for the impact of the geothermal project, and especially the power line.

For the inhabitants of Alto El Loa, scattered in remote areas in the Atacama desert, if the project is sustainable and benefits their communities, it will be a positive thing. But they say they are concerned that their way of life may not be respected.

“I would like to see more help, and if this is a good thing, then it’s welcome,” Luisa Terán, a member of the Atacameño indigenous group from the village of Caspana, told IPS. “Sometimes we feel a bit neglected and isolated.

“But it has to come with respect for our traditions, and it is our elders who are demanding that most strongly,” she added.

Others, however, reject the project as “anti-natural” and “violent” towards the local habitat.

“If you hurt the earth, she will in one way or another get back at you,” tourist guide Víctor Arque, of San Pedro de Atacama, a highlands village 290 km from Ollagüe, told IPS. “It can’t be possible to drill kilometres below ground without something happening.”

A photo taken at dawn in the middle of the steam from the El Tatio geysers in northern Chile, where this clean, unlimited source of energy will begin to be harnessed with the construction of the Cerro Pabellón geothermal plant in the rural municipality of Ollagüe. Credit: Marianela Jarroud/IPS

A photo taken at dawn in the middle of the steam from the El Tatio geysers in northern Chile, where this clean, unlimited source of energy will begin to be harnessed with the construction of the Cerro Pabellón geothermal plant in the rural municipality of Ollagüe. Credit: Marianela Jarroud/IPS

The El Tatio precedent

Chile was a pioneer in research on geothermal potential. The first exploration was carried out in 1907 in El Tatio, a geyser field located some 200 km from Cerro Pabellón and 4,300 metres above sea level. This country was the third to explore geothermal energy, after the United States and Russia.

Two wells were drilled in that area in 1931, and in the late 1960s the government carried out more systematic exploration, which was later abandoned.

In 2008, the Geotérmica del Norte company, which belonged to the Italian consortium ENEL, began exploration in Quebrada del Zoquete, a few km from El Tatio, using the equipment already installed in the geyser field.

In September 2009, a 60-metre high column of steam shot up from one of the wells where the company was extracting and reinjecting geothermal fluids. The anomaly, caused by a failed valve, lasted more than three weeks and led to the government’s cancellation of the permit for further operations.

Tokman, energy minister at the time, remembered the incident. “Fortunately all of the safeguards had been taken to demand different instruments of measurement for the project, to ensure that the reservoir was deeper and distinct from the reservoir in the El Tatio geyser field,” he said.

Cuenca said the mistake was “having restarted a geothermal programme in Chile doing everything that shouldn’t be done: that is, interfering in a place where there are indigenous communities, an area with a high tourist and economic value, simply to take advantage of the infrastructure that was already installed there.”

Experts warn that geothermal power is not a panacea for Chile’s energy deficit, because if there is one thing this country has learned, it is that a diversified energy mix is essential.

But if Chile’s potential is confirmed, Cerro Pabellón could open the door to geothermal development not only in this country but in South America.

Edited by Estrella Gutiérrez/Translated by Stephanie Wildes

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