Costa Rica’s National Stadium, donated by China as a gift for the reestablishment of bilateral ties in 2007, and built in 2009-2010 by a Chinese company with Chinese labour. Credit: Diego Arguedas Ortiz/IPS

By Diego Arguedas Ortiz
SAN JOSE, Aug 21 2015 (IPS)

For years, Latin America has exported its raw materials to China’s voracious factories, fuelling economic growth. But now that the Asian giant is putting a priority on domestic consumption over industrial production, how will this region react?

China’s dizzying growth gave a boost to the economies of Latin America, and in exchange, this region received manufactured products, credits, and heavy investment in infrastructure.

Given the slowdown in China’s growth, the countries of Latin America have two options: move toward a more value-added economy or lose relevance with an obsolete economic model inherited from the 20th century, said several experts consulted by IPS.

“Over the last five years, the relationship between Latin America and China has been dominated by Latin America sending China a few raw materials and China sending Latin America manufactured goods,” U.S. academic Rebecca Ray told IPS.“In simple terms, China’s rebalancing is aimed at reducing the relative importance of investment and exports in its economic growth, relying on household consumption playing a larger role.” -- Keiji Inoue and Sebastián Herreros

“But this may be about to change,” added the research fellow at the Boston University Global Economic Governance Initiative, where she coordinates the Working Group on Development and the Environment in the Americas’ China in Latin America project and coauthors the China-Latin America Economic Bulletin.

According to Ray, China’s leaders are shifting toward a development strategy with an emphasis on slower but steady growth, which prioritises internal consumption over factory production, thus opening up opportunities for importing manufactured goods from other countries.

The path toward that future was one of the central focuses of the Forum for East Asia-Latin America Cooperation (FEALAC) meeting in the Costa Rican capital from Tuesday, Aug. 18 to Friday, Aug. 21, which brought together foreign ministers and other senior officials from 36 countries under the theme “Two Regions, One Vision”.

The experts who spoke to IPS all agreed that given China’s slowdown, decision-makers in Latin America must take the initiative and propose economic alternatives based on more value added.

But the region has been slow to make the leap. Just five commodities – soy, iron, oil and unrefined and refined copper – account for 75 percent of exports to China, only a tiny share of which are manufactured goods.

But the other major economic flow between China and Latin America, investment in infrastructure, could paradoxically benefit from the slowdown and the shift in direction of the Chinese economy, the experts said.

The deceleration in the engine of the global economy since 2014, when China’s growth stood at 7.4 percent, the lowest level in 24 years, “May hurt Latin American economies that have become dependent on exporting those few commodities. In contrast, China’s infrastructure investments can help all industries do well,” Ray said.

Ponta da Madeira, a port in northeast Brazil where ships carrying iron ore set out, mainly for China. Credit: Mario Osava/IPS

Well-administered, she said, Chinese-financed projects could close the region’s historic gap in infrastructure and serve as a platform for the development of other industries that would benefit from investment in transport and energy, two main areas of interest for China.

“Hopefully, policy makers will make use of this opportunity to spur development in non-traditional industries,” Ray said.

Keiji Inoue and Sebastián Herreros, with the Economic Commission for Latin America and the Caribbean’s (ECLAC) International Trade and Integration Division, concurred.

“To the extent that these projects are aligned with the priorities of countries in the region, a greater Chinese presence could help gradually close Latin America’s infrastructure gap, thus strengthening regional integration and improving the region’s international competitiveness,” they stated in a joint analysis for IPS.

One of the aims of China’s investments in infrastructure in Latin America, they noted, is for that country’s to invest people’s savings.

But the direction taken by the growing links between Latin America and China do not leave much room for optimism.

Up to now, the region’s exports to China “Support fewer jobs, generate more net greenhouse gas emissions, and use more water than other LAC (Latin American and Caribbean) exports,” according to a study by GEGI.

China, meanwhile, has been promoting and financing controversial megaprojects in the region, like the “great inter-oceanic canal” in Nicaragua, to be built by the Chinese consortium Hong Kong Nicaragua Canal Development (HKDN-Group) at an estimated cost of 50 billion dollars, and the projected 5,000-km Transcontinental Railway, which would connect Brazil and Peru.

Chinese investment has also fuelled trade ties based on raw materials. According to ECLAC, between 2010 and 2013 nearly 90 percent of China’s investment in the region went into the extractive industry, mainly mining and fossil fuels.

Executives of the Chinese consortium HKDN-Group behind a big banner on Dec. 22, 2014 in the town of Brito Rivas on the Pacific ocean coast, at the ceremony for the formal start of construction of the Great Canal of Nicaragua, which will cut across the country. Credit: Mario Moncada/IPS

“From that perspective, China’s high level of demand for raw materials at a global level has effectively consolidated and reinforced the specialisation of these processes, also known as ‘re-primarisation’ of the economy,” Enrique Dussel, director of the Centre for China-Mexico Studies of the National Autonomous University of Mexico, told IPS.

But Dussel said emphatically that the countries of Latin America will have to respond, given the signals. “It is Latin America and the Caribbean that have the responsibility – and need – to make a decision, not China,” he stated.

This refocusing of the economies of the region on the production of primary commodities for export happened when Latin America was seduced by last decade’s high commodities prices and prioritised exports of raw materials over exports of greater added value.

Raw materials represent more than 60 percent of the region’s exports – the highest proportion seen since the early 1990s, according to ECLAC studies – up from 44 percent at the start of the century.

Manufactured goods like machinery and electronic devices, meanwhile, make up 64 percent of China’s exports to this region, and are less sensitive to price swings.

Between 2000 and 2014, imports from China rose from two to 14 percent of the regional total.

Dussel said China’s growth highlighted the serious problems faced by the region’s exports. In his view, the problems do not necessarily lie in the predominance of raw materials, but in the fact that these industries have “very little value added and technology.”

ECLAC’s Inoue and Herreros say the shift in focus of China’s development presents an opportunity.

They said that “in simple terms, China’s rebalancing is aimed at reducing the relative importance of investment and exports in its economic growth, relying on household consumption playing a larger role.”

“To the extent that this process has an effect, it should favour the diversification of Latin America’s exports to China,” they said.

They expect sectors like agribusiness and processed food to become more important in the region, although they warn that it could take years for the effects to be felt, and say that in order for that to happen, decision-makers would have to take ambitious steps toward consolidating the region as a trade bloc.

“We must also make more decisive progress towards a truly integrated regional market,” Inoue and Herreros wrote. “That would make Latin America more attractive and increase its bargaining power vis-à-vis China, the rest of Asia and other big global economic actors.”

Edited by Estrella Gutiérrez/Translated by Stephanie Wildes

By Roberto Azevêdo
GENEVA, Jun 29 2015 (IPS)

The latest report by the World Trade Organisation (WTO) on G20 trade measures shows a slight deceleration in the application of new trade-restrictive measures by G20 economies, with the average number of such measures applied per month lower than at any time since 2013.

According to the thirteenth such WTO report, issued on Jun. 15, G20 economies had applied 119 new trade-restrictive measures since mid-October 2014, an average of 17 new measures per month over the period.

Roberto Azevêdo

A slight decrease in the number of trade remedy investigations by G20 economies has also contributed to this overall figure.

But it is not yet clear that this deceleration will continue and the WTO calls on G20 leaders to show continued vigilance and reinforced determination towards eliminating existing trade restrictions.

The longer term trend remains one of concern, with the overall stock of trade-restrictive measures introduced by G20 economies since 2008 continuing to rise.

Of the 1,360 restrictions recorded by this exercise since 2008, less than one-quarter have been eliminated, leaving the total number of restrictive measures still in place at 1,031. Therefore, despite the G20 pledge to roll back any new protectionist measures, the stock of these measures has risen by over seven percent since the last report.

The broader international economic context also supports the need for continuing vigilance and action. According to the WTO’s most recent forecast (14 April 2015), growth in the volume of world merchandise trade should increase from 2.8 percent in 2014 to 3.3% percent 2015 and further to four percent in 2016, but remaining below historical averages.“The longer term trend [vis-à-vis protectionism] remains one of concern, with the overall stock of trade-restrictive measures introduced by G20 economies since 2008 continuing to rise”

The overall response to the 2008 financial crisis has been more muted than expected when compared with previous crises. The multilateral trading system has proved an effective backstop against protectionism.

During this period, G20 economies also continued to adopt measures aimed at facilitating trade, both temporary and permanent in nature.

These developments confirm that G20 economies overall have shown a degree of restraint in introducing new trade restrictions. However, it is not yet clear that the deceleration in the number of measures introduced will continue in future reporting periods. It is also relevant that the slow pace of removal of previous restrictions means that the overall stock of restrictive measures is continuing to increase.

The broader international economic context also supports the need for continuing vigilance and action.

Trends in world trade and output have remained mixed since the last monitoring report, as merchandise trade volumes and GDP growth picked up in the second half of 2014 but appear to have slowed in the first quarter of 2015.

Economic activity remained uneven across countries as the United States and China slowed in the first quarter, while growth in the Euro area and Japan picked up.

Plunging oil prices and strong exchange rate fluctuations, including an appreciation of the U.S. dollar and a depreciation of the Euro contributed uncertainty to the economic outlook.

Lower prices for oil and other primary commodities were expected to provide a boost to importing economies, but reduced export revenues weighed heavily on commodity exporters.

In light of these developments, our most recent forecast (14 April 2015) predicted a continued moderate expansion of trade in 2015 and 2016, although the pace of recovery was expected to remain below historical averages.

In the area of government procurement, work from the Organisation for Economic Cooperation and Development (OECD), identifying 65 measures implemented since the financial crisis, suggests that discriminatory government procurement policies have become increasingly popular and potentially affect 423 billion dollars of government procurement in the implementing economies.

This report shows that G20 economies implemented 48 new general economic support measures during the period under review, with the majority targeting the manufacturing and agricultural sectors through various incentive schemes, often, but not exclusively, in the context of exports.

The overall assessment of this thirteenth report on G20 trade measures is that the continuing
increase in the stock of new trade-restrictive measures recorded since 2008 remains of concern in the context of an uncertain global economic outlook.

Individually and collectively, the G20 must show leadership and deliver on the pledge to refrain from implementing new measures taken for protectionist purposes and to remove existing ones. (END/COLUMNIST SERVICE)

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. 

Excerpt:

By Roberto Azevêdo
GENEVA, Jul 29 2014 (IPS)

In the 1960s, there were high hopes for the development of the newly-independent sub-Saharan African countries but these hopes were quickly dashed following a series of shocks which began in the mid-70s, with the first oil price spikes, followed by a severe decline in growth and increase in poverty in the 80s and early 90s. However, by the mid-1990s, economic growth had resumed in certain African countries. Economic reform, better macroeconomic management, donor resources and a sharp rise in commodity prices were having a positive effect.

WTO Director General Roberto Azevêdo. Credit: WTO/CC BY SA-2.0

In the 2000s, many African countries witnessed high economic growth performance and during that period some of the world’s fastest growing economies were in sub-Saharan Africa. Angola, Nigeria, Chad, Mozambique and Rwanda all recorded annual growth of over 7 percent.

In 2012 Africa’s exports and imports totalled 630 billion dollars and 610 billion dollars respectively, ­ a fourfold increase since the turn of the millennium. And the long term prospects for growth are good. The Economist Intelligence Unit has forecast average growth for the regional economy of around 5 percent yearly from 2013-16.

Despite all this, the continent still plays a marginal role in the global market, accounting for barely 3 percent of world trade. One significant reason – although, of course there are others – is that African economies are still narrowly based on the production and export of unprocessed agricultural products, minerals and crude oil.“There is little doubt that the regional [African] market offers good scope for African firms to diversify their production and achieve greater value addition”

Now, due to relatively low productivity and technology, these economies have low competitiveness in global markets – apart from crude extractive products. The low productivity of traditional agriculture and the informal activities continue to absorb more than 80 percent of the labour force. And growth remains highly vulnerable to external shocks.

This story of half a century of struggle, set-backs and progress shows two things:

One, the road to meaningful and inclusive development still seems long.

Two, we are in a better position than ever to make real, sustainable progress.

Many countries are striving to do more in turning their strength in commodities into strengths in other areas,­ using commodities as a means of spurring growth across various sectors. The United Nations Economic Commission for Africa’s 2013 Economic Report echoes this ­ calling for the continent’s commodities to be used to support industrialisation, jobs, growth and economic transformation.

In line with this, I think there are a number of essential steps to take:

– diversification of economic structure, namely of production and exports;

– enhancement of export competitiveness;

– technological upgrading;

– improvement of the productivity of all resources, including labour; and

– reduction of infrastructure gaps.

Only by delivering in these and other areas can policymakers ensure that growth enhances human well-being and contributes to inclusive development. But how can we take these steps?

Of course I should say that although African countries share some common features, no unique set of policies, including those on trade and industrial policy, could ever fit for all in a uniform way. Even among the least-developed countries (LDCs), some are already exporters of manufactured products, although often they rely on a single product  while others are more dependent on commodities. Nevertheless, I think it is clear that some preconditions of success are universal.

African regional integration is of course very high on the policy agenda. There is little doubt that the regional market offers good scope for African firms to diversify their production and achieve greater value addition. Already now, manufactures constitute as much as 40 percent of intra-African exports, compared with 13 percent of Africa’s exports to the rest of the world.

The Bali Package, which World Trade Organisation members agreed in December last year, will help to resolve some problems. Inclusive, sustainable development was at the heart of the whole Bali project ­ and our African members played a crucial role in making it a success. It brought some progress on agriculture. It delivered a package to support LDCs. It provided for a Monitoring Mechanism on special and differential treatment.

And, in addition, Bali delivered the Trade Facilitation Agreement and this is a direct answer to some of the problems of fragmentation. Costly and cumbersome border procedures, inadequate infrastructure and administrative burdens often raise trade-related transaction costs within Africa to unsustainable levels, creating a further barrier to intra-African trade.

This Agreement will help to address some of these bottlenecks. It will support regional integration, and therefore complement the African Union’s efforts to create a continental free trade area. And it will begin to remove some of the barriers which prevent full integration into global value chains. As such it will create an added impetus for industrialisation and inclusive sustainable development.

And it is worth noting here that the Trade Facilitation Agreement broke new ground for developing and least-developed countries in the way it will be implemented.

Another vital issue here is the importance of agricultural development in industrialisation, and the role of industrial collaboration through regional cooperation. The contribution of the agriculture sector is of utmost importance for the establishment of a sound industrial base. It can provide a surplus to invest in industrial capacity building, and supply agricultural raw materials as inputs to the production process, especially for today’s highly specialised food processing industry.

Moreover, it can also significantly contribute to industrialisation by providing an ample supply of food products. This is because food constitutes a large share of what wage earners in African countries spend their money on. Its availability at low prices contributes to increase the purchasing power of wages, and therefore raise the competitiveness of a country in international markets. (END/IPS COLUMNIST SERVICE)

Excerpt:

The official outlook for agriculture up to 2023 carries optimistic forecasts for agricultural productivity and commodity prices but it is unlikely that the benefits will be shared by the world’s poorest.

The mix of good and bad news comes in the 2014-2023 Agricultural Outlook, issued jointly by the U.N. Food and Agriculture Organization (FAO) and the Organisation for Economic Cooperation and Development (OECD) this month.

The OECD/FAO Agricultural Outlook examines trends regarding prices, dietary habits and other influencing factors such as production and demand, in addition to assessing the major policy challenges facing the sector."We still face a challenge with access to food. Higher food prices imposed undeniable hardship on the world’s poorest people, who spend a large share of their incomes on food. They also did more harm than good to poor farmers, who are more often than not net buyers of food staples" – OECD Secretary-General Angel Gurría

This year’s Agricultural Outlook, which is the 20th of its kind, “looks at the prospects for developing countries under the assumption that average weather patterns and current policies persist”, according to Holger Matthey, an economist at the Trade and Markets Division of FAO and team leader for the Agricultural Outlook.

“It gives an overview of the global market within the next 10 years, assuming that there are no disturbances”, Matthey told IPS

Crop prices are expected to stabilise significantly below recent peaks, although they will likely remain above pre-2008 levels, while meat and dairy prices will have reached record highs in 2013/14.

“We are very positive regarding the agricultural outlook for developing countries because they have the resources to expand production and are also expected to maintain strong growth rates in terms of consumption”, said Matthey.

Under the assumptions of this outlook, he added, it was found that “more than 80% of additional production will originate from developing countries and 50% of both the additional production and consumption over the next decade will take place in Asia.”

But there are still many obstacles in the way of ensuring that everyone can reap the benefits of increased agricultural productivity.

“We still face a challenge with access to food. Higher food prices imposed undeniable hardship on the world’s poorest people, who spend a large share of their incomes on food. They also did more harm than good to poor farmers, who are more often than not net buyers of food staples,” OECD Secretary-General Angel Gurría said at the launch of the report.

Among others, he said, there is a need “to extend social protection to cushion the effects of price shocks and help farmers manage risks and continue to invest in agricultural productivity so that farmers can respond effectively to price signals”, but tackling these challenges “in ways that are both inclusive and sustainable is a formidable challenge.”

This year’s Agricultural Outlook focuses on the case of India, the world’s second most populous country and home to the largest number of food-insecure people, for which the report portrays a “relatively optimistic” scenario, saying that the country is “projected to sustain production and consumption growth of food.”

In 2013, India adopted a National Food Security Act (NFSA), designed to ensure greater access to adequate and affordable food. The NFSA entitles more than 800 million people to 60 kg of food grain per person each year at prices that are 90 percent more economical than current retail prices.

According to FAO Director-General José Graziano da Silva, the NFSA – the world’s largest right-to-food programme – is something that will have an impact for food security around the globe.

However, the Agricultural Outlook also warns that implementation of the programme will be challenging.

“While there is enough food being produced, the access to food, the distribution of food and the healthy utilisation of food [in terms of adequate diet and access to clean water, sanitation and healthcare] are challenges that remain,” said Peter Kenmore, FAO representative in India.

For example, according to the U.N. Children’s Fund (UNICEF), 48 percent of children in India are stunted as a result of chronic malnutrition, a condition that has long-term physical and mental development consequences, such as weakening the immune system and decreasing productivity in adulthood.

The challenge is also to be more efficient in terms of infrastructure, including storage and transportation as well as means of delivery.

“The circuit of producing, procuring, storing and distributing food to those who lack access, all completed locally, as is accomplished in many places covered by the Zero Hunger Programme in Brazil, is worth pursuing,” Kenmore told IPS.

The Zero Hunger Programme was launched in 2003 by the Brazilian government with the aim of eliminating hunger and poverty.

However, Kenmore warned that “the fact that the price of subsidised food grains is 90 percent cheaper also represents a strong incentive for opportunists to obtain this subsidised food and resell it on the open market.”

“At the moment there are millions that are benefiting from the Public Distribution System that is being expanded under the NFSA but many that are not. Exclusion, discrimination and sub-optimal implementation are key concerns”, he told IPS.

There is a need to improve accountability and grievance mechanisms to allow people to make a complaint in case they cannot access subsidised food to which they would otherwise be entitled and, said Kenmore, these mechanisms “must not merely be notional but also effective.”

A smelter at the El Teniente mine, which produces 37 percent of Chile’s copper. Credit:Marianela Jarroud/IPS

By Michelle Tullo
WASHINGTON, May 16 2014 (IPS)

China’s massive urbanisation has been built, literally, by metal, supplied mostly by Latin American countries (LAC). Yet now China’s slowing economic growth and falling commodity prices threaten Latin American commodity booms.

“As commodity prices decline, Latin American policy-makers will wish that they had used some of the benefits of the commodity-boom to diversify into other sectors,” Kevin Gallagher, professor at Boston University and author of a recent China-Latin America bulletin published by Boston University’s Global Economic Government Initiative (GEGI), told IPS."That the prices go down is actually good for China, the buyers of the commodities, not so much for the Brazilian and Chilean exporters." -- Matt Ferhen

Regarding China’s growth rate and commodity prices, the report states, “Whereas from 2006 to 2011 the IMF primary commodity price index soared by an average annual rate of 9.8 percent and the Chinese economy grew at an average annual rate of 10.5 percent, in 2012 commodity prices fell by 3.2 percent and the Chinese economy slowed to 7.7 percent.”

The fall in commodity prices disproportionately affects LAC, as 86.4 percent of LAC exports to China are primary goods, while 63.4 percent of Chinese exports to LAC are manufactured.

“As prices rose, exports grew and growth improved significantly. Latin America can thank China and the commodity boom for not being so affected by the [global] financial crisis [of 2008-2009]. However, exchange rates appreciated, investment concentrated in commodities, manufacturers couldn’t compete with imports from China and beyond, and commodity-led growth led to numerous social and environmental conflicts,” said Gallagher.

According to the GEGI report, average annual export growth from LAC to China averaged 23 percent between 2006 and 2011, but dropped to 7.2 percent in 2012. These exports are mainly concentrated in copper, iron, and soy. The metals exports are densely concentrated in two countries: 86 percent of iron exports came from Brazil and 92 percent of copper comes from Chile.

China’s exports to LAC are significantly more diverse, coming mostly from manufactured goods like electronics and vehicles that are less sensitive to pricing variables than commodity goods. Effectively, commodity price declines have created a trade imbalance between LAC and China inChina’s favour.

“China bases its relationship with Latin America on its idea of win-win, complementary South-South relations, and they’ve been able to hang their hat a bit on high-price commodity trade that benefits reciprocally,” said Matt Ferhen, head of China and the Developing World Programme at the Carnegie-Tsinghua Center for Global Policy, at a discussion held here Thursday at the Inter-American Dialogue.

“That the prices go down is actually good for China, the buyers of the commodities, not so much for the Brazilian and Chilean exporters, where we might see some difficulties in the relationship.”

In response to slowed growth, the Chinese public demanded that the government institute financial reforms. Chinese President Xi Jinping has announced a series of reforms that have yet to be enacted.

“There is discussion under new party leadership about rebalancing China’s economy, away from heavy exports and government investment…consumption is meant to replace exports and government led investment and behind this is a new growing middle-class that will then further drive economic growth,” Ferhen said.

This new economic model responds to pessimistic concerns that government has invested heavily in transit, property development and infrastructure that might never be used and only increase debt. Yet a switch to emphasising internal consumption comes at the expense of LAC commodity exporters.

“Most LAC governments are not well prepared for a commodity price decline. Chile has a strong copper stabilisation fund and sovereign wealth fund that captured some of the commodity boom and stands ready to help out. Most other countries, such as Peru, were never able to admit that the price would change as they locked in a commodity-led growth path,” Gallagher told IPS.

Yet research by institutions like the World Bank suggests that Latin America is not as susceptible to external shocks in the commodity markets as in the 1980s and 1990s.

First, most LAC have instituted macro-financial immune systems, such as paying down debts, accumulating reserves, and reducing dependence on the dollar. The degree to which each country is insulated against external shocks varies.

For example, although the investment rate in the region is almost 25 percent of gross domestic product, close to the rate in Southeast Asia, Brazil’s rate is lower, at 18 percent, and critics say Venezuela has not invested its oil revenues smartly.

A semiannual report from the World Bank also highlights that LAC has rebalanced “its sources of financing away from portfolio and bank credit flows and towards foreign direct investment and remittances.”

On another positive note, China foreign direct investment in LAC, especially in infrastructure and energy, should positively influence LAC economies. Chinese presence, especially in mergers and acquisitions, has also expanded beyond traditional partners like Argentina and Brazil to include Ecuador, Bolivia, and Peru.

Experts hope that these other markets, particularly energy, can offset the commodity trade decline, which is expected to only decrease in 2014.

Based on data from the World Bank, the IMF, and the Economist Intelligence Unit Global Forecasting Intelligence, the GEGI report predicts a 3.1 percent price decline in the LAC-China export basket, nearly twice as deep as the 2013 price decline, implying a growing LAC-China trade deficit in goods for 2014.

The effect on countries’ growth will be nuanced across the region, based both on external factors, domestic demand factors, and internal economic policies. The World Bank predicts Panama will continue growth near seven percent, followed by Peru at five and a half percent.

They predict Chile and Colombia will hover around three and a half percent, Mexico at three percent, and Brazil close to two percent. Venezuela is expected to contract one percent.

This contraction in commodity-based markets has effects beyond Latin America.

“This is not just a concern within Latin America, but globally – Africa, Southeast Asia, and elsewhere. One of the interesting elements of this, and thinking of those who are interested in and concerned about the impact of labour, environment impact, questions of FDI, this is a shared concern across many nations,” said Fehren.

Misinvoiced trade in five African countries cost their governments billions of dollars in tax revenue and facilitated at least 60.8 billion dollars in illicit financial flows from 2002 to 2011, says a new report by Global Financial Integrity (GFI), a research advocacy organisation here.

Using data on bilateral trade flows from 2002-2011 from the U.N.’s Commodity Trade database, the study calculated that the potential average annual tax loss from trade misinvoicing amounted over the same decade to roughly 12.7 percent of Uganda’s total government revenue, followed by Ghana (11 percent), Mozambique (10.4 percent), Kenya (8.3 percent), and Tanzania (7.4 percent), according to the 52-page report, “Hiding in Plain Sight.”“A lack of domestic enforcement of regulations against deliberate trade misinvoicing, as well as unclear international regulations, exacerbates the illicit money flows.” -- Brian LeBlanc

The report, sponsored by the Danish foreign ministry, represents the first comprehensive study on the magnitude of the loss of tax revenue for these countries.

Trade misinvoicing is the intentional misstating of the value, quantity, or composition of goods on customs declaration forms and invoices, usually for tax evasion or money-laundering purposes.

“Fraudulent trade transactions rob the people of these countries of funds that could otherwise have been used for investments in infrastructure, schools, hospitals, and other much-needed public services,” said Mogens Jensen, Denmark’s minister for Trade and Development Cooperation.

Further, misinvoiced trade is a significant source of illicit capital flight.

Tanzania tops the list, with the greatest annual average gross illicit flows of 1.87 billion dollars. Kenya is second with 1.51 billion in average gross flows. They are followed by Ghana (1.44 billion); Uganda (884 million), and Mozambique (585 million).

These losses create “one of the most damaging conditions undermining economic growth and development, governance, and human rights in Africa and around the world,” according to the report which, noted that misinvoicing thrives in a global shadow system that features financial secrecy and tax havens for the rich.

Over the decade, gross illicit outflows in Kenya were twice what the country received in official development assistance (ODA); in Ghana these flows roughly equaled its ODA, followed by Tanzania (77.6 percent), Uganda (58.9 percent), and Mozambique (32.6 percent).

The numbers are huge, but experts caution that these might be too modest.

“The estimates provided by our methodology are likely to be extremely conservative as they do not include trade misinvoicing in services or intangibles, same-invoice trade misinvoicing, hawala transactions, and dealings conducted in bulk cash,” GFI President Raymond Baker noted.

Ghana, Kenya, Mozambique, Tanzania, and Uganda have all experienced significant economic growth in recent years. But the wealth remains concentrated in the hands of a very few and has not trickled down to the average citizen and the very poor, who often lack basic services.

The revenues that the governments lost due to misinvoiced trade and illicit money flows could  help fill these gaps.

“The problem lies in a lack of transparency and poor data reporting. And publishing data is important,” Brian LeBlanc, who co-authored the report, told IPS.

He also noted statistics presented at last week’s launch of the latest report by the African Progress Panel, a think tank chaired by former U.N. secretary-general Kofi Annan. It estimated that illegal fishing and logging – most of which benefits foreign interests – cost sub-Saharan Africa an average of over 20 billion dollars each year.

GFI experts highlighted the importance of governments both domestically and internationally in cracking down against trade misinvoicing. Thus, the two main objectives of the report are focused on helping governments improve transparency in domestic and international financial transactions and enhancing cooperation between developed and developing country governments to shut down the channels through which illicit money flows.

“A country with weak laws or lax enforcement of money laundering statutes could encourage trade misinvoicing by making it easier to transfer and use the money gained from the illegal transaction,” the report says.

According to LeBlanc, particular attention needs to be paid to providing customs officials with “real-time access to pricing data” in order to identify the mispriced and mistraded goods. More pressure should also be placed on auditing firms to inform governments of misinvoiced trade.

Customs authorities often lack the means, or, in some cases, the will to collect the data they need to understand the magnitude of illicit flows of capital due to trade misinvoicing or the tax revenue and investment capital that are lost as a result.

Governments need to track the direction of trade flows, detect if the invoices are altered in different jurisdictions, and understand how the values of items included in invoices compare to the world market for the products involved.

“Many countries don’t have access to world market prices for different commodities, this information asymmetry makes it difficult to make progress in curtailing misinvoicing trade and illicit financial flows,” Clark Gascoigne, communications director at GFI, told IPS.

Not only does the information asymmetry deprive governments of tax revenues, it also hinders their efforts at halting illicit flows.

“A lack of domestic enforcement of regulations against deliberate trade misinvoicing, as well as unclear international regulations, exacerbates the illicit money flows,” LeBlanc said.

The five countries are nonetheless making some progress. The establishment of electronic customs systems and, in some cases, the creation of financial intelligence units (FIUs) hold some promise.

The World Trade Organisation (WTO) could also be used as an important enforcement mechanism, according to LeBlanc, who also cited a model that has been used with considerable success in the Philippines.

“A final step to curtailing illicit trade transactions and financial flows is a whistle-blowing mechanism, where employees as well as competitors can blow the whistle anonymously if their employers or rivals are engaging in misinovocing trade,” LeBlanc told IPS.

He added that it is in the interests of both employees and competitors. And while it is obvious why competitors would benefit from blowing the whistle on their rivals, LeBlanc further elaborates on why it is in the interest of employees of the company.

“There is a misconception that misinvoicing trade results in a better company performance in terms of revenue. It in fact hurts the company,” LeBlanc says, and “the extra profits from over- or under-invoicing imports and exports end up being transferred to off-shore accounts of the company owners and are not distributed to the employees.”

Brazil’s Guaraní-Kaiowá people are no longer willing to wait quietly for the government to demarcate their land. Credit: Courtesy of CIMI/Cléber Buzatto

By Fabiana Frayssinet
RIO DE JANEIRO, Nov 15 2012 (IPS)

The threat of mass suicide by native Guaraní-Kaiowá people in southwest Brazil brought to light a new formula for worsening conflicts over indigenous territory: the expansion of the cultivation of soy beans and sugar cane, two top export crops.

The situation is the focus of a study, “Em terras alheias – a produção de soja e cana em áreas Guarani no Mato Grosso do Sul” (On other people’s land: Production of soy beans and sugar cane in Guaraní areas of Mato Grosso do Sul), by Repórter Brasil, a local NGO.

Drawing on official data and research in villages of the southwestern state of Mato Grosso do Sul, the study mapped the cultivation of sugar cane and soy beans in six indigenous areas.

“When international commodity prices go up, it becomes more profitable to grow soy beans or sugar cane, and land values rise,” investigative journalist Verena Glass, one of the authors of the study, told IPS. “With greater demand for land, large landowners arm themselves against the indigenous people, and conflicts surge, as happened last year.”

In Mato Grosso do Sul, which is home to some 44,000 Guaraní-Kaiowá, conflicts broke out this year on cattle ranches. But the same logic is at work: there is “a dispute between commodities and lands claimed by indigenous people,” she said.

When the report was presented on Oct. 24, the conflicts worsened. The study was carried out in July, when occupations by the Kaiowá to recover their territories led to confrontations and violent reactions by large landowners, including armed attacks on native encampments.

But the conflict crossed state borders when some 30 families of the Pyelito Kue Kaiowá community announced their “collective death” if they were driven off their land, which is currently in the process of being demarcated by government authorities as their communally owned territory.

Tired of waiting in encampments along the side of the roads, the native people occupied a small part of their ancestral lands that had been taken over by large landowners. But in October a court ordered their eviction.

When the news, interpreted as a threat to commit mass suicide, circled the globe by means of social networks, the government had the judicial decision revoked, so that the Pyelito Kue people could stay where they were until the demarcation process was complete.

The community was partly satisfied with the decision, Egon Heck, of the Catholic Indigenist Missionary Council (CIMI), told IPS.

They were happy, he said, because they would not be expelled from their land, but unhappy because they still have to live in overcrowded conditions on just one hectare, without being able to set foot outside it, for who knows how long.

“It’s a situation of aggressive confinement that has been going on for years and was aggravated by the court verdict,” said Heck, whose organisation is linked to the Brazilian Catholic Bishop’s Conference.

He asked how nearly 200 indigenous people, “linked to their territory and natural resources as their way of life, are supposed to manage to survive on one hectare.

“Can it be that the interpretation of the constitution, which guarantees collective land to these people, is being distorted by the interests of private property?” he asked.

Maurício Santoro, a human rights adviser to Amnesty International in Brazil, told IPS that Mato Grosso do Sul has areas densely populated with indigenous people, but that these areas are scattered between soy bean plantations and cattle ranches.

“These lands have not yet been demarcated by the federal government, and the legal vacuum has fuelled conflict,” he said.

Like Pyelito Kue, other communities were forced off their lands and are now living in camps by the side of the road, without medical services and constantly threatened by gunmen hired by local landowners.

“The waiting is killing people anyway,” Tonico, a Kaiowá Indian, told IPS in September. “No one is making decisions. We are going to occupy all our lands, even knowing that there is no security and that we are going to die. The people have decided.”

The rates of malnutrition, suicide and violence are extremely high in these communities, Santoro said.

According to CIMI, suicide has long been present among the Kaiowá and other Guaraní groups, particularly among young people. Between 2003 and 2010 there were 555 suicides.

Since 1991, only eight reserves have been formally approved for the Kaiowá-Guaraní people, who are the second-largest native group in Brazil but live in small territories.

The expansion of agribusiness, which has been heavily promoted by the state government, has exacerbated the situation.

The type of agriculture practised, based on intensive use of pesticides, the destruction of soil microorganisms and the devastation of rivers and forests, has been a “major aggravating factor” in the historic process of expulsion and extinction of the Guaraní-Kaiowá people, said Heck.

Agricultural mechanisation and the use of toxic chemicals have also reduced the employment of indigenous people as workers on large estates or in ethanol plants, where sugar cane is used to produce biofuels.

“Soon they won’t even have this work, which may be in semi-slavery conditions but is practically the only income available, besides government assistance,” since they don’t have access to their own land, Heck said.

Repórter Brasil launched a campaign urging transnational corporations to boycott the produce of estates illegally located on indigenous lands.

“The idea is for big buyers to avoid purchasing products from indigenous lands, as a kind of punishment. That way, the producers are economically weakened, and the value of indigenous land is reduced,” Glass said.

Two ethanol plants in the state, São Fernando and Raízen, have promised not to buy sugar cane from indigenous areas.

But others, like Monte Verde, which belongs to the Bunge company, buy grains from five estates on indigenous lands that are still being demarcated, according to Glass. The company argues that it is not infringing any rules as long as the estate owners are not legally compelled to leave the areas.

The government of President Dilma Rousseff has promised to accelerate the process of demarcation of native reserves. Meanwhile, rural producers are demanding economic compensation for leaving indigenous lands, and complain that one historic error is being paid for “with another historic error,” namely, penalising a productive sector.

Local residents and authorities in the northern Peruvian region of Cajamarca say they will continue to protest the Conga gold mine, despite the state of emergency declared by President Ollanta Humala.

Local residents opposed to the Conga gold mine hold a vigil at one of the lakes that the project would affect in the highlands of Cajamarca. Credit: Courtesy of the La República newspaper

The 4.8 billion dollar Conga gold mine project, to be run by the Yanacocha mining company, is backed by the government of Humala, a left-leaning former army officer who took office in July.

Yanacocha operates the largest gold mine in Latin America, 25 km southwest of Conga, and is owned by the U.S.-based Newmont Mining and the Lima-based Buenaventura corporations.

Peasant farmers, backed by local and regional authorities, environmental activists and independent experts, say the Conga mining operation would cause irremediable damage to four high mountain lakes, and deplete their water supply.

Newmont and Buenaventura have promised to replace the lakes with artificial reservoirs.

Last week, Newmont suspended work on the project, which affects the Cajamarca districts of Encañada, Sorochuco and Huasmín, where the mainly impoverished rural highlands population depends on agriculture and livestock for a living and needs abundant clean water.

The 60-day state of emergency was imposed by Humala after Prime Minister Salomón Lerner failed – after 10 hours of negotiations Sunday in the city of Cajamarca, the regional capital, 160 km from the lakes – to convince the demonstrators to call off the protests, which have brought activity in the city to a halt for two weeks.

“We will agree to sign the agreement if Yanacocha removes its machinery from the Conga project area, because its mere presence there is a provocation for the peasants,” the president of the Cajamarca Defence Front, Idelso Hernández, told IPS.

“But minister Lerner told us that we couldn’t force Yanacocha to pull its machines out – which made it clear to us which side the government is on,” he said.

“Even though Yanacocha suspended the Conga project on Nov. 29, it left its machinery in the area, which means the police are still there, to protect the equipment,” Hernández said. “The aim is to seek any pretext to trigger an outbreak of violence. The government is offering dialogue with one hand whole holding a club ready in the other.”

The head of the Cajamarca Environmental Defence Front, Wilfredo Saavedra, concurred with Hernández, telling IPS that “we even called off the shut-down of activities in the city on Friday (Nov. 3) to facilitate the talks, which shows that we are not intransigent.

“However, the government deployed a large number of troops over the weekend, and even brought in the head of the joint forces command, General Luis Howell, on Sunday. That means everything was prepared for the declaration of a state of emergency, and they were just looking for a pretext for a military crackdown on the social protests,” he added.

The two-month state of emergency, which covers the provinces of Cajamarca, Celendín, Hualgayoc and Contumazá in the south of the region of Cajamarca, suspends constitutional rights such as freedom of assembly, association and circulation, and gives the security forces the right to search homes at will. Humala also said the armed forces would help the police maintain public order.

The aim of the measure was to reopen schools, businesses, the airport, bus stations and markets in the city of Cajamarca, which had been shut down by the protesters since Nov. 24.

When he visited Cajamarca as a presidential candidate, Humala expressed his support for the protest against the Conga project.

But he has now decided that it will go ahead, on the argument that if the gold and copper mining project is properly managed, the local residents will benefit from the “canon minero” – the direct economic compensation received by areas where minerals or oil are extracted.

Cajamarca is one of the Peruvian regions that receive the largest amounts of revenue from the canon minero.

Figures from the Ministry of Economy and Finance indicate that since 2007, the district of Encañada received 8.1 million dollars in canon minero funds, Sorochuco took in 2.1 million dollars, and Huasmín 661,000 dollars.

But that money has done little or nothing to change the lives of local residents. The latest report from the national statistics institute, dating to 2009, shows that 75 percent of people in Encañada and Socochuco are poor, as are 63 percent of people in Huasmín.

The most recent report from the Defensoría del Pueblo (ombudsman’s office) says that nearly 60 percent of the 154 active social conflicts in the country’s 25 regions involve socioenvironmental protests, like the one in Cajamarca.

“The people of Cajamarca weren’t expecting a state of emergency to be declared,” Mesías Guevara, who represents the region in Congress for Perú Posible, a party allied with Humala’s Gana Perú party, told IPS. “It is an extreme measure that will fuel the discontent.

“The people of Cajamarca are not anti-mining,” the lawmaker added. “What we want is respect for our rights, such as the obligatory prior consultation. I would think that people in Cajamarca who voted for Humala are feeling pretty disillusioned.”

Under Peruvian law, mining companies must consult local communities and obtain prior approval before conducting any mining operations.

Besides demanding the removal of Yanacocha’s machinery from the area around the lakes, the local and regional authorities and social leaders were asking for 24 hours to consult with the mainly indigenous protesters holding a vigil at the site of the Conga mining project, which is located in the Andes highlands over 4,000 metres above sea level.

“We told Lerner that we couldn’t sign anything without informing and consulting with the peasant protesters in the mountains, because that’s how we do things among our people,” said Saavedra. “But the prime minister didn’t understand, and insisted we sign immediately.”

The Defensoría del Pueblo’s special envoy, Rolando Luque, a specialist in social conflicts, who was present at the talks on Sunday, said both sides were respectful, and that the negotiations were “broad and participative.”

He added that even though no agreement was reached, due to the disagreement over the removal of the machinery, he was optimistic.

“Although unilateral measures have been taken, the talks have not collapsed,” Luque told IPS. “We have been following the process over the last few days, and are confident that the negotiations will continue and that an agreement that is beneficial to the people of Cajamarca will soon be reached.”

South America has managed to withstand the knock-on effects of recession in the EU and U.S. thanks to the protection offered by the soaring Asian demand for commodities. But many things could change in the medium term.

Pipelines that transport grains from the Suape port. In the background, Brazil's largest flour mill, owned by the Bunge agribusiness company. Credit: Mario Osava/IPS

There is a new centre of gravity in the world, comprised of emerging countries led by China, while the influence of the powers of the industrialised North is waning, experts in political science and the economy agreed at a recent seminar in Buenos Aires.

As a result of growing exports of food and mineral commodities to China, producers of those goods such as Argentina, Brazil, Chile, Paraguay, Peru and Uruguay have posted high levels of growth and achieved enviable fiscal stability, said participants at “Crisis in the developed world: opportunity for emerging countries” held Friday Nov. 2.

But that beneficial effect, which is projected to continue in 2012, may not last if the global crisis drags on and if South America does not move in the direction of greater industrialisation and higher spending on education, said experts from Argentina, Brazil, Ecuador, Peru and Uruguay, who were brought together by the private consultancy Abeceb.

Ecuadorean economist Leonardo Suárez of the University of Guayaquil pointed out that “global foreign exchange reserves stand at 10 trillion dollars, eight billion of which are in emerging countries.”

China is driving global growth by means of increasing demand for minerals and grains, he added.

“My forecast is that China will rescue commodities, and that is good for Latin America,” Suárez told IPS. “But there is also a risk that the crisis will affect spending decisions, change expectations and trigger devaluations.”

Argentine political scientist Juan Gabriel Tokatlián at the private Torcuato Di Tella University said the international context in 2012 will be marked by “great turmoil and uncertainty,” and even higher levels of social polarisation.

U.S. influence has declined significantly in South America, he added. Against that backdrop, Argentina and Brazil should lead a “strategic alliance” based on hi-tech industries and other sectors, he recommended.

“Crises bring both opportunities and risks, because although the conditions are now favourable for Latin America, the developed countries are facing a slowdown and Asia is producing goods at lower and lower costs,” economist Bernardo Kosacoff, a professor at Torcuato Di Tella University and a former director of the Economic Commission for Latin America and the Caribbean (ECLAC) in Argentina, told IPS.

The crisis should drive “an agenda of competitiveness” in the region, he said in his speech.

Former Brazilian minister of finance and the environment Rubens Ricupero made the same point.

Ricupero, who was secretary general of the U.N. Conference on Trade and Development (UNCTAD) from 1995 to 2004, said Brazil is confronting the crisis by means of incentives for consumption, as it did in 2008 and 2009.

In 2012, these incentives will enable Brazil to continue growing and to keep up wages and the current situation of near full employment.

But there will be uncertainty in the medium term, the economist said. He cited a “worrisome sign” in Brazil: the loss of competitiveness of local industry in the face of imports from China.

Ricupero said the growing demand driven by incentives in the domestic market cannot be met by Brazilian industry, but is covered by products from China, “a phenomenon that cannot be fixed with old-fashioned protectionism.”

In Brazil some industrialists are becoming importers – the same thing that happened in Argentina during the 1990s, a period of deindustrialisation, he said, stressing that it is necessary to come up with “regional solutions” to this challenge.

Ricupero does not believe commodities will rescue the economies in the region in the medium term.

“It’s not a question of rejecting profits from agriculture or mining, but those activities do not have the capacity to diversify and generate jobs like industry has. The question is: how are we going to stand up to China five years from now?”

Value must be added to natural resources, interest rates must be lowered, appreciation and volatility of local currencies must be avoided, and the tax burden must be lightened, he recommended.

He was responding to the more optimistic scenario outlined by Suárez and Pedro Kuczynski, a former Peruvian prime minister and minister of economy and energy and mining.

Kuczynski stated flatly that “China will save Latin America,” noting the fact that nearly 20 percent of Peru’s exports are shipped to ports in the Asian giant.

“This demand will save South America, which is in the best position to supply China with food and minerals,” he said. “The myth that commodities are bad has burst. They can serve as a source of financing.”

He acknowledged, however, that it’s not a question of specialising in raw materials. “The economy must diversify, but in the meantime these goods generate hard currency that enabled many countries that are now industrialised to finance their own development,” he said.

By IPS Correspondents
BUKA, Bougainville , Oct 16 2011 (IPS)

Whether the world’s largest open-cut mine on this island territory of Papua New Guinea (PNG) will resume copper and gold production, after being mothballed for 22 years, will depend on how satisfied matrilineal landowners are with the proposals.

Panguna mine's copper and gold await political settlement before extraction can resume. Credit: C.E. Wilson/IPS

“What sort of mining and with what process will it reopen?” asks Patricia Tapakau, president of the Panguna Women in Mining, an organisation which represents women in 13 mining affected villages. “We need to know, because we don’t want any more destruction. We have had enough of that.”

The Panguna copper mine opened in 1969 when Bougainville was under Australian colonial administration and customary landowners were excluded from the Bougainville Copper Agreement between the Australian government and the mining company, Conzinc Rio Tinto Australia.

For 20 years, the Barapang, Kurabang, Basikang and Bakoringku clans, customary landowners of the mine pit, endured devastation of their land and waterways by waste from what was the mine, community evictions and negligible share in profits.

In 1989, following BCL’s refusal to pay the landowners’ demand of 10 billion kina (454 million dollars) compensation, the Bougainville Revolutionary Army (BRA) forced the mine to close.

The PNG government, a major owner (19.06 percent) of the operating company, Bougainville Copper Ltd (BCL), alongside British multinational, Rio Tinto (53.58 percent), imposed a blockade on the island and a 10-year civil war followed during which 20,000 people died, communities suffered human rights abuses and infrastructure was destroyed.

Helen Hakena, director of the Leitana Nehan Women’s Development Agency, a local NGO, counsels women victims of violence and develops leadership capacity and awareness of land rights in communities. She said a significant achievement since the 2001 Bougainville Peace Agreement was the formation of the Autonomous Bougainville Government (ABG) in 2005.

“We have our own government in place and a lot has been achieved in terms of peace-building and the laying down of arms,” Hakena recounted. “The setting up of businesses here has been a good thing, and schools and other institutions have been opened.”

However, the population of Bougainville has doubled from 175,000 in 2000 to over 300,000 now, and with the island’s current revenue deriving mainly from international aid donors, public services remain limited. Many villages lack electricity, clean water and adequate medical services.

The ABG views potential mining revenues as vital to developing services and attaining economic self-sufficiency for the second pillar of the Peace Agreement, a referendum on independence from PNG within the next 5-10 years.

In May, BCL chairman Peter Taylor visited Bougainville with a business delegation and held preliminary discussions with Bougainville President John Morris about reopening the Panguna mine, which the company estimates has reserves of 3.5 million tonnes of copper and 12.7 million ounces of gold.

Taylor stated publicly that he expects the ABG and landowners to lead in mining negotiations. However, women landowners remain concerned that the customary value of land as a source of livelihood will give way to corporate interests that see land as an expendable resource.

“The important thing about the land is that, to us, it is like a mother, because we feed on the land,” said Joanne Dateransi. “We always depend on land; it cannot be compared to money.”

The women say the economic potential of local industries, such as cocoa, copra and tourism must be fully explored first and unresolved issues, following the mine’s abandonment, must be addressed, including financial compensation and environmental damage.

“The first thing, the government and the company, they have to pay that 10 billion kina, which is part of the (landowners’) demands, then the killings and the damage has to be paid. Then we talk about the mining issue,” said Panguna landowner Lynette Ona.

“The chemicals are still there in the river,” she said. “No one drinks the water, there is no fish there, it is still the same,” said Ona who promotes the participation of women in local politics and plans to be candidate in the 2012 Bougainville elections.

An environmental report on the Panguna mine by Applied Geology Associates (1998) spoke of thousands of tonnes of tailings including toxic metals such as mercury, lead and zinc. Tailings flowing into the nearby Jaba river decimated fish and contaminated water supplies and crops.

“It (BCL) has to come up with a very good plan on how to dispose of toxic waste,” stated Coleman. What has happened as a result of the mine being closed is the (improved) fertility of the soil. We never had coconuts (during the mine’s operation) in our own village, now you can see trees full of coconuts.”

Long-term political and social unity is also a key issue with reconciliation and weapons disposal incomplete. A survey, supported by PNG’s ‘Post Courier’ newspaper, of 500 families in Central Bougainville affected by the civil war death toll of 1,629, showed households still in possession of weapons.

“We will not take away all the guns,” Hakena said. “But there needs to be a priority set by the government in getting those arms out before the (possible) reopening of the Panguna mine.”

However, a decision on whether the mine will reopen is still to be made by the ABG, landowners, the PNG government and BCL.

ABG’s chief mining officer, Stephen Burian, said new mining laws were being drafted with assistance from the World Bank, but a review of the Bougainville Copper Agreement, a precondition to mine negotiations, awaits unification of all landowners in mining affected areas under the Panguna Landowners Association and an independent environmental audit made.

The Panguna community also includes the Mekamui hardliners, comprising many former BRA fighters, who control access to the Panguna mine and have not yet agreed to any mining proposals.

What is clear is that the mine’s future is in the hands of Bougainville people who want to see strategies of economic development that preserve human rights, social cohesion, environment and culture.

“We want to develop, but to redevelop from the mistakes, not to repeat the mistakes (of the past),” said Tapakau.

Excerpt:

By Mario Osava
CUIABÁ, Brazil, Aug 8 2011 (IPS)

Despite challenges like high interest rates and high household electricity tariffs, the Brazilian economy has been growing at the highest rates seen in decades. Another problem that, although it has not stood in the way of growth, must be overcome is the costly use of roads for transporting farm products – an issue that is being addressed by the expansion of railway networks.

Traffic jam of trucks at Jaciara, 140 km from Cuiabá, caused by repairs to BR-364 road. Credit: Mario Osava/IPS

Around 8,000 trucks a day drive along this stretch of the BR-364 road, the main connection between the main local production centres and foreign markets. The trucks, carrying mainly soy from Mato Grosso, then drive the remaining portion of the 2,000-kilometre route to the Atlantic ocean ports.

One solution to ease that burden on the road is the Ferronorte railroad, in the process of being built. It will connect the new agricultural frontier in the west and north of Brazil with the more developed south-central part of the country.

The railway sets out from the northwest border of the southern state of São Paulo, 1,056 km from Cuiabá, the capital of Mato Grosso. Railroad stations in three cities in Mato Grosso have already begun to operate.

The railway is to reach Rondonópolis in 2012, and two years later it should make it to Cuiabá, according to Francisco Vuolo, special secretary of intermodal transport logistics, a post created this year by the government of Mato Grosso.

A 90-year concession, renewable for another 90 years, for the Ferronorte railway line was granted five years ago to América Latina Logística (ALL), which refused to build the railroad all the way to Cuiabá, and only agreed to cover construction up to Rondonópolis.

The company did not want to run the risk of taking on some 500 million dollars in debt in such a long-term business venture, said Vuolo. He regretted that the concession would put the railway, and a large part of the country, “at the mercy of private interests for 180 years.”

Meanwhile, demonstrations have been held to demand that the railway be extended all the way to Cuiabá. As a result ALL gave up the concession to that stretch of the route, and the state government will make sure it gets built, through an agreement with the national land transport regulatory agency ANTT and Brazil’s federal rail company Valec.

The railway will be named for Senator Vicente Vuolo, the father of the secretary of intermodal transport logistics Francisco Vuolo. As a lawmaker, Vuolo senior, who died in 2001, was the driving force behind plans for a railroad linking Cuiabá and São Paulo, approved in a national law passed in 1976.

There will be no problem finding investors to build the Rondonópolis-Cuiabá stretch of railway. Firms from “China, Germany and other countries” have already expressed an interest in forming a partnership, Francisco Vuolo said, because it will involve building “just 200 km and gaining access to another 1,000 km,” by forming part of a broader transport system, which through other connections will provide access to ports on the Atlantic.

The railroad will not only be used to transport soy and other agricultural exports to port, but will also carry merchandise back inland to Cuiabá, a city of 550,000 people.

Described as a “utopian project” when it was first proposed by Senator Vicente Vuolo, the railroad now responds to a clear need for large-scale transport facilities.

Over the past decade, Mato Grosso has been the leading national producer of soy, of which Brazil is the world’s second largest exporter. The state produces more than 20 million tons of soy a year, besides exporting cotton and corn, using the same land for a second crop, normally between February and July.

Nevertheless, agricultural development has been slowed down by logistics problems, says Seneri Paludo, executive director of the Mato Grosso Federation of Agriculture and Livestock (FAMATO).

Although local grain prices are “the lowest in the world,” they are increased by transport costs, which means both ends of the supply chain – the growers and the buyers – lose out, Paludo said.

The semi-arid northeast, Brazil’s poorest region, purchases expensive corn from the south, because corn grown in Mato Grosso “is not competitive there,” as the cost is driven up so much by transport, he explained.

The railway could reduce the transport costs for Mato Grosso’s agricultural output by 30 percent, according to the Movimento Pró-Logística, created by local business associations in 2009 to demand more efficient transport alternatives.

A study by University of Campinas economists Vivian Correa and Pedro Ramos says the competitiveness of soy from west-central Brazil is undermined by the fact that 25 percent of the total cost is spent on transport, compared to less than 10 percent in the United States.

Greater logistics capacity is also indispensable due to the continued expansion of agriculture. The area under crops in Mato Grosso could double, since the state has another 9.2 million hectares of pasture land suitable for growing soy and other crops. The trend now is to replace extensive livestock farming with crops that are more profitable, Paludo said.

Besides the railway to Cuiabá, the Movimento Pró-Logística is also pressing for construction of the Centre-West Integration Railway (FICO), which would cut across north-central Mato Grosso, where the state’s heaviest soy production is concentrated. The business movement is also calling for improved paving of existing roads, the construction of five new roads, and the creation of two navigable waterways.

Francisco Vuolo, a proponent of the railway like his father, prefers the original design of the Ferronorte line, which would link Cuiabá not only with the state of São Paulo but also with Porto Velho, the capital of the neighbouring state of Rondonia, and with Santarém, one of the main river ports in the heart of the Amazon jungle.

But for now, railway lines stretching to so many different destinations seem unlikely. A railroad requires a large initial investment, and the cost can only be justified by the transport of high volumes of freight, like minerals and grains, over long distances

Moreover, part of the soy produced in Mato Grosso already goes through Santarém, by means of a road that is due to be paved by next year, which will be complemented by waterways.

Santarém is a port city in the northern state of Pará on the Tapajós river, where it converges with the Amazon river. The planned construction of five hydroelectric dams on the Tapajós river and others on two of its tributaries, the Juruena and Teles Pires rivers, over the next decade will make way for a navigable waterway that will serve both the north and the west of Mato Grosso.

The Teles Pires-Tapajós waterway could reduce the current cost of road transport of soy from north-central Mato Grosso by 74 percent, according to the study by the University of Campinas professors.

Excerpt:

By Danilo Valladares
GUATEMALA CITY, Jul 14 2011 (IPS)

“We started out with 10 organisations and now we have 22 cooperatives with more than 19,000 members who grow and export crops with an environmental, social and economic focus,” says an enthusiastic Marvin López, with the Guatemalan network of small-scale fair trade farmers (CGCJ).

Thousands of members of cooperatives in Central America have turned to fair trade production, which is based on the principles of environmental conservation, gender equality, sustainable production, respect for human rights, no child labour, safe and healthy working conditions, and the payment of fair prices that ensure farmers a living wage.

The CGCJ produces some 290,000 quintals (one quintal = 100 pounds) of coffee and 830 tons of sugar a year, which are mainly exported to the United States and Europe. The income offers an opportunity for better living standards to more than 100,000 people in this impoverished Central American country of 14 million people.

“Our aim is to provide organisations of small farmers with opportunities to earn higher incomes by gaining access to a special niche market with a social as well as economic focus,” López told IPS.

But it hasn’t been easy. Lack of financing, limited access to technology and infrastructure for production, and a lack of knowledge about marketing are just a few items on a long list of limiting factors that have made it difficult for small-scale fair trade farmers in the region to compete in the world of global trade.

“We have to be competitive and work hard on these aspects to ensure good production levels and supplies for our customers,” added López, a coffee grower from northern Guatemala.

The seven countries of Central America – Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama – have a combined population of 43 million people, 40 percent of whom live in poverty.

“Fair trade benefits small farmers because it guarantees you a minimum price for your product and gives you a small incentive,” Nelson Guerra, with the Honduran coordinator of small-scale fair trade farmers (CHPP), told IPS.

The cooperative member pointed out that in 2000, during the world coffee crisis, the price of a quintal plunged to 43 dollars on the New York Mercantile Exchange. But at the same time, fair trade certified cooperatives were selling their coffee at 135 dollars per quintal.

“What fair trade represents for small-scale producers is insurance that their product will always be sold at a price higher than production cost and that it will generate enough earnings to support their families for the rest of the year,” Guerra said.

That is the reason for the growth in fair trade production in Honduras, from 5,000 quintals of certified fair trade coffee in 2002 to 200,000 quintals today, the small-scale businessman said.

Nevertheless, fair trade production still represents only a tiny share of the coffee produced in the region.

Guerra said that of the more than five million quintals of coffee produced annually in Honduras, just five percent is produced under fair trade conditions – a proportion similar to that of other countries in the region.

“This is basically because of two things. First, 80 percent of coffee production in Honduras is in the hands of small-scale producers, and it is difficult for them to organise. Of the 105,000 coffee growers, only 10,000 are organised in cooperatives,” he said.

At the same time “there is a lack of access to financing because agricultural production worldwide depends on credit, but in Honduras, a farming country, only one private bank finances 80 percent of the coffee production,” he said.

Producers in Costa Rica face similar challenges. “In relation to the country’s overall trade, fair trade represents a very small share of exports, but little by little our sales abroad are increasing, as are the number of markets our products are being sent to,” Sonia Murillo with Costa Rica’s national fair trade coordinator told IPS.

Some members of cooperatives estimate that fair trade production in Costa Rica, which is mainly of coffee, sugar, fresh fruit, cacao and bananas, accounts for less than one percent of total output.

However, “fair trade has brought together many small-scale producers organised in cooperatives and associations that have improved their situation and conditions in their communities,” said Murillo.

Factors like climate change, global trade and the lack of specific government policies make it hard for small companies, which see fair trade as a life saver because it offers them better treatment and access to a niche market, to get established, she added.

But according to economists, there is one key aspect that would enable fair trade to expand: the elimination of farm subsidies by the world’s big economies.

“The world’s major food exporters, like the United States and European Union, shell out agricultural subsidies, which makes it impossible for us to compete in those markets,” Pablo Urrutia, at the Association for Social Research and Studies (ASIES), an independent research centre and think tank in Guatemala, told IPS.

He also called for more intermediaries, who have been reduced to a minimum in fair trade. “There are many people who have no access to markets because they don’t have middlemen – a mechanism that facilitates trade,” he said.

Urrutia also underlined the importance of other factors, like competitiveness, an improved customs system, and the strengthening of free trade treaties, because “fair trade has immense possibilities here.”

Excerpt:

By Louise Redvers
JOHANNESBURG, Jun 29 2011 (IPS)

South-South co-operation is firmly on Africa’s agenda. Leading the way is South Africa, which has recently joined up with Brazil, Russia, India and China’s BRIC formation to form a new global grouping of emerging markets, known as BRICS.

Rob Davies: South Africa's huge trade imbalance with the rest of Africa cannot be allowed to go on forever. Credit: South African Department of Trade and Industry

Q: What is South Africa’s current trading relationship with the BRIC countries? A: We have seen a very large quantitative increase in trade between South Africa and BRIC countries. South Africa’s exports increased four-fold between 2006 and 2010 and our imports doubled over the same period.

Meanwhile our trade with developed countries took a significant dip in 2009 and, although it recovered somewhat in 2010, it still remains at pre-2008 levels. So what you can see is definitely a shift in terms of our South-South trade and this is a policy we are pursuing.

Q: How would the South African government want South-South trade to develop from here? A: What we’re looking to do is to try to change some of the quality of the trade we do with the BRIC countries. For example, here in South Africa, we are mostly supplying primary products but we also have bilateral undertakings from countries that we now want to enforce.

We want these countries to purchase more value-added products from us so we can try and even out the imbalances that exist in the trading relationship at the moment.

And, within the African framework, we want to bring about more balance of trade with the rest of the continent. We can’t continue to carry on just selling to them if there’s a huge imbalance, which is something we recognise.

Q: So, you want Africa to do more than export raw minerals and resources? A: Yes. That’s what we’re looking at, to construct a set of relations with other countries of the South and on the African continent. Because the principles that are often mentioned in trade agreements are very often not followed through, like mutual benefits and reciprocity.

We want to see these principles being put into place in the trading relationships with other developing countries, either the emerging markets or even those on the African continent.

Q: Do you think being part of the Tripartite Free Trade Area (T-FTA) gives South Africa more weight within BRICS? A: I think we already represent Africa in terms of carrying a mandate. We’re there as a member in our own right but I think it’s obviously very clear that the other BRIC members felt they were lacking something from the African continent when they were thinking about enlarging the group.

So they chose us because we are a key player on the African continent. The dynamic and relationship between us and the BRICS, and us and the African continent, is very much connected.

Q: Do you therefore think the BRIC countries will start to see Africa as more of a single entity due to the T-FTA? A: We would hope so. I have said this before: it’s not very difficult to find someone to construct the infrastructure from the mine to the coast, to get raw materials out of the African continent, there are plenty of people who are willing to do that.

But a more difficult nut to crack is building the infrastructure that connects us, because all the main communications routes on the African continent go from the inland to the coast. They don’t go from north to south, nor connect us as people.

And I think that’s where the challenge lies. We would like to work with other partners on those kinds of infrastructure challenges to improve the connections, the transport logistics between central, eastern and southern Africa ourselves.

Q: What has been the reaction from the BRIC countries to the proposed T-FTA? A: I am not aware of any specific comments made since the summit but we had shared the ideas for this project before and we had talked about it on several occasions during our interactions with them. They all seem pretty positive about it and view it as an important development.

All of the BRICS are becoming increasingly involved with the African continent, and they all know that Africa is a source of opportunity. I think this is the big change that has been happening since the recession: Africa is now increasingly being recognised as source of opportunity.

A number of studies are saying that Africa has the best growth prospects globally, after China and India.

Q: Is South-South trade more attractive to Africa than the historical North-South relationship? A: I think there’s a clear historic opportunity for us to create a new pattern of trading relations based on real delivery on principles of mutual benefit.

To some extent, the model of North-South trade has so far been replicated with South-South trade, as Africa has been supplying raw materials. This is due to the fact that you have new players, the fact that China is industrialising and creating a commodity boom and that commodity prices are high.

But the African continent is very well aware that it cannot continue to live on the basis of a commodity boom, nor anticipate that it will carry on forever. We have to develop more value-added activity. So I think we’re looking to, among other things, South-South trade and co-operation to give us ways of moving that forward.

Excerpt:

By IPS Correspondents
WASHINGTON, Jun 22 2011 (IPS)

As the date for South Sudan’s long anticipated Jul. 9 secession inches closer, on-going violence in the Northern state of South Kordofan threatens to destroy the country’s hopes for peace.

United States President Barack Obama said in a White House statement Wednesday that the situation in the central region of the country is “dire, with deeply disturbing reports of attacks based on ethnicity”.

“The United States condemns all acts of violence, in particular the Sudanese Armed Forces (SAF) aerial bombardment of civilians and harassment and intimidation of United Nations peacekeepers,” Obama said.

Since early this year, the civilians of oil-rich South Sudan have paid heavily for their attempts to break from the Arab-dominated North – most recently by enduring a brutal occupation of the fiercely contested border region of Abyei by President Omar al-Bashir’s notorious military forces.

Though the situation abated slightly Monday following the signing of a peace deal in Addis Ababa, Ethiopia – which mandated a withdrawal of the Khartoum-backed SAF and the deployment of 4,000 U.N.-sponsored Ethiopian peacekeeping troops to patrol the region and buffer the North-South boundary – violence has rapidly spread now to the centre of the country, where the largely pro- Southern Nuba people are weathering a ferocious attack.

“Under the Comprehensive Peace Agreement (CPA), both the Government of Sudan and the Sudanese People’s Liberation Movement (SPLM) committed to resolve their differences peacefully, and both parties have a responsibility to end the current violence and allow immediate humanitarian access to desperate people who have been driven from their homes and are now cut off from outside help,” Obama said today in Washington.

He commended the peace agreement, but warned that the crisis in Kordofan must also be addressed immediately. “Without [a ceasefire] in Southern Kordofan, the roadmap for better relations with the Government of Sudan cannot be carried forward, which will only deepen Sudan’s isolation in the international community, [and] the people of Southern Kordofan [will not] enjoy the right to have their political grievances addressed.”

However, with barely two weeks left before newly elected President Salva Kiir Mayardit’s government officially takes its seat in the new Southern capital of Juba, reports from the ground in South Kordofan foreshadow a bloody and protracted conflict.

The ‘New York Times’ reported yesterday that the Sudanese Army and its allied militias have gone on a “rampage” to crush rebel fighters in South Kordofan’s Nuba Mountains, “bombing thatched-roofed villages, executing elders, burning churches and pitching the central region… into crisis”.

According to Human Rights Watch (HRW), aerial bombardments, extra-judicial killings, assassinations of even women and children and destruction of property have caused “tens of thousands to flee”.

Some sources believe the number is higher – the U.N. estimates that refugees from South Kordofan’s capital Kadugli number 40,000, and the World Council of Churches reported that 300,000 civilians are besieged, totally barred from humanitarian assistance.

The Sudanese Army has forbidden all aid workers and threatened to shoot down U.N. helicopters.

Last week, the Sudan Ecumenical Council claimed, “civilians are being hunted down like animals by helicopter gunships.”

“This is going to spread like wildfire,” an American official speaking under condition of anonymity told the ‘New York Times’ yesterday. “Without mediation you’re going to have massive destruction and death in central Sudan and no one seems able to do anything about it.”

Eric Reeves, a Sudan analyst and researcher at Smith College, blasted U.S. special envoy Princeton Lyman’s quiet diplomacy with Khartoum in the face of a “terrifying” crisis, warning that unless the U.S. leveraged its military and diplomatic muscle, the consequences would be disastrous.

“I have read enough accounts of the ethnically-targeted violence – including testimony from U.N. officials and interviews with civilians – to say that what we are seeing in Southern Kordofan is undisputedly ethnic cleansing,” Reeves told IPS.

Some experts in Washington believe that the U.S. has little influence on al-Bashir, who has long relied on the support of oil-purchasing Gulf and Asian powers to back his army’s military excesses.

“I’m not sure the administration has a muscle to flex anymore,” David Shinn, former U.S. ambassador to Ethiopia, told IPS. “The only thing it can do other than pontificate more vociferously than it has in the past is to threaten to slow down any aspects of the normalisation of relations.”

“However, given that the overriding issues are moving forward with implementation of the CPA and [securing] Southern Sudan on Jul. 9, there will likely be a reluctance in Washington to do or say anything that threatens those processes,” he added.

Blood and Oil

Home to the historically marginalised Nuba people – who have long endured the brunt of Khartoum’s oppressive Islamist-Arabism, including what some experts have labelled a “genocidal massacre” in the 1990s – South Kordofan will not be won without a fight.

The ethnically, religiously and culturally distinct Nuba people now include over 30,000 Northern fighters, who battled alongside the Southern Sudan People’s Liberation Army (SPLA) during the civil war, and are now fighting tooth and nail against the Northern government’s demand that all pro-Southern forces disarm on the eve of secession.

“When I was in the Nuba Mountains… I spoke to a number of senior military officials and civil society leaders,” Reeves told IPS. “And they made very clear to me that Khartoum has never regarded them as human beings, that they have no exit, and no option but to fight to the death.”

But when measured in terms of oil-revenues, the cost of the Nuba’s autonomy in the North’s only oil- producing state might be too high for Khartoum to bear.

Just last week Sudanese finance minister Ali Mahmoud claimed that “the national budget will lose 36.5 percent of its revenues” as a result of the secession since the South houses three quarters of the country’s crude, which has thus far accounted for over 50 percent of Khartoum’s annual budget.

Add potential lost revenues from South Kordofan’s reserves and the equation bodes very badly for peace.

“Without international pressure, you can expect a continued military campaign by the SAF to eliminate or expel former SPLA units from Southern Kordofan,” E.J. Hogendoorn, the Africa project director of the International Crisis Group, told IPS. “This will be difficult, since they are holed-up in the mountains and continued fighting could trigger a Southern response.”

However, others continue to hold out hope that economic motivators might budge the international community into action in the face of ethnic cleansing.

“Khartoum has already threatened to close down the major pipeline unless the South agrees to pay transit fees that are likely to be extortionate – anywhere from 50 cents to 50 dollars a barrel,” Reeves told IPS. “Currently, there is no incentive for the SPLM not to attack the oil infrastructure in retaliation, and this would be a disaster.”

“What few people realise about Sudanese crude is that it is very dense in paraffin, which congeals very quickly. If the oil flow is stopped, it is enormously difficult to get it started again – and this should surely provoke China to act more aggressively,” Reeves said.

“China-U.S. relations are also worth considering in this matter,” Shinn told IPS. “I wouldn’t be surprised if there haven’t already been discussions with China in an effort to lean a little heavier on Khartoum.”

“Given that China has more economic leverage than the U.S., they might well be willing to speak frankly with the government in Khartoum to ensure that the situation in Southern Kordofan doesn’t totally destroy the possibility of a peaceful transition on Jul. 9,” he added.

Excerpt:

By Julio Godoy
PARIS, Jun 20 2011 (IPS)

The high economic growth enjoyed by many African states during the 2000s have not led to poverty elimination. This is because the growth did not happen in the sectors where poor people work, as in agriculture, or in the rural areas where poor people live, or simply did not involve labour provided by poor people.

Jan Rielaender: High fuel and mineral commodity prices have strongly influenced economic growth in many of the fastest growing African economies. Credit: OECD

Rielaender works at the Organisation for Economic Cooperation and Development (OECD) Development Centre and is co-author of the AEO.

Around 75 percent of foreign investment in Africa has been in oil-rich countries and in so-called extractive industries with few links with the rest of the domestic economy or with poor people.

Rielaender said that the weak response of “poverty reduction” to economic growth was caused partially because growth was not strongly linked to activities and economic sectors where the poor are. Numerous African countries are therefore trapped in a contradiction of resistant poverty despite high economic growth.

The AEO reports that high fuel and mineral commodity prices have strongly influenced economic growth in many of the fastest growing African economies in the period from 1996 to 2008, given that fuels and minerals account for the largest share of Africa’s exports.

But this growth and its limited impact in reducing poverty creates a vicious cycle, for higher poverty diminishes even further the effects of economic growth in reducing poverty, the report says.

The report, released in June, is a joint effort by the OECD, African Development Bank, the United Nations Development Programme and the United Nations Economic Commission for Africa.

From 2001 to 2009 only three of the 14 African countries, where the annual gross domestic product growth rates were higher than the regional average of 5.3 percent, registered substantial poverty reduction rates.

In an interview with IPS, Rielaender said that the lack of correlation between growth and poverty reduction in African countries should force “African governments to concentrate their immediate efforts in creating jobs, invest in basic social services and promote gender equality”.

The AEO 2011 points out that most of the African oil or mineral-exporting countries with high growth rates experienced “low growth elasticity of poverty” – that is, economic growth with little impact on reducing poverty. “On the other hand, oil producers with high growth elasticities of poverty have low growth rates,” the report says.

To tackle this lack of correlation between “growth and poverty reduction”, the AEO also encouraged African governments to “take simultaneous actions on several fronts. Economic growth will improve human development only if it is inclusive and pro-poor.

“Investing in social sectors will produce sustainable human development, if investment is accompanied by efforts to create more economic opportunities that benefit a large segment of population.”

The AEO 2011 also recommends regional development policies that promote different economic sectors and reduce reliance on commodities such as cash crops and minerals.

Rielaender told IPS that, “industrial policy in the pharmaceutical sector could be one appropriate policy measure to create employment and simultaneously achieve social objectives in Africa”, by locally produce generic medicines.

International development agencies, such as the U.N. Commission on Trade and Development (UNCTAD), and humanitarian nongovernmental organisation, such as Médecins sans Frontières, have recently urged selected African countries to launch a process of industrialisation to locally produce generic medicines indispensable in fighting epidemics such as HIV and AIDS, malaria, and tuberculosis.

By so doing, African countries would benefit from present exemptions from international requirements on intellectual property, such as medicines patents which expire in 2016.

Rielaender said that such a policy is feasible in selected African countries. “When you talk about industrial policy in developing countries, you are also talking about infant industry protection,” he explained. “But the local industries created this way should be efficient enough to avoid the misallocation and waste of quite scarce resources.”

So far, he believes, Africa has managed the regional impacts of the global economic crisis relatively well. However, he warned that the political turmoil in the Maghreb region and inflation in food and fuel would again slow down the continent’s growth to 3,7 percent this year.

He argued that African recovery after the slowdown caused by the global economic crisis was primarily based on the shift that has taken place in global economic activities away from the OECD countries in Europe and North America and towards emerging economies in Asia and South America.

This shift is reflected in African international trade. In 2009 China surpassed the U.S. and became Africa’s main trading partner. In general, the share of trade conducted by Africa with emerging partners has grown from approximately 23 to 39 percent in the last 10 years.

Africa’s top five emerging trade partners are now China (38 percent), India (14 percent), Korea (7,2 percent), Brazil (7,1 percent) and Turkey (6,5 percent).

Another factor supporting the African economy is overall “good macroeconomic management” during the last decade, he added: “Inflation has remained relatively low, and high commodity prices have led to increased revenues in the continent.”

Excerpt:

By Peter Custers
LEIDEN, The Netherlands, Jun 10 2011 (IPS)

The alarm bells this time are not being rung by climate scientists or by environmental activists. They are being rung by none other than the International Energy Agency (IEA) – the institution established in the 1970s to defend the interests of Western oil consuming nations.

On May 30, the IEA issued a press release that sent shock waves through the Western world. According to the release, global emissions of carbon dioxide (CO2) have reached their highest levels ever in 2010.

Although following the financial crisis emission levels in 2009 temporarily dipped, in 2010 they are calculated to have been 30.6 gigatonnes. For the layperson, the implications of this figure may not immediately be evident, but the figure squarely indicates that exponential growth in CO2 emissions has not been stopped by the joint international initiatives taken since the 1990s.

Accumulation has continued up until today. A decade back, in 2000, the level of emissions was probably about 23 gigatonnes. This means that over the last ten years alone annual emission levels have increased by a staggering 25 percent! Hence, the IEA’s chief economist, Fatih Birol, is sounding the alarm, stating: “Our latest estimates are another wake-up call. The world has edged incredibly close to the level of emissions that should not be reached until 2020, if the two degree Celsius target is to be attained.”

Global leaders agreed a target of limiting temperature increase to two degrees Celsius at the U.N. climate change talks in Cancun in 2010.

How do we assess the implications of the IEA’s assessment of humanity’s efforts to avert a climate catastrophe? Prominent climate scientists have for years been debating what target humanity should set for itself. What maximum level of greenhouse gases in the atmosphere is permissible if runaway climate change is to be averted? Many scientists have been pushing for the target to be set at 350 parts per million – meaning that the presence of greenhouse gas molecules in the world’s atmosphere should not exceed 350 molecules per million molecules of atmospheric air.

Significantly, when the Copenhagen Summit was held in December of 2009, it witnessed a growing consensus among a majority of nations that the precautionary advice of climate scientists should be taken to heart, and that the target of a 1.5 degree Celsius cap should be maintained. Hence, critics reading the IEA press release will react or retort that the agency is not sounding alarm bells as loudly as it should – for it is still working on the presumption that a two degree Celsius target is defendable.

James Hansen, one of the world’s foremost climate archaeologists, has become internationally renowned, amongst others because in his scientific papers and publicity work he takes account of the evolution which the earth’s climate has undergone during the many hundreds of millions of years before human civilisation arose. Hansen puts forth data on the situation that prevailed three million years ago. At that time the earth was two or three degrees warmer than it is today – and it was a different planet, with sea levels not just higher than they are now, but a staggering 25 metres higher!

The lower sea levels since civilisation arose have led to the building of human settlements in coastal areas previously flooded or covered by ice. The sea level difference is, of course, basically explained by the existence today of huge ice sheets – notably the Antarctic and the Greenland ice sheets.

Hansen argues that – unlike previously believed – the Antarctic and Greenland ice sheets won’t take thousands of years to melt. They will disintegrate rapidly once danger points are reached. Hence, the American scientist maintains that “a two degree Celsius global warming, or even a 1.7 degree warming, is a disaster scenario”.

Clearly, given the IEA’s data on 2010 CO2 emissions at hand, Hansen would ring shrieking, not soft alarm bells.

What policy-consequences should be drawn from the IEA’s revelations? So far the two key paths the world’s policymakers have followed to stem the exponential growth in emissions have been ineffectual. These are the paths of ‘technological’ and of ‘market-based’ fixes.

Here it is striking that the IEA’s chief economist continues to express a holy belief in technological fixes.

When releasing the IEA’s data on CO2 missions, Birol advocated – of all technological fixes – continued reliance on nuclear energy. This is surprising because any expansion in capital-intensive nuclear production requires many years to accomplish – doing very little to prevent exponential growth of CO2 emissions in the short-term.

What’s worse is that both nuclear production and reliance on fossil fuels result in forms of waste that are inescapable – meaning that they represent a dead-end for humanity. This is not to deny there are great differences between the two types of waste. Greenhouse gases such as CO2 exist in nature – they have only become damaging due to their extremely high levels produced under the industrial system that is based on fossil fuels, i.e. on coal, oil and gas. On the other hand, many of the radioactive elements in nuclear waste do not exist in nature, but emerge as by-products when nuclear energy is generated.

Both fossil fuels and the nuclear production chain threaten to saddle humanity with consequences that can’t be undone. In case of nuclear waste: the half-life of radiation in thorium-230, in plutonium-242 and in jodium-129 respectively lasts 76 thousand, 380 thousand and over 15 million years!

If a technological fix via the expansion of nuclear production is questionable – what about a ‘market- based’ fix to solve the problem of climate change? Here it might be too early to close the debate. Yet the IEA’s announcement regarding CO2 emissions in 2010 raises big questions regarding market-based approaches to avert run-away climate change.

Under the Kyoto climate change treaty of 1997 policymakers set concrete targets towards reducing global emissions of CO2. To stem their exponential growth, obligatory reductions were agreed on. The main practical measures proposed to achieve reduction targets were market-based. They entailed making CO2 wastes tradable – which in effect transferred responsibility for storage of CO2 to countries of the Global South.

Perhaps the historical lesson to be drawn from the IEA’s announcement is that the time for market- based experiments is over. Humanity can no longer afford to continue with failed experiments.

From common sense, to avert a climate catastrophe, we need to rapidly embark on a different, a more ‘radical’ path.

Compelled by Hansen’s scientific analysis and the IEA’s historic, if defective, announcement, I venture to suggest that the Global South needs to insist on a new approach to avert a climate catastrophe.

Why not propose that the Western world agrees to help enforce global rationing of energy access? Why not demand from the West that it help institute a worldwide system of energy rationing that is both equitable to the world’s poor and to vulnerable nations? Why not and put a permanent and strict cap on overall emissions?

*(Dr. Peter Custers is author of a theoretical study on nuclear production, Questioning Globalized Militarism, Tulika/Merlin Press, 2011.)

Excerpt:

By Fabiana Frayssinet
RIO DE JANEIRO, May 25 2011 (IPS)

The same day that the lower house of the Brazilian Congress approved a reform of the forestry code that would make it easier to clear land in the Amazon jungle for agriculture, a husband and wife team of activists who spent years fighting illegal deforestation in the rainforest were murdered.

José Cláudio Ribeiro da Silva and Maria do Espírito Santo, murdered Tuesday May 24 in Pará. Credit: CNS Bélem

Introduced by Communist Party lawmaker Aldo Rebelo, the reform of the 1965 forestry code is, in the view of environmentalists, the first major defeat for President Dilma Rousseff, as the parties allied with her left-wing Workers’ Party did not vote in a bloc with it on this question.

“This vote represents the biggest setback to Brazil’s environmental legislation in decades,” Raul Silva Telles do Valle, assistant coordinator of the Socioenvironmental Institute, told IPS.

“It’s a law that looks to the past, not the future,” WWF-Brazil’s conservation director Carlos Alberto de Mattos Scaramuzza told IPS.

If the revised forest code is approved by the Senate and signed into law by Rousseff, it will make it impossible for Brazil to meet its greenhouse gas reduction targets, do Valle said.

The new code would grant an amnesty on fines to landowners who illegally chopped down forest on their property, as long as the deforestation took place before July 2008 and the farm is 400 hectares or less in size.

The new law on land use would also reduce the amount of forest that farmers must preserve, while allowing them to cut trees along rivers and on hilltops and hillsides. It would also retroactively legalise the clearing of land that is used for agricultural purposes, tree plantations, or rural and eco-tourism, if it was deforested before July 2008.

Rousseff has threatened to veto the amnesty portion of the law.

The vote symbolically coincided with the shooting deaths of José Cláudio Ribeiro da Silva, 52, and Maria do Espírito Santo, 51, leaders of the Projeto de Assentamento Agroextrativista Praialta Piranheira, a nature reserve where they had worked for 24 years, fighting illegal deforestation for charcoal production and cattle-raising.

Their family said they were ambushed on Tuesday morning by gunmen in the municipality of Nova Ipixuna in the northern Amazon state of Pará. The two environmentalist farmers had received death threats for their activism against illegal tree felling in the area.

“Brazil woke up to the news of the murders of two leading environmental activists, and it’s going to bed with the murder of the forest code,” Greenpeace Brazil ecologist Paulo Adario told the press.

Do Valle said the congressional vote and the double murder were the work of “the same political movement that sees environmental conservation as a barrier to growth – the most retrograde” sectors of agricultural producers who “defend an 18th century model” of production

In its current form, the forest code sets out how much of their land farmers can clear. Eighty percent of the forest must be left intact on property in the Amazon jungle, 35 percent in tropical savannah zones within what is known as the “legal Amazon” – which encompasses the nine Brazilian states partially or totally covered by rainforest – and 20 percent in the rest of the country.

But the law is not enforced. Rebelo argues that the amnesty on fines would make it possible to legalise 90 percent of rural properties that are in violation of the regulations.

Of Brazil’s 5.3 million square kilometres of jungle, 1.7 million square kilometres are protected.

Rebelo says he is acting in the name of “national interests” rather than in the name of environmentalist NGOs.

“This is a victory for Congress. The current forest code carries the logo of NGOs, but this one has Brazil’s logo,” said Senator Kátia Abreu, the chairwoman of the powerful Brazilian Confederation of Agriculture (CNA), who said the new revised code would put “an end to legal insecurity in the countryside.”

A total of 700,000 hectares were deforested in Brazil’s Amazon jungle in 2009 and 2010, the lowest level of destruction since records on deforestation began to be kept in 1988.

But a government report whose preliminary results were released on May 19 stated that from August 2010 to April 2011, deforestation rose 27 percent with respect to the same period the year before, with the destruction especially concentrated in the soy-growing western state of Mato Grosso – a phenomenon that the government blames on expectations that an amnesty would be approved.

In response, Rousseff set up a “crisis cabinet” and sent 500 environmental prosecutors and National Public Security Force agents and forestry police to investigate deforested areas.

WWF-Brazil’s Scaramuzza pointed out that the agriculture lobby is pushing hard for more flexible forest legislation against a backdrop of soaring commodity prices. Brazil is one of the world’s largest exporters of soybean, coffee, orange juice, beef, poultry and other key farm products.

In Mato Grosso, soy earnings rose nearly 100 percent in a year, he said. That represents annual profits of one million reals (more than 600,000 dollars) for a 1,000-hectare farm, “which not only lets them buy new pickup trucks, but also pushes them to continue to deforest,” he added.

The activist said the amnesty, the rising profits and the fact that government monitoring and control of deforestation, although it has increased, still falls short, make “an explosive combination.”

“How can a country that aims to be a leader in the fight against climate change and that will host the next Rio+20 (Earth Summit 2012) do such poor homework?” he asked.

The revised forestry code could also end up transferring to provincial and municipal governments the authority to grant environmental permits to agricultural properties, which would weaken “the state’s oversight and control mechanisms” and make it easier for farmers who break the law to evade punishment like foreclosure, the seizure of profits from sales of illegally cultivated products, or the cancellation of loans, Greenpeace Amazon campaign activist Marcio Astrini told IPS.

“But the whole world will lose out, because Brazil is a major emitter of greenhouse gases and will not meet its goal” of cutting emissions by between 36 and 38.9 percent from projected 2020 levels, do Valle said.

If the legislation passes the Senate, the winner will be “the most backwards sector of agribusiness, which does not want to invest a thing towards meeting minimum standards of sustainability,” he said.

Astrini noted that at least 15 legislators would benefit from the amnesty because they are landowners who owe huge environmental fines – not to mention those who have received campaign donations from agribusiness.

Furthermore, “Brazil has international commitments to avoid expanding soy and beef production at the expense of deforestation. A law that encourages cutting down trees would jeopardise these commitments,” Astrini added.

Scaramuzza said the vote on the forest code and the murder of the environmentalists “are both along the same lines.”

“Things have improved a great deal in the last few years” in Brazil, but the state still does not have a presence in remote regions like the Amazon jungle area where the two rural activists were killed, and it has not created incentives for modern agricultural techniques that combine high yields with the conservation of natural resources, he said.

Excerpt:

By Isolda Agazzi
GENEVA, May 24 2011 (IPS)

Some of the decisions taken on trade in the Istanbul Plan of Action are likely to disadvantage poor countries while others are so vague as to be meaningless, says Abdoulaye Sanoko, counsellor at the mission of Mali to the World Trade Organisation (WTO) in Geneva.

TWN's Sanya Reid Smith: The Istanbul LDC conference sent out a message that LDCs should not be pressured or advised to liberalise imports. Credit:

“LDCs negotiated, but they had no choice. There had to be a result, so this is a compromise text which is not necessarily good,” Sanoko told IPS upon his return from Istanbul.

The International Centre for Trade and Sustainable Development (ICTSD), a Geneva-based think tank that also had representatives in Istanbul, concurs that “trade proved to be the most controversial issue at the negotiations” for the plan of action.

Sanoko says, “when I see the chapter on trade, I have a feeling of setback when comparing it to what the WTO has already cast in stone regarding special and differential treatment.

“In the Doha Round, it is clearly said that LDCs will not have to cut any tariffs. They would do so only on a voluntary basis, while they are encouraged to consolidate their applied tariffs.”

ICTSD underlines that the final version of the plan of action only calls for a timely implementation of the duty-free and quota-free market access on a lasting basis for all LDCs, in line with the Hong Kong ministerial declaration of 2005, and the abolition or reduction of arbitrary or unjustified trade barriers.

However, for Sanoko, this language is “full of ambiguities”. “It is a contradiction and a setback from the Hong Kong commitment of duty-free and quota-free access, since it includes the possibility of ‘reduction’ alongside ‘abolition’ of unjustified trade barriers”, he notes.

While he welcomes the call to strengthen regional integration, he regrets the absence of innovative means to do so, particularly concerning the amendment of article XXIV of the General Agreement on Tariffs and Trade (GATT), one of the issues currently discussed in Geneva.

This article stipulates that in regional so-called free trade agreements (FTAs) the parties have to liberalise most of the exchanges, without specifying how much. LDCs and developing countries are asking for it to be amended to include a good dose of special and differential treatment so that poor countries would not be asked to reduce their tariffs too much.

“We understand that such a conference cannot resolve problems related to trade rules, but we would have liked a reference to it,” Sanoko comments. “The UN Conference on LDCs is a common effort by the international community to encourage the development of our countries and one cannot talk about general concepts that are largely accepted without deepening them.”

Concerning trade agreements like the economic partnership agreements (EPAs) between the EU and the Africa, Caribbean and Pacific (ACP) countries, he argues that, “they are supposed to be a partnership, but they are an FTA like any other one.

“How can you imagine a partnership between some hyper-developed countries and others that can barely stand on their feet? This is another missed opportunity to innovate.”

Sanya Reid Smith, legal advisor and senior researcher at Third World Network (TWN) points out that in the high-level debate in Istanbul a strong message was sent that LDCs should not be pressured or advised to liberalise their imports since, when they did that in the past, it had very damaging effects. TWN is an international nongovernmental organisation headquartered in Malaysia.

“Fears were also expressed about the free trade agreements and economic partnership agreements, which can cause similar kinds of damage and can prevent the use of export taxes to industrialise on the basis of natural products,” she told IPS.

“Due to the WTO impasse, there should be an early harvest package for LDCs which includes issues such as duty-free and quota-free market access and the elimination of trade-distorting subsidies for cotton,” Reid Smith concludes.

Another fuzzy point, according to Sanoko, is the request to LDCs to broaden their export bases so as to be able to double their share of international trade within 10 years. “But on what basis? Today they represent only one percent of world trade. You could even take it to three percent but, concretely, how?” he wonders.

He considers it is a “great pressure on LDCs” to ask them to avoid protectionists tendencies and to correct trade-distorting measures while agriculture in Northern countries is being distorted.

“For African LDCs, agriculture is a vital issue,” he stresses. “Take Malawi: it had a chronic food deficit, but within three years only it has become self-sufficient and today it even exports.

“Their solution was to put in place a new agricultural policy that gives some support to small producers, like seeds and fertilizers. At a time when the food crisis may erupt again, supporting small farmers can make a crucial difference and help a population to feed itself.”

“In 30 years, only three LDCs have shed that status. This shows little progress, particularly since the number of African LDCs is going to increase with the partition of Sudan,” Sanoko concluded.

Martin Khor, director of the South Centre, an intergovernmental organisation of developing countries based in Geneva, argues that it is untrue that LDCs are not integrated into the world economy. In fact, many LDCs have higher export ratios than some developed countries.

The way in which the LDCs are integrated disadvantages them as they are too dependent on raw materials export and, with prices of commodities being in long-term decline, they are suffering great revenue losses, he concludes.

Excerpt:

By Marcela Valente
BUENOS AIRES, May 20 2011 (IPS)

Food shortages may be causing hunger in the developing world, but the large Latin American agricultural countries that belong to the Group of 20 (G20) see the situation as an opportunity to exploit.

This became clear at a working meeting on commodities held by the G20 on May 19-20 in Buenos Aires, where economy and agriculture ministers discussed today’s soaring food prices.

The meeting was organised to address the causes of the new upward trend in food prices, including the growing demand in China and India, financial speculation and growing production of biofuels.

The concern was raised by France, which currently holds the rotating presidency of the G20 group of major industrialised and emerging nations, that together control most of the world’s fertile land.

The G20 members are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, the United States and the European Union.

But France was forced to put aside its original proposal of commodity price controls in the face of pressure from Argentina, Brazil and other major food producers.

However, the countries did commit themselves to making the commodities market more transparent and to make progress towards on a five-point action plan, which the agriculture ministers will discuss in Paris in late June.

The five points are: boost investment in agriculture to increase supplies; expand information sharing to curb speculation and increase transparency; create action mechanisms to overcome the food crisis; control price swings; and establish regulations like the ones that exist in other global markets.

At the Nov. 3-4 summit in Cannes, France, G20 leaders will try to reach agreement on and adopt the plan of action to stabilise the markets and mitigate the impact of price hikes on the most vulnerable nations.

Combating the volatility of commodity prices is one of France’s top priorities in the G20 presidency, along with reform of the international monetary system and the strengthening of financial regulations.

In the second half of 2010, food prices climbed by an average of 30 percent, according to a newsletter by the Economic Commission for Latin America and the Caribbean (ECLAC), the Food and Agriculture Organisation (FAO) and the Inter-American Institute for Cooperation on Agriculture (IICA).

The price of wheat went up 94.4 percent between June and December last year, according to the newsletter, “Price volatility in agricultural markets (2000-2010): implications for Latin America and policy options”.

The World Bank estimates that since June, 44 million people have been pushed into extreme poverty by higher prices for corn, wheat and oil.

Although their populations also suffer from the consequences, for Latin America’s agricultural producers, the scenario represents windfall profits first and foremost.

In India and China, where resources like fertile land and water are limited, demand for food is rising dramatically. And this region should invest to take advantage of that situation, Brazilian economist Mauricio Mesquita Moreira, with the Inter-American Development Bank (IDB), told IPS.

Although financial speculation fuels price swings, the hikes are due above all to growing demand from emerging nations, the economist said.

That is why Latin America must take greater advantage of the terms of trade, instead of continuing to plan for greater industrialisation, which the countries of Asia have already achieved, he argued.

“The idea that industrialising is the only solution was viable in the 1970s and 1980s. If Latin America had moved then towards that stage with more sophisticated and less vulnerable assets, it would be a different thing, but today it makes no sense to insist on this, in an increasingly congested market,” he said.

The question is “how to make the most of this opportunity,” he added. “Our countries, due to the colonial legacy, have an enormous concentration of wealth, and agriculture is capital-intensive and does not generate much employment.

“The good thing about manufacturing is that it creates enough jobs to make it possible to eliminate poverty in a short period of time. We have seen that in many Asian countries, but I think we have missed the opportunity,” he said.

In Mesquita Moreira’s view, “the new challenge is to specialise in natural resources, add value, offer more sophisticated goods, while at the same time generating employment and conditional cash transfer schemes for the poor.”

Rural producers in the Mercosur (Southern Common Market) countries – Argentina, Brazil, Paraguay and Uruguay – could not agree more.

Represented by the Federation of Rural Associations of Mercosur, the influential agricultural producers stressed “the opportunity that strong food prices are opening up for the region.”

The organisation recommended that governments foment production and strengthen political coordination to help maintain domestic supplies while capitalising on the opportunities offered by the global market.

The experts meeting in Buenos Aires agreed that the decisive factor in the food market in the last few years is the surge in demand in China and India.

On the supply side there are other factors that have driven up prices, such as droughts, flooding and other extreme climate events that have affected agricultural yields around the world.

But there are less traditional challenges as well, such as new uses for crops, especially for biofuels, and the “financialisation” of agriculture.

In financial markets, there is exponential growth of futures activity in agriculture, a tool created to mitigate the risks inherent to farming, but which can cause artificial price hikes, the “Price volatility in agricultural markets” newsletter says.

But while these factors trigger fast price swings, the general upwards trend in prices is in response to greater demand, a factor that is here to stay.

Excerpt:

By Isolda Agazzi
GENEVA, May 17 2011 (IPS)

Long-term investors like pension funds are probably the reason why the prices of commodities, including crops, have been driven to a higher level than in 2008 when food riots erupted in 30 countries, according to the British nongovernmental organisation Christian Aid.

It is predicted that, by 2020, up to 250 million people in Africa will experience increased water stress and many will be driven to cities. Credit: Christian Aid

The social justice organisation has just released “Hungry for justice: Fighting starvation in an age of plenty”, a study indicating that between Jan. 2005 and Jun. 2008, food prices rose by an average of 83 percent. And it is even worse now: in Feb. 2011, they trumped the record figures of Jun. 2008 when food riots erupted in some 30 countries.

While financial speculation in agricultural products has largely contributed to this increase, the study suggests that the main responsibility does not lie with hedge funds and “cowboy” speculators, as usually assumed, but rather with the more prudent institutional investors such as pension funds.

“While we are not able to definitively prove that investment in commodity futures is driving up food prices, we are saying that the similarities in increases makes a strong case for urgent investigation into whether this enormous amount of money is contributing to global hunger,” Hogg specified.

In financial jargon, “futures” are what is believed a crop would be worth at some defined point in the future when it will be harvested.

While these products have been around for hundreds of years – usually as a way of giving farmers an advance income to invest in production – today companies have a huge amount of money to invest in the respective values of crops.

Another major turn has been the creation of commodity index funds, that is, indices of commodities bundled together.

Goldman Sachs opened the first commodity index fund in 1991. The bank selected 18 commodities, including wheat, coffee, cocoa and pork, and invited investors to invest in this bundle of commodities rather than in individual ones. Since then, other indices have appeared.

Following the U.S.’s deregulation of commodities trading in indices in 2000, these funds began to attract an influx of non-traditional investors, such as pension funds and managed investment funds that were betting on the rise of commodities after the burst of the dot-com bubble.

The total value held by institutional investors in these funds increased from 15 billion dollars in 2003 to 317 billion dollars in mid-2008.

In contrast with hedge funds where selling and buying of shares happen at a rapid pace and where funds move “against the market” – they buy when the price is low and sell when it is high – long-term institutional investors look for “safe” returns. And since people will always need to eat, food crops are seen as low risk investments.

“Never again should policymakers agree to such regulatory changes without assessing their impact on the poor in developing countries,” Hogg exclaimed. “It is impossible now to ban investment in commodity futures but we send a strong warning that these consequences had not been predicted. People should have thought about this more.”

The Food and Agriculture Organisation estimates that almost one billion people experience chronic hunger. “This is a scandal in an age where we should be able to feed everybody,” Hogg commented.

“There will always be shortages due to events like earthquakes, wars or cyclones, but they can be remedied with international aid. The persistent problem of hunger should attract our concern, particularly since things may get even worse in future,” added Hogg.

One of the main threats to chronic hunger comes from climate change. Some surveys suggest that if nothing is done, the number of malnourished children under five is going to be 24 million higher in 2050 than if the climate had remained unchanged.

In Africa it is predicted that, by 2020, some 75 to 250 million people in places such as northern Kenya will be exposed to increased water stress that will drive them to urban areas.

Another neglected issue is investment in agriculture. “We call for sustainable agricultural practices and more investment in agriculture,” Hogg continued.

“Agriculture has been badly hit because the West has tried to impose economic policies on developing countries that have not worked. What we suggest is that investment and research be increased. Ultimately the small-holder farmer could be the solution to the question of food security.”

In the first half of May a cabinet minister of Cameroon, speaking in Geneva, called it a “scandal” that the West African country imports 90 percent of the rice it consumes. He issued a plea to foreigners to invest in agriculture in Cameroon.

He insisted, however, that as his country aims to be self-sufficient, the resulting crops should primarily feed the local population with only the surplus being exported. Also, value addition should be done locally.

Hogg pointed out that Christian Aid does not believe that foreign direct investment (FDI) is necessarily devoid of benefits for locals.

If provisions are put in place to protect the livelihoods and land rights of people, FDI could be to their advantage. But it should be recognised that people living on the land might not have enough negotiating power to protect their livelihoods, therefore contracts have to be carefully scrutinised.

Excerpt:

By Patricia Grogg
HAVANA, May 11 2011 (IPS)

Cuba hopes to revive its sugar industry as part of the recently announced economic changes and take advantage of good international prices for what was once the Caribbean island’s main export.

López Peña sugar mill in the town of Baguanos, Holguín, Cuba. Credit: Jorge Luis Baños/IPS

A total of 39 sugar mills were in operation this season, and a dozen were kept running in April and some even into early May. “They will keep working for as long as efficiency permits,” Ministry of Sugar spokesman Liobel Pérez told Tierramérica. “All in all, this harvest has been very positive,” he added.

In comparison with last year, industrial and agricultural output has improved, costs were lower than planned, and inputs and resources arrived when they were needed. “The potential is huge. The policy now is to take maximum advantage of the installed capacity,” said Pérez, the communications director for the ministry.

The sector seems to be bouncing back after touching rock bottom. The 2010 harvest was the worst in 100 years. At the time, state media outlets blamed the disaster on poor planning policies, obstinacy and a lack of control, as well as the error of compromising the development of the industry by milling sugar reserved for the next season.

The strategy to revive the sugar industry, which was once the driving force of the Cuban economy, includes expanding the area under sugar cane cultivation from the current 750,000 hectares to over a million hectares, according to a researcher on the subject who asked to remain anonymous.

“Resources should also been invested in repairing equipment, since the poor condition of the equipment in use tends to cause frequent interruptions during the harvest. Failing to make these investments would be a huge mistake,” he added. In any event, this point is included in the economic and social policy document approved at the sixth congress of the ruling Communist Party of Cuba, held in April.

According to the policy document, the primary objective of the sugar industry will be to increase sugar cane production. It was also noted that the links between sugar cane growers and sugar mills need to be streamlined. During discussions, delegates at the congress stressed the need for sugar cane plantations to be located closer to the refining facilities.

The strategy also includes diversifying production through the most efficient use of sugar cane derivative production facilities, taking into account the current conditions on the international market, a factor that should also be considered when setting prices for the purchase of sugar cane and sugar from producers.

There are plans to gradually increase the production of sugar and sugar cane derivatives until enough hard currency revenues are generated to totally finance operation costs and cover investments made in the sector, finally achieving a net contribution to country’s coffers.

The plans encompass the creation or recovery of facilities for the production of sugar cane derivatives, with priority placed on alcohol, animal feed and “bioproducts” in which the sugar industry has proven its capacity.

Another area of development of the sector involves increasing the generation of electricity from bagasse, a by-product of sugar production, and other sugar cane and forestry waste products, creating the conditions for the industry to continue generating power during inactive periods.

But any strategy must reverse the process of decapitalisation and deindustrialisation of the sugar sector in recent years, according to specialists. Because of the sector’s significant potential to exercise a multiplier effect on the rest of the economy, it should be restored to its proper place with a new vision.

For his part, economist Armando Nova emphasises the need to develop a “bio-energy agroindustry” to create new sources of renewable energy and produce food and raw materials, generating exports while permitting the substitution of imports.

Unconfirmed reports indicate that the government is planning to convert the Ministry of Sugar into a union of state enterprises under which the entire sugar agroindustry would be reorganized, from the planting of sugar cane to the production of sugar. The industry could also be opened up further to foreign investment, which is currently limited to sugar cane derivatives.

After the fall of sugar prices on the world market – which dropped to less than six cents a pound (454 grams) – and the decapitalisation of equipment and machinery, Cuba restructured its sugar industry in 2002 and 2004, reducing the area of sugar cane plantations and shutting down over half of the 156 sugar mills in operation at the time.

But international prices rallied, reaching a high of over 30 cents a pound in 2010 and currently sitting at just over 25 cents.

According to official figures, during the “good times” of trade with the now defunct Soviet Union and its allies, Cuba’s sugar exports once totaled up to four billion dollars a year.

*This story was originally published by Latin American newspapers that are part of the Tierramérica network. Tierramérica is a specialised news service produced by IPS with the backing of the United Nations Development Programme, United Nations Environment Programme and the World Bank.

Excerpt:

The rapid rise in prices for food, fuel and commodities has been disastrous for the world’s poor, including Indonesian market vendor Lia Romi. But it’s a bonanza for multinational trading firms such as Glencore.

While Romi has trouble feeding her family, Glencore – the world’s largest diversified commodities trader – is planning a $11 billion dollar share sale, likely the largest market debut ever seen on the London Stock Exchange.

“The price for our daily food has at least doubled in the past two years,” Lia Romi told Al Jazeera through a translator. “Food costs 100 per cent of my family’s daily income [of about $3]. I have nothing saved and I owe [money] from my [market stall] business.”

While Romi, and millions like her, worry about feeding their families, the initial public offering from the commodity speculating giant will create at least four billionaires, dozens worth more than 100 million dollars and several hundred old fashioned millionaires. Chief Executive Ivan Glasenberg is set to make more than nine billion from the share sale. And speculating on food prices is an important part of his wealth.

Controlling prices

Valued at about 60 billion dollars, Glencore controls 50 percent of the global copper market, 60 per cent of zinc, 38 per cent in alumina, 28 per cent of thermal coal, 45 per cent of lead and almost 10 per cent of the world’s wheat – according to information the firm disclosed prior to its share sale. It also controls about one quarter of the world market in barley, sunflower and rape seed.

“They are possibly one of very few mining companies that are price makers, rather than price takers,” said Chris Hinde, editorial director of Mining Journal magazine. “They are the stockbrokers of the commodities business [operating] in a fairly secretive world. They are effectively setting the price for some very important commodities,” he told Al Jazeera.

The firm employs about 57,000 people, generated a turnover of 145 billion dollars in the past year and has assets worth more than 79 billion. Glencore’s media department refused interview requests from Al Jazeera.

Based in Baar, Switzerland, where regulation is minimal, the company’s sprawling interests span Bolivian tin mines, Angolan oil, zinc producers in Kazakhstan, Zambian copper mines and Russian wheat operations.

“Glencore’s vertical integration really is unprecedented,” said Devlin Kuyek, a researcher with GRAIN, a non-profit international organisation working on food security.

“Glencore owns almost 300,000 hectares of farm land and it is one of the largest farm operators in the world. They are engaging in speculation on the grain trade and have immense market power,” he told Al Jazeera.

Global food prices have climbed recently, returning close to their 2008 peak, when bread riots swept parts of the Middle East, Africa and the Caribbean.

“A disturbing amount of price increases, I fear, is being driven by speculative activity,” Marcus Miller, a professor of international economics at the University of Warwick, told Al Jazeera. “Bets [on future price rises or declines] can become self-fulfilling if you are big enough to affect the market.”

In March 2011, the World Bank’s global food index was 36 per cent above levels from a year earlier, although prices for commodities have dropped in the past few weeks.

Some analysts believe price increases have more to do with a growing global population and rising middle classes, particularly in India and China, who are eating more meat and thus driving up prices for corn and other animal feed.

Duncan Green, the head of research at development organisation Oxfam Great Britain, said international markets for food and other commodities can be compared to the shape of a champagne glass. “There are a lot of people producing, and a lot of people consuming, but there is a pinch point in the middle, controlled by corporations who can walk away with the final value,” he told Al Jazeera. “Many of the world’s poor are -bizarrely – people growing food.”

In 2010, investment bank Goldman Sachs warned of “violent price spikes” in commodities markets, and that prediction has more or less come true.

Knowledge and power

To make money betting on food, metals and energy, Glencore – like other trading houses and hedge funds – relies on one crucial commodity: Information.

“They have offices all over the world and unique access to information about production and distribution,” said food security researcher Kuyek. “When the people who have that information are also the ones speculating, there is grave cause for concern; they can purchase forward contracts when they know prices are going up.”

In August 2010, for example, Russia issued a ban on grain exports, after droughts ravaged crops. On Aug. 3, the head of Glencore’s Russian grain unit encouraged the government to halt exports. The government followed his advice on August 5, causing prices for cereals to rise 15 per cent in two days.

“Days before the export ban went into place, Glencore made huge bets,” said Kuyek. “They had some kind of information there; companies with information are in the best place to capture profits from volatility.” Glencore, for its part, said it also lost money as a result of the ban, because it had to fulfill delivery obligations to clients outside Russia at the new, higher price.

In addition to manipulating food prices – potentially with insider information – the trading giant appears to have broken laws on several continents.

Prosecutors in Belgium charged Glencore employees with criminal conspiracy and corruption, alleging they illicitly sought confidential information on European export subsidies from a public official. The case will be heard in Brussels on May 12.

Shady deals

During Saddam Hussein’s rule in Iraq, and the U.N. sanctions which accompanied its final years, Glencore made handsome profits marketing embargoed oil. In February 2001, Glencore bought one million barrels of Iraqi crude oil destined for the US and diverted the black gold to Croatia, where it was sold for a premium of 3 million dollars, according to a U.N. Security Council report.

When the news broke, the Sunday Times newspaper in the UK headlined their investigation “Secretive Swiss trader links City to Iraq oil scam”.

Glencore’s founder and lifelong commodities hustler Marc Rich was dubbed the “face of scandal”, by Vanity Fair magazine. After founding the company in 1974, Rich rose to prominence by pioneering “combat trading” -aggressive deal making in countries facing turmoil.

He traded oil for Ayatollahs when Iran was blacklisted by the US, did business with South Africa’s apartheid government and skirted US trade embargoes on Cuba and Libya to make trades under the motto: Do whatever it takes.

“There will always be allegations that they [Glencore] are dealing with some unsavory folks,” said Chris Hinde from Mining Journal magazine. “But I wouldn’t say that makes them unusual for traders.”

Tony Hayward, the disgraced former BP CEO who presided over the worst oil spill in US history, has been approached by Glencore to become a non-executive director on the board of the company when it becomes public.

While Rich sold the company in 1993, his take-no-prisoners approach to the commodities business lives on in today’s traders and speculators, including the South African CEO Ivan Glasenberg, who gave Rich’s trading empire the name Glencore.

In a January interview with the Financial Times newspaper, his first in 20 years, Rich supported the share sale, although he acknowledged that it is “much more convenient” for a trader not to be a public company as mandatory disclosure and regulatory oversight “limits your activity”.

Perhaps, Glencore is going public to increase its size, allowing it to acquire large competitors, particularly the mining giant Xstrata. “They are so big now, that they cannot get any bigger unless they are listed,” Hinde said, adding that some of the firm’s 800 partners might want to take the company public with the hope of cashing out their millions over the next few years.

Food insecurity

Regardless of the firm’s reasons, institutional investors from the U.S., East Asia and the Middle East have all committed to buying.

Aabar, the sovereign wealth fund from the United Arab Emirates, controlled by Abu Dhabi’s oil-rich monarchs, is expected to become the largest “cornerstone investor”, pledging to buy about one billion dollars’ worth of stock.

“It seems that they are buying a stake to strengthen the UAE’s control over the global grain trade, for their own food security,” said Kuyek. “In the absence of anything meaningful being done at the international level, – except for the same prescriptions of open markets and trade liberalisation.” Food insecure countries in the Gulf, Northeast Asia, Korea and other regions are attempting to gain more direct control over food, as the market economy “can’t guarantee decent prices”, he said.

Back in her hut in Indonesia, on the front lines of the global food crisis, Lia Romi hasn’t been following Glencore’s stock flotation. She is worried about how to feed her three kids.

“I’ve sacrificed several times not to buy books or clothes for my daughter and son, just for our daily food because I have no savings at all,” she said.

As Glencore’s directors prepare to pocket their millions, it’s unlikely that they will bet on Romi’s future, as fluctuations in the global market could push her family over the edge.

“Stability is to be prized,” said Oxfam’s David Green. And that is the last thing Glencore wants, as it’s instability which is most profitable – for those who have the inside knowledge to exploit it.

* Published under an agreement with Al Jazeera.

Malawi’s gross domestic product has grown by more than six percent in each year since 2005. The country’s most recent Welfare Monitoring Survey finds unemployment stands at just one percent. At a glance, Malawi makes being a landlocked, least developed country almost desirable.

Tobacco leaves drying - Malawi, like other LDCs, is exposed to volatile prices of commodity exports. Credit: Pappahase/Wikicommons

There are plenty of reasons for optimism over the economic performance of Africa’s poorest countries since 2000. Many developing economies did well on the back of a booming global economy that drove up prices for the primary commodities they export.

But the 2007 food crisis and the 2008 financial crisis, which ushered in a global recession, have exposed the vulnerability of least-developed countries (LDCs) to external shocks – and in some cases a lack of essential domestic economic data to guide policy.

Even before the global slowdown, civil society and other observers warned that GDP growth was not being effectively translated into improvements in the lives of the most vulnerable. The numerous Millennium Development Goal targets that are unlikely to be met by 2015 substantiate these fears.

The Fourth United Nations Conference on the Least Developed Countries, which opens in Istanbul on May 9, will be an occasion to review progress under the decade-old Brussels Programme of Action and set out fresh guiding principles for improving lives and livelihoods in 48 of the world’s poorest countries.

Only a small fraction – perhaps 500,000 – of Malawi’s work force of more than six million actually enjoys formal employment.

Accurate, detailed information about employment is hard to come by in African LDCs – in part a measure of inadequate capacity, in part a reflection of the highly informal nature of work.

Employment figures from Malawi’s 2008 census are not yet available; the one percent unemployment figure comes from Malawi’s National Statistics Office, which conducts annual surveys meant to identify vulnerable households. The survey definition of “employed” covers anyone who has done even one hour of work within the past week, and doesn’t discriminate between formal or informal employment, or even paid and unpaid work.

The reality is that half of Malawian adults earn less than 36 dollars a month in cash, though they may grow most of their own food; 30 percent earn less than 50 cents a day. The minimum wage (92 cents/day in urban areas, 75 cents/day in rural areas) is not enough to keep an average family of five above the poverty line.

Sustainable jobs and improved livelihoods are among the priorities that the Malawi Congress of Trade Unions has stressed at a meeting of civil society preceding the U.N. conference.

“How will the country make progress in development if its people remain unemployed?” said MCTU Secretary-General Robert Mkwezalamba.

“How can we get decent jobs for our people? These are the prerequisite questions we are bringing to the LDC conference. We want to get answers from our peers in the LDCs, developed nations and donors on this and find solutions.”

An International Labour Organization analysis of employment carried out for the government of Malawi in 2010 found 80 percent of the labour force is employed in agriculture, overwhelmingly involved in subsistence farming. Strong maize harvests by smallholder farmers since the introduction of the Agriculture Input Subsidy Programme in 2004 have improved food security and produced signs of prosperity such as livestock and other assets in the countryside, but debate about the efficiency and sustainability of this subsidy is growing ever louder.

Vulnerable actor on a global stage

Malawi derives 60 percent of its foreign exchange earnings from production of tobacco, produced both on large commercial estates as well as by smallholders who grow it as a cash crop alongside the staple maize. Over the past three years, the auction prices for tobacco in Malawi have plummeted from three dollars a kilogramme to just 55 cents a kilo this year. The falling price, according to Mkwezalamba, is linked to to the fast-gaining momentum of the World Health Organization’s anti-tobacco efforts.

Malawi – already experiencing a foreign exchange shortage – is keen to find alternative exports. The shortage of hard currency has led to the rationing of forex for the private sector, been blamed for shortages of fuel in the country, and come up as an issue in the delayed implementation of an electricity interconnection scheme that would bring in badly-needed power from Mozambique.

“As a country, we are planning to diversify to other economic activities such as mining,” Mkwezalamba told IPS. “But do we have the right capacity and technological know-how?”

He said donors and developed nations have to help countries like Malawi with increased support for skills development and technology if decent work is to be created.

The Istanbul conference will be considering a plan of action for LDCs with priorities including access to technology, the promotion of agriculture to strengthen food security, good governance, and adapting to climate change and securing a fair deal at the U.N. climate conference.

In the ILO report, co-authors Dick Durevall and Richard Mussa agree that agriculture is a vital starting point for Malawi, because of the large numbers whose livelihoods are presently dependent on farms, but a shift from subsistence to market-oriented farming is needed. Plans for job-rich growth will also have to recognise the low levels of education of the 400,000 people who enter the new labour market each year.

Their broad recommendations – for thoughtful investment in post-primary school education, diversification of production, and the design and implementation of subsidies that will support entrepreneurs in rural areas with electricity, roads, and water – could apply to any of the 33 least developed countries in Africa.

Carrying any of them out will likely require internal and external support. More than one participant at the civil society forum in Istanbul, held under the title “Towards a World Without LDCs”, said it was important for the world’s least developed countries to stand up for one another and assist each other in solving their development challenges.

“In today’s world, one society affects another and the practices of one country affect other countries,” said Dr Ihsan Karaman, chair of the NGO Doctors Worldwide, which is lobbying to build up public support for equitable and sustainable development.

He said LDCs cannot be left to solve their problems alone.”Their problems are the problems of the world,” said Karaman.

By Isolda Agazzi
GENEVA, May 7 2011 (IPS)

While foreign direct investment in least developed countries (LDCs) in Africa has risen sharply over the past decade, most of it went to resource-rich economies and had little impact on employment creation.

UNCTAD's James Zhan: Emergent powers such as China and Brazil provide LDCs with more opportunities to attract investment. Credit: Isolda Agazzi/IPS

The study, called “FDI in LDCs: Lessons learned from the decade 2001 – 2010”, shows the results are at best mixed.

In terms of capital formation, figures are encouraging: despite an abrupt interruption in 2009 due to the economic crisis, FDI flows to LDCs grew at a rate of 15 percent during the last decade to reach 24 billion dollars in 2010.

This is significant when compared to the 7,1 billion dollars of FDI inflows in 2001. In international comparison, LDCs’ share of FDI in global flows almost doubled, going from 0,9 percent to more than two percent over the same period of time.

“FDI from developing and transition economies is increasing. (Emergent economies) provide LDCs with more opportunities to attract investment,” James Zhan, director of UNCTAD’s division on investment and enterprise, says.

The EU is still the largest investor but transnational corporations (TNCs) from emerging economies – particularly Brazil, China, India and South Africa – are becoming increasingly important, especially to many African LDCs. Nearly half of total inflows came from these economies in 2010, compared with one quarter in 2003, Zhan points out.

FDI inflows have trumped bilateral official development aid (ODA) from 2006 onwards. But there was a fall in FDI by 12 percent in 2009 and 14 percent in 2010. For UNCTAD, “this is a matter of grave concern, particularly when taking into account the global increase in FDI”, Zhan remarks.

Despite the overall growth, foreign investment has not lived up to the high expectations in terms of development that were set up 10 years ago. With over 80 percent of FDI flows in value going to resource-rich economies in Africa, the effects on job creation have been weaker than expected and the transfer of technology and skills limited.

“As a result, LDCs remain at the margin of the global value chain. The predominance of FDI has reinforced the commodity dependence of some LDCs and worsened their vulnerability to external shocks,” Zhan warns.

Also, the geographic concentration of FDI flows has increased, contributing to further divergences in economic performance.

However, the picture is not entirely negative and many LDCs have also succeeded in attracting more diverse forms of investment in value-adding activities, like telecommunications, banking, tourism, commerce, food and beverage and agriculture.

Poor physical infrastructure hinders the development of productive capacities that are key to sustainable development.

Therefore, UNCTAD proposes a plan of action that foresees the careful liberalisation of the infrastructure sector while, at the same time, establishing a regulatory framework – in particular in electricity, telecoms, transport and water.

Concretely, it suggests establishing an LDCs infrastructure development fund to support public-private partnerships and grant risk insurance to private investors.

Another idea is to boost aid for productive capacity. “The key bottleneck preventing benefits from trade is not just the rules but the capacity to produce,” comments Zhan. “Therefore, we suggest creating a productive capacities fund to increase investment in vocational training, among others.”

The third measure seeks to enable firms of all sizes (and not just TNCs) to capture investment opportunities in LDCs.

“Big firms may see LDCs markets as limited but others may see opportunities in sectors like solar energy. Solar energy does not require network infrastructure and the price of solar energy equipment has dropped. It is not high tech anymore but a mature energy,” Zhan explains.

“We need new ideas for TNCs. How can we change business mentality? Usually companies look at GDP (gross domestic product) rates and the size of markets. But we see business opportunities even in the bottom of the pyramid. There are more and more social entrepreneurs but we need to educate them on the concept of sustainable investment.”

UNCTAD wants to tap into the rising pool of “impact investors”. Masataka Fujita, head of the investment trends and issues branch of UNCTAD, explains that the concept of “impact investment” appears to have emerged from a variety of sources, but mostly from the investor community itself.

“These sources and initiatives are now converging to better define the concept, and perhaps even move towards some sort of regulatory framework. The U.S. department of state has bought into the concept and is now seeking to advance it through partnerships,” he explains.

The Global Impact Investing Network is a U.S.-based initiative aiming to provide a framework for “impact investment”, including through the impact reporting and investment standards (IRIS) initiative, an attempt to elaborate a set of tools to measure social and environmental impacts.

“The network has a strong U.S. focus but it looks like they are seeking to expand globally view,” he adds.

Excerpt:

By Eprahim Nsingo
LUSAKA, May 5 2011 (IPS)

Zambia has enjoyed economic growth of around six percent per year over the past decade, says Patrick Mucheleka, but the government is failing to translate this into social and economic development for the majority of citizens. The upcoming conference on least developed countries in Turkey offers an opportunity to recalibrate the country’s approach to development.

Mining truck at Nchanga: strong economic growth on the back of commodity exports is not enough. Credit: Blue Salo/Wikicommons

Mucheleka, who heads Civil Society for Poverty Reduction, a network of more than 140 pro-poor develompent organisations in Zambia, says the economic growth figures have to be discounted against the growth in the country’s population. Further, the sectors that have driven growth are capital-intensive, creating relatively few new jobs.

Zambia will be among the countries participating in the United Nations Fourth Conference on Least Developed Countries in Istanbul beginning on May 9. The conference – along with a forum on the U.S. African Growth and Opportunity Act which will be hosted in Lusaka in June – offer fresh opportunities to recalibrate Zambia’s approach to development.

Q: What issues with Zambia’s economic performance and governance record do you think should be addressed at the LDC conference in Istanbul to ensure that development benefits all Zambians? A: There are a number of issues. Zambia should address the need for targets on human development and be able to state by what percentage we shall reduce poverty in particular years.

The country should also discuss stimulation of economic growth in rural areas.

The government should also address the empowerment and active participation of the poor in the governance on one hand and the accountability of public institutions to the poor on the other hand. This constitutes a critical platform for human development and poverty reduction.

Q: What specific recommendations would you make in relation to the energy, mining and agriculture sectors as we ready for the conferences? A: Emphasis should be placed on the agriculture sector as it is the provider of livelihood for majority of the population and has a direct link to poverty eradication. The sector needs substantial investment in infrastructure and research as well as effective farming practice, sustainable technologies, access to financing and marketing mechanism.

The Zambian government has to think broadly about agriculture, for example the focus on maize production to the neglect of other sub sectors like fisheries and livestock development is not helping the development of agriculture in Zambia.

In the mining sector, the country needs to enhance revenue collection from minerals so that they benefit Zambians and generations to come. As a country we need to move away from copper dependence, long-term and large-scale formal investment in minerals such gemstones, manganese, uranium and other precious metals.

Zambia needs a minerals policy – this policy should state the development of mineral resources taking into consideration the national and strategic considerations.

Energy still remains a challenge across the country. People in especially in rural areas still rely on traditional sources of energy [like firewood and charcoal]. Lack of adequate energy has constrained the development opportunities in Zambia. It is therefore important to expand power infrastructure and increase capacity for energy generation, especially renewable energy.

Q: There has been the suggestion from certain quarters that not enough is being done to attract foreign investment. A: We first of all have to deal with our governance challenges – corruption and constitutionalism.

We need to have a clear roadmap for foreign direct investment. It should be handled in a way that ensures Zambians benefit. For examples investors should be told about the “dos and don’ts” in Zambia, this will help guide them for example on issues of casualisation of labour.

Q: The 2011 African Growth Opportunities Act (AGOA) forum will be held in Zambia in June, under the theme “Enhanced trade through competitiveness, value addition and deep regional integration”. How can Zambia enhance its own economy and pro-poor development in light of this theme and of AGOA itself (ten-year old U.S. legislation intended to offer support and incentives to African countries trading with the U.S.)?

A: The theme itself summarises key issues in enhancing trade – and i would say nothing can be more important than addressing competitiveness, value addition and regional integration – all isues that continue to be a challenge for Zambia. Often our products are not competitive at the regional and world markets.

Generally Zambian products face challenges of low value addition to meet international standards. The theme therefore represents Zambia’s trade challenges and solutions.

What Zambian traders need is access to finance and market information. Access to loans with reasonable interest rates will help trades produce competitive products able to compete at an international level. Access to information would help them to find market for their produce. Traders will then gain in terms of profits.

Q: What should be done to ensure that Zambia gets the best out of the two upcoming conferences? A: Firstly Zambia should provide a truthful analysis of development efforts with their challenges that we are going through as a country. It should not try and paint a picture which is does not exist. The government needs to be open to criticism.

Conferences such as the AGOA and LDC-IV will come up with very good recommendations. The challenge has always been the implementation part of it. It is our hope that this time we shall see real changes in the implementation system in Zambia.

Excerpt:

By Danilo Valladares
GUATEMALA CITY, Apr 12 2011 (IPS)

Guatemala has been accepted as a candidate country by the Extractive Industries Transparency Initiative (EITI), which aims to strengthen governance by improving transparency and accountability in the sector, and to reduce tensions between mining and oil companies and local people affected by their activities.

“It should be a great help in reducing conflicts,” Guatemalan EITI delegate Silvio Gramajo told IPS. “The EITI sets transparency standards for companies to publish what they pay in taxes, and for governments to disclose what they receive, and what use they make of these resources.”

The EITI is a coalition of governments, companies, civil society groups, investors and international organisations that promotes better governance in countries rich in natural resources, through the publication and verification of tax payments made by the companies and of government revenues from oil, gas and minerals.

Regina Rivera of the Gremial de Minas y Canteras, the industry association for mines and quarries, told IPS: “If the EITI process is implemented responsibly, it creates an opportunity to build trust in the extractive industries, as it makes two-way financial information accessible and transparent, which can contribute to reducing conflicts.”

Candidate countries must take five steps in order to gain compliant status: joining EITI, development of a working group and work plan, capacity building, disclosure and dissemination of the report, and validation. Guatemala has only taken the first step.

Only three countries of Latin America and the Caribbean are EITI candidates: Peru was accepted in 2004 although it has not yet qualified as a compliant country; and Guatemala and Trinidad and Tobago were accepted at the Mar. 2-3 EITI Global Conference in Paris.

To be admitted, Guatemala submitted a work plan for publishing reconciliation reports next year of financial flows for the mining and oil industries, to be agreed by consensus between companies, government and civil society.

The task ahead is not an easy one. The country is aspiring for EITI certification at a time when extractive industry companies are clashing with peasant farmers, who complain of serious environmental damage from mines and oil wells, and very few benefits, or none at all, for their communities.

“The mining industry does not provide appreciable support to our communities,” indigenous leader Pedro Bal told IPS. “We want to renegotiate terms so that the affected communities are the main beneficiaries.”

There have also been complaints of environmental risks and actual harm caused by the companies.

For example, the environment secretariat of the Dominican Republic and Central America Free Trade Agreement (DR-CAFTA) with the United States recommended on Mar. 29 an investigation into the extension of an oil contract in the Laguna del Tigre National Park, in the northern Guatemalan province of Petén.

The Anglo-French oil firm Perenco is operating there in a core area of the Maya biosphere reserve, home to a large number of wildlife species and archaeological sites, although it did not receive approval from the state National Council for Protected Areas (CONAP). Nevertheless, in July 2010 the government extended its contract for a further 15 years.

In another case, the Inter-American Commission on Human Rights (IACHR) called on the Guatemalan government to suspend gold and silver mining at the Marlin mine, in the western province of San Marcos, and to take steps to protect the rights and health of people in 18 local indigenous communities.

But Montana Exploradora, a subsidiary of Canada’s GoldCorp, which has been accused of polluting several rivers, is still operating the Marlin mine because of administrative delays in the suspension procedure.

In spite of the protests, mining has grown vigorously in Guatemala in recent years. Production climbed from 8.6 million dollars in 2005 to 370 million dollars in 2009, according to the Ministry of Energy and Mines.

But GoldCorp pays the government only one percent of its revenue from the mine, in accordance with the current mining law – which civil society groups protest is too little.

Meanwhile, in South America, Peru is working hard at becoming an EITI-compliant country.

In December Peru sent in its first reconciliation report, but failed to satisfy the EITI, which designated Peru as “close to compliant” but noted that some requirements still have to be met.

“The main criticisms were that some important companies had not participated in the account reconciliation,” economist Epifanio Baca, a civil society delegate on the working group in charge of preparing the report, told IPS. “And the figures presented were not entirely clear.”

Peru’s report for 2004-2007, presented in July 2010, indicates that mining companies paid 3.8 billion dollars in taxes, and between 871,000 and 873,000 dollars in royalties, while oil companies paid 237,000 dollars in taxes and 1.6 billion dollars in royalties.

Of the 24 mining companies participating in the report, six did not provide detailed figures, allegedly “for security reasons.” The EITI board said it would be “desirable” to include figures for 2008, as well.

Baca said the goal now is to prepare a second reconciliation report by June, with figures for 2008, 2009 and 2010.

More than 70 percent of social and environmental conflicts in Peru, one of the world’s leading producers of gold, silver, zinc and lead, are linked to mineral and oil extraction industries, according to the Ombudsman’s Office.

Was the first reconciliation report of any use in preventing conflicts in extractive industry areas? Economist Gustavo Ávila of the Grupo Propuesta Ciudadana, a coalition of local NGOs, said it was not, as implementation of the EITI programme in Peru is still “very rudimentary.”

“The process has not been disseminated widely among all those involved in the social and environmental conflicts,” Ávila told IPS, “and the reconciliation report does not contain up-to-date and detailed information from all the companies, so it is not a useful tool.”

According to the industry, mining and oil companies invested more than 24.1 billion dollars in Peru between 1992 and 2007.

While the overall poverty rate in Peru fell to 39 percent in 2009, it is considerably higher in highlands regions where the benefits of the mining industry have failed to trickle down to local communities.

* With additional reporting from Milagros Salazar in Lima.

Excerpt:

Peanut crops, in the background, fertilise the soil before sugar cane is replanted. In the foreground, sugar cane fields. Credit: Mario Osava/IPS

By Mario Osava
RIBEIRÃO PRETO, Brazil, Apr 12 2011 (IPS)

The mechanisation of sugar cane harvesting, originally aimed at curbing the pollution caused by the burning of cane fields, has resulted in an added bonus: it has helped to improve soil quality, according to growers and technical experts in the southern state of São Paulo, where most of Brazil’s sugar and ethanol is produced.

Traditionally, sugar cane fields were set on fire before harvesting to burn off the dried leaves from the plants, making it quicker and easier for cane cutters to manually harvest the crop. Now that leafy “trash” stays in the soil, fertilising it, trapping moisture, and preventing erosion.

This leaf residue supplies every hectare of land with around 45 kilograms of potassium, agronomist Gustavo Nogueira, the technical director of the Sugar Cane Growers Association of Western São Paulo State (Canaoeste), told Tierramérica.

While around 70 percent of sugar cane harvesting in São Paulo is now mechanised, that figure will grow to 100 percent in the coming years. Sugar cane growers have been ordered to end the practice of burning cane fields in flat areas by 2014. In hilly areas with a slope of more than 12 degrees, where current harvesters cannot operate, they have been given until 2017.

In places where mechanised harvesting was adopted early on, there are sugar cane fields that are productive for seven or eight years, compared to the usual five years, said Manoel Ortolan, the president of Canaoeste. Although the organisation was founded by growers in western São Paulo, its headquarters and most of its current members are based in the northeastern part of the state.

“The leaf litter restores the soil’s microflora and can raise the longevity of the sugar cane to 12 or 15 years, making it almost a perennial plant, a fantastic result,” Ortolan told Tierramérica in his office in Sertãozinho, a city where sugar cane growers take up over three blocks with company offices, cooperative headquarters, supermarkets and a service station.

In addition, many growers are taking advantage of the annual “renovation” of their plantations, during which roughly one fifth of their fields are usually left fallow, to plant peanuts or soybeans after removing the old sugar cane and before planting new cane.

These legume crops help fertilise the soil by fixing nitrogen from the atmosphere. As a result of this growing practice, northeastern São Paulo now accounts for 80 percent of Brazil’s total peanut production, said Nogueira.

Meanwhile, the development of sugar cane ethanol production in Brazil “killed two birds with one stone,” according to Cícero Junqueira Franco, a veteran sugar cane producer. The country’s ethanol production has grown seven-fold since 1975, when the government decided to promote the use of this alternative fuel for economic reasons – to cut down on costly oil imports – although its greatest effect has been environmental, said Franco.

Mixing ethanol with gasoline made it possible to eliminate lead additives, which has improved air quality in big cities. “Without ethanol, São Paulo would be drowning in pollution,” Franco stressed.

But Manoel Tavares, president of the Pau Brazil Cultural and Ecological Association, views the spread of monoculture sugar cane plantations in the Ribeirão Preto region – which encompasses 85 municipalities, three million inhabitants and 50 sugar mills and ethanol distilleries in northeastern São Paulo – as an environmental disaster.

Before the adoption of the National Ethanol Programme in 1975, forests covered 25 percent of the region. Now forest cover has been reduced to a mere four percent, which has resulted in an alteration of rainfall patterns, decreased moisture and higher temperatures, he stressed.

As well as an environmental activist, Tavares is also an agronomist and a producer of honey, which he exports primarily to Asia. He is now forced to look for honey in other states, since the sugar cane invasion and subsequent loss of forests has driven the bees away, decimating local honey production. “There were 2,500 beehives in Ribeirão Preto 30 years ago,” he said.

The region was once a major producer of a variety of foodstuffs, but now imports food staples like rice, beans, milk, coffee and garden vegetables, Tavares told Tierramérica.

Moreover, he noted, the sugar cane industry has brought about “agrarian reform in reverse,” with a “troubling” concentration of land ownership in a small number of hands and the squeezing out of small farmers.

What’s more, he added, the regional water table and the Guaraní Aquifer, which supplies water to many cities in the state of São Paulo, are threatened with pollution from the leaching of toxic agrochemicals used on sugar cane plantations and vinasse, the dark liquid residue left over from ethanol distillation.

The environmental authorities have found evidence of water pollution, but these infractions have gone unpunished because of “collusion” between the industry and government agencies, he charged. In addition, the burning of cane fields continues, and the resulting soot poses a risk to public health.

With the growth in ethanol production, vinasse killed off the fish in many rivers in São Paulo and other sugar cane producing areas. For every one litre of ethanol, 10 litres of this liquid waste are produced, and spills in local waterways were once a frequent occurrence.

However, these environmental impacts were curbed when growers started to use vinasse, which is rich in potassium and other nutrients, to fertilise the sugar cane fields themselves.

Vinasse is now a valuable by-product of sugar production with a number of potential uses. It can be used to feed the growth of algae that can in turn be used to produce biodiesel, or as the basic ingredient of fertiliser after partial dehydration or the extraction of its potassium content, explained Octavio Valsechi, director of the Department of Agro-Industrial Technology at the Federal University of São Carlos.

“There are fish in the local rivers again, there hasn’t been vinasse discharged into them for a long time,” and the Guaraní Aquifer – shared with Argentina, Paraguay and Uruguay – continues supplying water to many cities with no problems, maintained João Borges, a doctor who treats employees at the Santo Antonio sugar mill in Sertãozinho, 20 kilometres from the city of Ribeirão Preto.

Borges, the recipient of awards for his achievements in drastically reducing child mortality in Barrinha, the poorest city in the region, and rehabilitating workers disabled by accidents or occupational diseases in the sugar industry, also believes that the soot produced by the burning of cane fields does not pose a serious health risk.

The soot is composed of large particles that “don’t reach the lungs” and disperses in a very short time, he said.

For his part, Tadeu Adrade, the director of the Centre for Sugar Technology, created by a cooperative of ethanol plants, pointed out that sugar cane is genetically resistant to diseases and requires fewer pesticides than other crops such as cotton and soybeans. In addition, research and development have yielded even more resistant varieties and biological pest control methods that use insects.

Sugar cane “refertilises” the soil, which requires fewer chemical additives to sustain production indefinitely, as is being seen in older sugar cane growing areas in Brazil that are experiencing a new increase in yields, he said.

The environmental potential of sugar cane is fully exploited at the São Francisco and Santo Antonio sugar mills in Sertãozinho, which produce Native brand sugar and other organic food products.

The company cultivates two green fertilisers, crotalaria and velvet beans (Mucuna pruriens) to nourish the soil, and reforests as much land as possible.

The owners are members of the Balbo family, which has been growing sugar cane in the region for over a hundred years, and are recognised for their social and environmental sensitivity both by environmentalists like Tavares and by trade union leaders.

*This story was originally published by Latin American newspapers that are part of the Tierramérica network. Tierramérica is a specialised news service produced by IPS with the backing of the United Nations Development Programme, United Nations Environment Programme and the World Bank.

Excerpt:

By Mario Osava
PIRACICABA, Brazil, Apr 4 2011 (IPS)

For nearly five hundred years, sugar cane was used almost exclusively for making sugar, with a handful of by-products like rum, alcohol and molasses. Now, in Brazil, it has become a source of multiple derivatives, and the focus of much scientific and technological research.

Ethanol, or fuel alcohol, has become a major product, rivalling sugar, over the last three decades. But recently, the waste materials, like bagasse (the fibrous residue after sugar cane is crushed), straw and vinasse have grown in importance.

Vinasse, the liquid residue left over from ethanol distillation, can be used to feed the growth of microscopic algae that can produce biodiesel, a process being developed over the next few years by researchers at the Agricultural Sciences Centre (CCA) of the Federal University of São Carlos in Araras, 170 kilometres from São Paulo, the largest city in Brazil.

The nutrients in the vinasse accelerate proliferation of the algae, which are rich in fatty acids that in turn can be used to produce biofuels.

Fertilisers will also be produced, as “the algae capture up to 64 percent of the potassium present in the vinasse,” the head of the CCA’s Department of Agro-Industrial Technology, Octavio Valsechi, told IPS.

Using algae to produce biodiesel has the advantage that it avoids the monoculture of oilseed crops on extensive areas of land. However, it is still not clear whether the cost of biodiesel made from algae will be higher than that made from vegetable oils.

Bagasse is increasingly used to generate electricity in the sugar mills themselves. But a biomass Gasification Centre being built over the next three years in Piracicaba, 160 kilometres from São Paulo, offers even more promising prospects.

Synthetic gas, or syngas, produced at this pilot plant will generate three times the electricity currently generated from bagasse, and can also be converted into liquid fuel or a precursor material for plastics, according to the Institute for Technological Research (IPT), the São Paulo state government agency that set the project in motion and forged partnerships with several public and private bodies to make it a reality.

Syngas is normally produced from coal, but the technology to gasify biomass is only now being tested on an industrial scale.

The potential for electricity generation from bagasse with current technology, by burning it directly in furnaces, is equivalent to “one Itaipú,” a reference to the 14,000 megawatt hydroelectric complex shared by Brazil and Paraguay, according to the Brazilian Sugarcane Industry Association (UNICA) which represents the largest companies.

But using this traditional method, “we are losing half the potential energy of the cane,” because of the humidity content of the bagasse when it is burned, Valsechi pointed out.

Increasing mechanisation of harvesting, which by 2014 will extend to the whole sugar cane crop in the state of São Paulo, that accounts for 60 percent of national production, will do away with the practice of burning the cane fields. Studies are still under way to determine the best way of collecting the straw.

“Anything that can be derived from oil can also be extracted from sugar cane,” Tadeu Andrade, head of the Centre for Sugarcane Technology (CTC) established in 1969 by Copersucar, a cooperative of São Paulo sugar mills that has expanded into other states, told IPS.

Sugar cane is the closest thing to “a perpetual motion machine, because there is so much recycling and feedback,” he said, pointing out that it has the capacity to produce its own fertiliser to grow it and energy to process it, and it yields more biomass than other major crops like maize or soybeans.

The potassium-rich vinasse, together with the residues trapped in industrial filters and the straw left on the ground, fertilise new crops, he said, although he acknowledged additional input of chemical fertiliser was also needed.

Unprocessed sugar cane juice is a good medium for growing microorganisms that are a source of countless substances, including polymers for bone regeneration, various foods, medicines and cosmetics, and even components for artificial blood plasma, Valsechi said, adding he regrets the scarcity of sugar cane researchers to fill the huge demand.

Sugar cane may also provide a pathway towards hydrogen-based energy, he said. Great strides have been taken in researching the chemistry of alcohol in Brazil, and a large petrochemical company is already producing “green”, or biodegradable, plastics.

Even aviation fuel can be made from sugar cane. EMBRAER, the Brazilian Aerospace company, one of the world’s largest manufacturers of small and medium-sized passenger planes and military aircraft, has announced that the first test flight fuelled by biokerosene made from sugar cane will take place in 2012.

Diversification of sugar cane products and scientific exploration of their potential arose from the National Alcohol Programme (PROALCOOL), launched in 1975 to find gasoline substitutes and reduce imports of oil during the 1970s oil crisis, when prices rose fourfold.

Since then, production of sugar cane increased sevenfold in Brazil, reducing demand for oil, but generating other problems. Vinasse, for example, caused an environmental disaster in the early days of the PROALCOOL programme in the 1980s, when it was discarded into rivers and killed millions of fish by starving them of oxygen.

The environmental threat receded when discovery of the high potassium content of vinasse led to its being used as a fertiliser.

Production of ethanol from sugar cane is still resisted in many Latin American countries where the soil already contains plenty of potassium, and shallow water tables are at risk of pollution from “fertigation” – irrigation with dissolved fertilisers – said Valsechi, an agronomist who has done research on sugar cane since his graduation in 1980.

For every litre of ethanol distilled, 10 litres of vinasse are produced, so its disposal can be costly. Algae that capture potassium could provide a solution.

In Argentina, where the soil has a lot of aluminium and the climate is less favourable than Brazil’s, it is particularly difficult to produce ethanol from sugar cane, said Marcos Vieira, another CCA professor and head of the Inter-University Network for the Development of the Sugar/Alcohol Sector (RIDESA), where researchers are funded by the national government to carry out genetic improvement of sugar cane.

The varieties developed by RIDESA, identified by the code RB, are planted on 60 percent of Brazil’s sugar cane area and have helped raise productivity to 85 tonnes per hectare, and in some cases 150 tonnes per hectare, Vieira said. Thirty-five years ago, the average yield was less than 50 tonnes per hectare.

RIDESA seeks out “eclectic varieties” that are adapted to the different climate and soil conditions in Brazil, produce good yields and are resistant to diseases and drought, Vieira said.

In contrast, CTC, which primarily serves the needs of the cooperative’s members, adopted the opposite approach, developing specific varieties for different soils and climates. “There are 25 soil and climate combinations,” and maps of them help farmers select the most productive variety for their lands, Andrade said.

But the advances in genetic engineering that give Brazil an advantage over other sugar cane producing countries “do not by themselves improve productivity in the field,” he said. Good agricultural practices, taught on many CTC courses, and mechanisation are also needed.

A policy adopted in the 1980s, setting the price for sugar cane according to its sucrose content, compelled farmers to use the best sugar cane varieties and cultivation techniques, Andrade said. University professor Roberto Rodrigues, a former agriculture minister, said the policy caused “a revolution.”

Large companies, like U.S. biotechnology company Amyris, have taken up research and development of new sugar cane products. Amyris is keen to secure supplies of Brazilian sugar cane for manufacturing farnesene, a molecular building block used to produce aviation fuel, lubricants, cosmetics and other derivatives.

Excerpt:

By Stanley Kwenda
HARARE, Mar 30 2011 (IPS)

Kindness Paradza has a mission. After he lost his job as a journalist when the ZANU-PF government closed his newspaper in 2004, he ploughed his life savings into a 2,000 ha farm he received as part of Zimbabwe’s controversial “land reform programme”.

(l-r) Farm manager Brian Ngwenya with farm owner Kindness Paradza. Credit: Stanley Kwenda/IPS

The launch of the new commodity exchange could have come as a boon for him, as he now has more room to negotiate better prices. Previously this space for negotiation did not exist as the state-owned Grain Marketing Board (GMB) was the sole buyer of grain.

However, Paradza, like many new farmers, is not celebrating the arrival of the Commodity Exchange of Zimbabwe (COMEZ).

Although it has been promoted as a mechanism to minimise exploitation of farmers by agricultural buyers and usher in orderly trading of commodities, while creating opportunities for farmers to get better prices, Paradza remains sceptical.

“We don’t know it and, surely, how does something that you don’t know help you?” Paradza asks rhetorically.

COMEZ is a commodities market; commodities markets across the world trade in agricultural products such as wheat, barley, sugar, maize and cotton, with contracts based on them.

These contracts can include futures. A simplified example would be: a maize farmer can sell a futures contract on her maize, which will not be harvested for several months, and guarantee the price to be paid at the time of delivery.

The futures contract is bought with a guarantee that the price will not go up when it is delivered. This protects the farmer from price drops and the buyer from price rises. COMEZ will initially trade grains, cereals and oil seeds.

According to the ministry of industry and commerce, COMEZ is meant to “provide fair and open prices” for agricultural produce as reflected on the market.

The minister of industry and commerce, Welshman Ncube, told IPS at the launch of COMEZ two months ago that it would serve as a mechanism to break the state monopoly in the grain trade.

“We should create a transparent, open and accessible commodities market where both buyers and sellers can participate, knowing the prevailing prices,” Ncube said.

In the last 10 years, the Agricultural Marketing Authority (AMA) determined the prices of agricultural produce, while GMB was designated as the sole buyer of grain. AMA is the regulator of grain pricing in Zimbabwe.

Tafadzwa Musarara, president of the Zimbabwe Grain Millers’ Association, welcomes COMEZ but says it should be organised in line with international standards for it to work properly.

“It is welcome in the sense that the contracts that farmers will enter into with grain traders and other buyers will give them bankable papers which they can use to capitalise their operations, rather than working on a cash basis as is the case right now,” Musarara told IPS.

“Nevertheless, it is important that we come up with structures that are in line with international practice in order to attract foreign buyers.”

Most farmers still do not understand what exactly COMEZ does and why it was established. They would prefer to see how it practically works before committing any of their produce.

Paradza complains that, “we know that it is not going to work in our favour because of the commissions that we will be asked to pay at the warehouse, auctions and traders — just like they do at the Zimbabwe Stock Exchange. The traders will sell on our behalf and it is those traders who will make money”.

Alice Machingauta, a Chihota farmer, told IPS while delivering her tobacco crop that, “I haven’t heard about it but if there are merchants involved then I don’t want it because the merchants are only there to reap what they did not sow”.

Grain trader and economist Tinashe Mawarire told IPS that COMEZ suffers from the fear of the unknown.

“Farmers are used to delivering their produce to GMB and waiting for the announcement of the price. The advantage with COMEZ is its willing-buyer- willing-seller arrangement, unlike in the past when everyone was compelled to sell to GMB only,” Mawarire points out.

“If you are not happy with the price, you don’t sell. It’s as easy as that.”

Analyst Brains Muchemwa cautions that, “farmers need to be educated on how COMEZ works and how they can get better prices”.

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By IPS Correspondents
LILONGWE, Mar 29 2011 (IPS)

An ardent listener to the radio, small-scale cotton farmer Mercy Kaduya from Chikhwawa in Nsanje in southern Malawi has just heard on the international news segment that cotton prices have hit a record high on the international market.

Malawian cotton bales on their way to the market. Credit: Claire Ngozo/IPS

The International Cotton Advisory Committee (ICAC) announced in early March that world cotton prices had reached a new record of two dollars per pound (0.5 kg) in February. ICAC is a global body representing governments, which raises awareness and promotes cooperative action on issues of cotton worldwide.

ICAC indicated that although cotton prices were expected to decline from record levels, it is expected that they will remain significantly higher than the average of 60 dollar cents per pound that prevailed in the past 10 years.

The rise in prices has been attributed to a low supply of the crop; high demand; and the depreciation of the U.S. dollar.

Malawi’s economy is highly dependent on agriculture, with cotton contributing about 32 million dollars in foreign exchange earnings. The crop is the country’s fourth largest foreign exchange earner, after tobacco, sugar and tea. Tobacco contributes 60 percent of the country’s foreign revenue.

Kaduya told IPS that she suffered huge losses on the local market in 2009 when buyers offered low prices in the range of between 28 and 30 dollar cents per kg.

Buyers blamed the low prices on the global recession which caused prices to collapse on the international market.

The Malawian government also accused cotton buyers of exploiting small- holder farmers which led to a stalemate that culminated in a government ban being imposed on the sale of cotton.

“Some of my produce got destroyed right in storage in my house because I could not take it to the market on time,” said Kaduya.

“I used the little money I made in 2009 to pay back loans for the inputs and pesticides I had used in growing the crop. I considered abandoning the production of cotton.

“But then I thought, ‘let me give it one more chance’. Many farmers in my vicinity stopped growing cotton after that bad experience,” said Kaduya.

The 2010 growing season gave Kaduya and the farmers who stuck to growing cotton some hope. Minimum prices rose to 75 dollar cents per kg.

Farmers such as Kaduya are getting more and more optimistic that the prices will be even better this year once the trend on the international market filters down to the Malawian market.

Principal secretary at the ministry for agriculture Andrew Daudi told local journalists after the ICAC announcement that prices were at record high. Projections for cotton production in Malawi for 2011 are 55,000 metric tonnes, up from 29,000 metric tonnes in 2010.

“The crop attracted good prices last year because many farmers had abandoned the production of cotton in the wake of 2009’s poor prices. There was high demand and so the prices shot up,” explained Daudi.

He added that farmers who continued to grow the crop have produced more in 2011 because of the positive development with prices.

The Cotton Development Trust (CDT), which works on ensuring that there is a fair deal between farmers and buyers on the Malawi market, is also excited about the development on the international market.

CDT spokesperson Duncan Warren anticipated that there will be stiff competition during 2010 among cotton buyers and that this will be good for small-scale farmers.

“Cotton ginners have already expressed interest to buy cotton from farmers at a good price and we are optimistic that everyone involved will be happy,” said Warren.

Small-scale farmers sell raw cotton to ginners who process the cotton and sell it on to the international market.

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By Zofeen Ebrahim
THATTA, Sindh, Mar 25 2011 (IPS)

Hasan Ibrahim’s tea stall is the busiest place in the sleepy, sand-dune covered village of Sholani, proof of the economic and social change the arrival of electricity has ushered in.

Solar panel installed in the village of Sholani. Credit: Zofeen Ebrahim/IPS

Since a free solar panel was installed outside his shop just six months ago, Ibrahim’s income has tripled. He owns a small black-and-white television and charges anyone who comes to watch 5 rupees (5 cents). Invariably, people would want some tea, for which he charges another 10 rupees. He sells a packet of ‘ghutka’ – a concoction of betel nut, tobacco and flavourings – for 5 rupees, and for those whose mobile phones need charging, Ibrahim offers the service for 10 rupees.

Sholani – one of 240 villages in Kharochhan, which counts among the least developed areas in the Thatta district of Sindh province, about 150 kilometres from the port city of Karachi – was chosen to be one of 18 villages to be provided with solar panels. The panels came from the Sindh Agricultural and Forestry Workers Coordinating Organisation (SAFWCO), a local non- governmental organisation which is implementing the programme with technical and financial support from the World Bank-funded Pakistan Poverty Alleviation Fund.

SAFWCO director Suleman Abro says the lives of about 5,000 people have been affected by the panels. The village now has streetlights. Each household also got solar panels to light two bulbs and power an electric fan for four hours.

Far from the national electricity grid, Sholani is a place where government- supplied electricity is unlikely to pass through – even within the next decade – considering the steep infrastructure costs and the burgeoning energy crisis the country is struggling to grapple with.

Roughly 35 percent of Pakistan’s population of 170 million live in places like Sholani that are still not connected to the national grid, said Arif Alauddin, director of the Alternative Energy Development Board. Some 130 million people lack access to natural gas as well.

“Since every household had at least three mobile phones, they have been provided with charging units as it was costing them 10 rupees to charge one cell phone,” Liaquat Panhwar, SAFWCO spokesperson, told IPS.

To guarantee that villagers bear maintenance and operational cost themselves, SAFWCO had to collect a deposit of 30,000 rupees (350 U.S. dollars) before the solar panels were installed. The villagers also provided the labour during installation. Every village has an organisation that ensures collection of 100 rupees (1.17 dollars) every month for maintaining and operating the solar panels and the batteries.

The happiest here are women who have discovered a newfound camaraderie now that they can spend time together after sundown. “We don’t have to worry about cooking in the day, as we know there will be enough light to get our work done,” said a young woman. Few in Sholani have latrines at home. Women expressed that when they now go out at night to relieve themselves, they need not be afraid.

“They were spending anywhere between 1,000 to 1,200 rupees [11 to 14 dollars] each month just on kerosene oil and candles. And this does not include the time spent on gathering wood which they use for cooking,” said Panhwar.

In Pakistan, people still use imported kerosene oil, draining foreign exchange, Alauddin said. And while 15 percent of the income of the urban rich goes into buying energy, he added that the rate goes up to as much as 35 percent for the poor, who spend between five to seven times more than their rich counterparts – those living in urban areas with access to grid electricity and piped gas – on energy.

Alauddin told IPS he foresees the situation going “from bad to worse” in the coming years unless something is done about it, “like increasing the share of domestic energy resources in our energy mix.”

Solar panels provide a solution. Many villagers in Sholani like Halima Jaffar, 32 and mother of five, have not bought kerosene oil for the last six months.

Jaffar led IPS to her one-room hut and showed off her prized possession: A sewing machine, which has brought a world of change into her life. She bought the machine partly from the money she saved on kerosene during the first three months the village had electricity. At night, while others embroider, she stitches their clothes and charges them for it. “I earn at least 1,000 rupees (11 dollars) every month,” she calculated.

By tapping into renewable energy sources, reliance on imported fossil fuel can be reduced, noted Alauddin, adding that globally, governments have subsidised renewable energy programmes and even provided easy loans and other innovative financing.

But other matters are keeping Pakistan from following suit. “The financial crunch Pakistan is in, there is no money to give subsidy to anything,” explained Alauddin. In addition, he says, there are powerful lobbies supporting thermal and rental power projects because of the huge investments and profitability involved.

“Another impediment is that we have not developed systems to deliver in terms of maintenance and repair. Vendors just sell imported equipment, parts of which are assembled here,” he pointed out.

Alauddin said Pakistan boasts of a myriad renewable energy sources, but “priorities” remain on the use of thermal power.

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By Mario Osava
RIBEIRÃO PRETO, Brazil, Mar 22 2011 (IPS)

The roads are exceptionally good and numerous here, in contrast with other parts of Brazil, but the monotony of the landscape is not inviting to tourists. Sugar cane fields stretch to the horizon along a 400-km stretch of highway to the north of São Paulo.

Sugar cane stretches to the horizon around Ribeirão Preto. Credit: Mario Osava/IPS

The sugar cane boom has driven local development because, since cane dries quickly after harvest, it must be processed immediately after cutting. This means that unlike other major cash crops, like coffee and soybeans, it has to be processed locally and cannot be exported as a raw material to be transformed elsewhere.

In this short local production chain there are no intermediaries, which keeps prices down, benefiting consumers, said engineer Cícero Junqueira Franco, one of the leaders of the ethanol industry in Brazil, who at the age of 79 is still an influential partner in a number of companies.

But it was the National Alcohol Programme (Proalcool), launched in 1975 to partially replace gasoline consumption and reduce oil imports, that fuelled today’s prosperity in the region of Ribeirão Preto, which has basically become one big plantation of sugar cane, for the production of ethanol, known simply as “alcohol” in Brazil.

Large-scale production of ethanol “changed the structure of the industry and changed Brazil,” Junqueira, one of the “fathers” of Proalcool, told IPS. He and other business leaders suggested that the government adopt the policy in 1974, when the price of oil rose fourfold in the space of a few months during the 1970s fuel crisis.

At the time, Brazil was importing 85 percent of the oil it consumed, and the soaring of fuel prices curbed the nation’s economic growth. Ethanol helped the country weather the energy crisis, at a time when there was a surplus of sugar cane on the domestic market, due to government incentives for production.

So Proalcool emerged to solve two problems, said Roberto Rodrigues, former agriculture minister from 2003 to 2006 and now a university professor and chairman of the Agribusiness Council of the Federation of Industries of the state of São Paulo (FIESP).

In the 35 years since the programme was created, Brazil’s ethanol production has skyrocketed from 611 million litres to 27.7 billion litres in 2010, while sugar output has risen more than five-fold, to 38.7 million tons.

To meet demand, the land under sugar cane production has quadrupled, which led to a seven-fold increase in the harvest. In 2010, 8.1 million hectares were planted and 625 million tons of cane were produced.

That was only possible because average productivity rose three percent a year, an “extraordinary” increase when it comes to agriculture, Junqueira explained in his rural residence, an oasis of trees watered by a stream and hemmed in on all sides by sugar cane fields, in the municipality of Orlandia, 55 km north of Ribeirão Preto.

The accelerated growth broke down the government’s control over the sugar cane industry, which was maintained by means of production quotas and a monopoly on exports, and transformed the rural areas and small towns of the state of São Paulo, especially in the northeast of the state, where sugar cane cultivation is concentrated.

In the past, few sugar cane processing plants employed an engineer, but today “they are unlikely to have fewer than three,” Junqueira noted. And in plants that produce both sugar and ethanol, “31 different kinds of professionals” are employed, he added.

Proalcool “breathed oxygen into a sclerotic system,” modernised it and attracted a new type of entrepreneur, “opening minds,” said Maurilio Biagi Filho, another ethanol tycoon, who as a child spent hours “studying and playing football” with the children of employees at a plant founded by his father.

Electricity, plastics and other chemical products, fertilisers and enzymes have been incorporated into the plans of the sugar cane industry. Scientific and technological research has received a strong boost in the area, which has driven the opening of universities and research centres run by the sugar and ethanol industry.

The growth has favoured the development of a diversified machinery industry for the production of sugar cane and its processing into sugar, ethanol and energy. In Sertãozinho, 20 km from Ribeirão Preto, there are 550 companies, most of which also provide equipment for other industries, like the oil and hydroelectric sectors, both within and outside Brazil.

The harvest is 70 percent mechanised, and is set to be totally mechanised by 2014. This has expanded the industrial market, by increasing demand for harvesters and other farm machinery, and has come hand in hand with environmental requirements set to prohibit the traditional practice of setting fire to sugar cane fields to clear them of waste in order to facilitate harvesting by hand.

Hotels filled to capacity in every city in the region reflect the economic boom driven by the sugar cane and ethanol production chain.

But “a clearer policy is needed,” Biagi told IPS. Ethanol production follows the sugar cane cycle. Without a harvest in the first quarter and without stocks accumulated and controlled by the government to regulate and stabilise the market, there is a shortage of ethanol because a greater share of the harvest went towards producing sugar, due to the rise in prices in 2010.

Flex-fuel vehicles which run on gasoline, ethanol or any blend of the two, have been produced in Brazil since 2003, which has made it possible for customers to use the least expensive fuel. But this time, demand for ethanol did not drop as much as expected.

The apparent progress driven by the sugar cane economy has its critics, however.

The mechanisation process began in the late 1980s, to thwart the sugar cane cutters’ movement for their rights, “not because of environmental reasons,” Helio Neves, president of the Federation of Rural Workers of the State of São Paulo, told IPS.

Mechanisation will also leave thousands of workers without jobs, and there are not enough training opportunities to help all of the labourers find new work, he said.

Sugar cane “is a wonderful plant,” but monoculture concentrates the power in corporations “at the expense of democracy,” imposing “a dictatorship of economic interests over social concerns,” lamented Neves, a highly respected trade unionist who was involved in the historic strike of sugar cane cutters in Guariba, 65 km from Ribeirão Preto, in 1984.

Furthermore, the prosperity brought by the industry is unequally distributed. Ribeirão Preto, where the best-paid services are concentrated, and Sertãozinho, are the wealthiest parts of the region.

Meanwhile, relative poverty and lack of jobs have forced thousands of women from Guariba, Barrinha and other municipalities with vast sugar cane production but virtually no industry to seek jobs as domestic workers in Ribeirão Preto.

That is the case of Maria Alcántara Silva, a local woman “over 30.” For the past six years she has commuted 35 km from her town, Pradópolis, to Ribeirão Preto and back every day. She says the better pay in the larger city compensates for the cost of the bus tickets. She at least earns enough to support her son, who is studying chemistry at the university, she said.

In Guariba there are 620 women registered as working as domestics in Ribeirão Preto, and the city government covers 40 percent of the cost of their transportation, said José Roberto de Abreu, municipal secretary of employment and labour relations.

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By IPS Correspondents
BAMAKO, Mar 21 2011 (IPS)

In the small village of Gwélékoro, 60 kilometres south of the capital, Bamako, the fields are empty now, during the dry season. After a poor harvest, farmers are worried by swiftly rising prices for staple foods like sorghum and millet.

“The cost of grain is particularly high this year,” Karim Diarra, a 43-year-old smallholder told IPS. ” A kilo of millet, for example, has not been sold for less than 100 CFA francs (around 20 U.S. cents). It’s been a long time since I’ve seen this. In previous years, a kilo could be sold at 50 CFA.”

While waiting for the start of the next rains (round about July) so that work in the fields can resume, the farmers are closely monitoring the prices of staple foods. They are apprehensive about the difficult period when they resume farming for a new season, but will have to buy grain to feed themselves, having run out of food from the previous year.

Sitting at a look-out point and gazing at the horizon, 65-year-old Niènè Traoré, said: “We have been anticipating these difficult times because of the sudden rise in prices. We don’t have many reserves for the rainy season (July to October), a period marked by the rocketing prices of basic foodstuffs.”

In the village of Hérémakono, seven kilometres from Gwélékoro, farmers claim the high cost of grain is partly due to the heavy rainfall in the area the previous season, which damaged their crops.

Talking to IPS, Madou Koné, a farmer who has 30 people to support, says that he is expecting difficulties. “Every year, I harvest enough to feed my whole family, but for the first time I might be buying cereals from the market. This really worries me because the prices are going to continue to rise.”

Currently, the price of millet is around 150 CFA francs (about 30 U.S. cents) per kilo in the markets of Hérémakono. This high price recalls a report released by the United Nations Food and Agricultural Organisation (FAO) last January, which sounded alarm bells about the rising prices of staple foods globally. But the local farmers say their predicament has little to do with the prevailing international situation or a local shortage.

They claim that the high price has nothing to do with the level of local production. “In Mali, the problem of high grain prices is not because of a shortage, but is a result of speculation. The authorities must control the market where subsidised grain is sold, to break the prices during the winter months,” said the chief of Hérémakono, Baba Dramé.

With an output of close to seven million tonnes of cereals, the 2010-2011 agricultural period, which has just been concluded in Mali, has been a very good one, says Moussa Léo Sidibé, secretary-general of the agricultural ministry.

According to Sidibé, many orders for export have been placed by big buyers, like the World Food Programme (WFP).

In February, it was reported on national television that WFP has ordered 15,000 tonnes of grain for Bénin and Sénégal. According to the same source, these exports and other reported orders will contribute to Mali’s economic growth in 2011.

To date, the government has not taken any measures against the rise in grain prices in 2011. While waiting to resume farming for the new season, the rural population is still managing to make ends meet. But for how long?

From their side, the grain banks will only open in the period between harvests when high prices are generalised and affect the whole country. Malian villages, organised into associations, re-establish their grain stores after the harvest each year; these are reserves that allow them to regulate the market price of the commodities.

The grain banks’ managers are autonomous in their decision over when to make their stocks available for sale, but they have never done it before the winter season begins. This stock is usually sold to the local population between June and September, to counter speculation.

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By Isolda Agazzi
GENEVA, Mar 21 2011 (IPS)

Investing in adding value to raw materials is crucial for the development of the African continent.

Some foreign entrepreneurs have created food-processing businesses in Africa and are making good money, despite an occasionally difficult business environment.

“A vibrant SME (small and medium enterprise) sector is key for employment, increased income, economic diversification, exports and foreign direct investment,” asserts Mohamed-Lamine Dhaoui of UNIDO, the United Nations Industrial Development Organisation.

“But, in Africa, manufacturing contributes only to 10 percent of gross domestic product,” adds Dhaoui, who is director of business, investment and technology services at UNIDO.

Raw commodities, like fuel, metals and unprocessed foods, form the most important part of African exports. In contrast, manufacturing export is limited to 29 percent of exports – low compared to other regions.

But the development of the private sector in Africa faces major challenges: a difficult business environment, inadequate technical support services, poor infrastructure and weak technological development, with high costs for processing and electrification.

Advantages of the African business environment include low labour costs, even though the labour force sometimes needs professional training. “And agriculture is one of the key sectors for manufacturing, with its agro- industry, cash crops and food industries,” Dhaoui notes.

Some foreign investors have taken up the challenge of manufacturing agricultural products directly in Africa. They are adding value locally, thereby contributing to local development while making good money.

Gary Hannam, CEO of the Swiss company Olivado Ltd, decided to create an international brand of extra virgin avocado oil that is manufactured in Kenya.

“In the Central Highlands of Kenya there is an abundance of good avocados and little domestic competition because local people don’t eat them,” he explains. “The possibility of having organic and fair trade certification is quick and the bureaucratic process is corruption-free.”

Despite some setbacks, a fair trade organic programme was set up in the record time of seven months. Hannam points out that Olivado is now the largest organic exporter in Kenya, with 820 small farmers certified. After extensive training programmes for farmers and the staff, they are now able to supply supermarkets directly.

“Our employment policy is to identify local people with good potential and train them. A former cleaner is now a fruit manager. And farmers’ incomes have doubled,” he explains.

Despite poor infrastructure – water, power and roads – Olivado has become a leading international brand of extra virgin avocado oil that has a presence in 22 countries. The number of farmers is expected to increase to 2,000 in the next four years, producing 460,000 litres of oil.

Based on the Kenyan model, the company is about to start a new factory in Colombia. “I am looking for partners to share this small Swiss company’s ideals,” he concludes.

Hans Peter Werder has another success story. The founder of HPW Ag, a small Swiss enterprise with only 12 employees, has built a dried fruit factory in Ghana. “Our strategy is to develop products with added value and target niche markets in Europe,” he explains.

“There are many advantages to beneficiation in Ghana, starting with the proximity to the production place and that you need only 15 kg of pineapples to make one kg of dried fruit. But there are also challenges, like unstable fruit supply, especially from small-holder farmers, inflation and the artificial value of the Ghanaian currency,” Werder notes.

Pineapples, coconuts and mangoes are prepared in Ghana, certified fair trade by Max Havelaar and sold in Switzerland and other countries.

In Ghana, fruits are prepared in partnership with a local company, Blue Skies, that employs 900 people in rural areas where the rate of unemployment is particularly high. This generates a demand for local hardware and other services.

HPW Ag helps pineapple growers to get fair trade certification. “Today we are the leading agricultural services provider in Ghana. We are responsible for the export of 35 percent of all pineapples from Ghana and possibly have the largest dried fruit factory in Africa. The factory is designed to pack consumer units at source and to supply retailers directly,” says Werder.

The key element is the procurement of fruit from multiple sources: 50 percent come from big growers and 50 percent from small ones. “If you stay only with big producers, who sell abroad, you depend on the export market. And with the small ones, you don’t know if they will have enough fruit,” Werder adds.

The processing of fruit is done in partnership with a South African dried fruit factory. Management is handled by a team in Ghana and through the relationship with the South African company.

Innovative ideas were required because of the high costs of electricity, gas and oil. HPW Ag decided to work entirely with renewable energy from the organic waste it produces.

Werder cautions that customers must take into consideration sustainability factors. “Whenever I send out my pitch, the answer is: send me the price list. Yes, I can send the price list, but Europeans should look also at sustainability.”

HPW assures consumers that approximately 37 percent of the consumer price remains in the country of origin.

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By Isolda Agazzi
GENEVA, Mar 18 2011 (IPS)

Local and foreign investment on the African continent is slowly moving away from agriculture and raw materials to manufacturing, services, communication and tourism, despite poor infrastructure and low skills levels.

Nozipho January-Bardill, group executive for corporate affairs at Mobile Telephone Networks (MTN), a South African company. Credit: Isolda Agazzi/IPS

She is the group executive for corporate affairs at Mobile Telephone Networks (MTN), a South African company that has invested in 21 countries, both in Africa and in the Middle East.

While most economies have contracted during the recession, African gross domestic product (GDP) has been expanding, she told the fourth Swiss- African business exchange, a gathering of businesspeople from Switzerland and African states that ended Mar 17.

“Africa is in a take-off phase, with foreign direct investment (FDI) increasing from 15 billion dollars to 80 billion dollars in eight years. And the per capita GDP of the top performing economies – Algeria, Botswana, South Africa, Libya, Mauritius, Morocco and Tunisia – exceed that of BRIC (Brazil, Russia, India and China), the traditional emerging countries,” January-Bardill noted.

In 2008, the collective GDP of the continent was 1.6 trillion dollars – equal to Brazil’s or Russia. In 2020, it is expected to be 2.6 trillion dollars.

African governments are playing a larger role in foreign investment. In the World Investment Report 2010, UNCTAD noticed that developing countries are increasingly pursuing a double strategy: attracting foreign investment while, at the same time, regulating it and directing it to sectors that are conducive to development.

Maggie Kogozi, the executive director of the Uganda Investment Authority, told IPS that, “our aim is to attract investment, both foreign and local. Since we have an educated workforce, we want it to go into value-addition: manufacturing, services, information and communication technologies, the financial sector, education and health are picking up quite well. There are also tourism opportunities, with a big need for hotels and lodges.”

Uganda, like other countries, is also rich in petroleum and minerals. “But the good news is that they are still in the ground, so now we can manage them better,” she said. “We have a strong standards and environmental body and a solid revenue authority, so we are ready to exploit our resources.”

With six billion barrels to be exploited, Uganda is putting out bids for an oil refinery in the country. It has also huge deposits of gold and a gold refinery for processing the metal locally, thanks to Russian investment. “And we would like that model for everything: adding value before we export,” Kogozi affirmed.

But there are problems too. Infrastructure remains the most obvious area to improve. Infrastructure bottlenecks, such as poor road networks, inefficient railway systems and expensive and unreliable electricity supply, are major hurdles.

“Most of Africa needs to be rebuilt or constructed from scratch,” said January- Bardill. “The cost of transport is very high. Like it is often said, Africa is expensive because it is poor and it is poor because it is expensive.”

Another challenge is the skills shortage. But new forms of FDI herald a new era, as foreign companies supply capital and new management methods, skills and technology. “We want to encourage all people to invest in Africa. I would like to invite you to think of the continent in a more positive light and to see opportunities the way they are,” she concluded.

Ramadhan R. Madabida, CEO of the Tanzania Pharmaceutical Industry (TPI), is also looking for investors. This state enterprise was privatised in 1997. “When we took over, it had a loss of about one million dollars, but last year we made 250,000 dollars profit.

“The local production of pharmaceuticals, especially in least developed countries (LDCs), is viable and feasible. It depends on a workable public private partnership, technical know-how, market size and cost structure. But there are technical and human resources gaps in poor resource-based settings like Tanzania that need to be filled by technology transfers,” Madabida added.

TPI produces and sells generic medicines for anti-malaria and AIDS-related diseases. As an LDC, Tanzania can benefit from the flexibilities of the World Trade Organisation’s Trade-Related Aspects of Intellectual Property rights (TRIPS) agreement and does not have to patent medicines till 2016.

Malaria and HIV/AIDS make up more than 75 percent of medical needs in the country. There are about 1.2 million people living with HIV and 350,000 people who need AIDS treatment immediately.

The government of Tanzania supports local pharmaceutical industries by giving exclusive tenders for all items that can be made locally. It also has abolished import duties on many inputs.

“The vision,” said Madabida, “is to transform TPI to become the regional pharmaceutical technology centre of excellence. Our mission is to break the cycle of dependency.”

The total investment required is 12 million dollars. Some 5,3 million dollars have already been invested and another 6,4 million dollars will be invested by December 2011.

The potential for total demand in the country is of 165 million dollars, of which anti-malaria represents 30-40 percent of all drugs needs.

“The demand-supply gap amounts to 104 million dollars, so further investment is justified. There is a huge potential market for pharmaceutical products in East, Central and Southern Africa,” he concluded.

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