Entering the Congo Resource Wars – Jungle Fever or Prelude of the New Landscape of Global Conflict?

In April 2012, I participated in an unforgettable expedition to the Congo basin in Central Africa, a part of the world which is often still referred to as the 'Heart of Darkness'. This particular place, once known as the Kingdom of the Congo, then Congo Free State or Congo Léopold, Belgian Congo, Zaire and now the Democratic Republic of the Congo is a land full of extremes: from abundant natural resources, flora and fauna, to conscience-shocking atrocities, with an estimated 5.4 million casualties since 1998. The Congo conflict is also known as 'Africa's World War' for being the deadliest albeit underanalyzed war since the Holocaust of the Second World War.

Tropical hardwood: a major source of illegal revenues 

As of today, the nation represents a complex crisis, a huge democratic deficit, lack of social cohesion, fueled by conflict commodities and cross-border power struggles. Ongoing plundering and looting in the worst tradition of King Léopold and Mobuto is sensible at every street corner. Within the Congo universe, a constant sensation of a place on the brink of collapse.

At the same time, Congo is a place of hope, with a young population, vibrant culture and astonishing landscapes. Although historically pictured by Europeans as a land of mythical beasts, plagues and cannibals, I encountered vibrant aboriginal cultures and sophisticated people. Kinshasa is the music and fashion capital of Central Africa. Ongoing conflict and disorder may have left deep physical scars and mental disturbances on the Congolese soul but its population is optimistic, dynamic and future-oriented. The DRC may rank rock bottom at the United Nations' Human Development Index, it also has one of the world's fastest growing populations, from a mere 10 million in 1960 upon gaining independence from colonial ruler Belgium, to an estimated 71 million in 2012.

On paper, the DRC has everything to be a top tourist destination. It is home to the okapi, bonobo and white rhino. The Congo is the world's deepest river with measured depths in excess of 220 metres and its basin is only second to the Amazon. The nation contains more Natural World Heritage Sites than the rest of Africa combined. The fate of its splendid rainforests are closely tied to ours as it plays a crucial role in carbon sequestration and thus combating global climate change. The future of the Congo will increasingly and intrinsically be intertwined with our own.

Fuelwood collection in Kinshasa outskirts

DRC forests, however, are increasingly under threat. A multitude of factors determine an alarming situtation. Forests are the preferred source of protein, medicine, energy and electricity. Its protected areas are all endangered, most have become 'paper' parks. Its forests are mostly 'empty', devoid of large animals. Slash-and-burn is the major culprit of deforestation, followed closely by charcoal fuelwood collection. Since the 1990s, palm oil plantations, oil exploitation and land grabbing are on the rise and the expense of forests. A more effective strategy to combat deforestation is urgent. Time is running out.

Congo is moreover extremely rich in natural resources. Copper, diamonds, gold and uranium are coveted, valuable prizes. The country is probably the world's worst victim of the resource curse. Coltan, tantalum, tin and tungsten remain key drivers of bloody cross-border conflicts. The Congo resource wars increasingly look like a prelude of the new landscape of global conflict. Outsiders cannot simply blame the situation on the ground on a lack of law enforcement or weak local governance. Chinese direct investors, South African multinationals and Swiss commodity speculators - to only name a few - all share a co-responsiblity. Resolving the multitude of conflicts which torture Congo's population, flora and fauna is not a generous act of altruism or 'development aid' but a moral obligation and necessary act of genuine self-interest and global significance.

Brazilian Incursions into the Peruvian Amazon – Desirable Interoceanic Integration or Jeopardizing a Fragile Environmental Balance?

No Latin American country has witnessed a bigger political and economic transformation in the last decade than Peru. Once torn apart by guerrilla warfare and hyperinflation, the country now enjoys an envious overall record in comparison to its neighboring countries. In the last decade, Peru has obtained an unprecedented period of strong economic growth. In 2010, its economy grew 8.7 percent and its stockmarket rallied 64 percent, among the best performing markets in the world, fueled by a global surge in commodity prices.

At the same time, however, 30 percent of the population lives below the poverty line. Regions where most commodity concessions were given have hardly benefited from the exceptional economic growth figures. For example, sixty percent of the inhabitants of Quechua-dominated Puno still live in abject poverty. This is a recipee for social conflict and source of discontent, which the majority of Peruvians agree is the single most important challenge for the country. Whether Peru is glass half full or half empty therefore depends on your perspective.

The invaluable biodiverse Yuruá or Juruá river nearby
the Peruvian-Brazilian border symbolizes what  is at stake
as both nations seek growing trade and infrastructure
links: integration at what price?

Peru’s foreign relations are undergoing a substantial transformation. Historically, Spain and the United States dominated Peru’s foreign affairs, diplomatic relations and foreign direct investment flows. Since the turn of the millennium, however, this scenario is changing rapidly. Both Spain and the United States are witnessing a period of retrenchment and seem to be frozen in their own economic tundra. The vacuum left by these once-upon-a-time superpowers is eagerly being filled by two emerging stars, Brazil and China. These changing economic power dynamics will have long-term geopolitical consequences.

Brazil’s politicians and captains of industry are showing a growing appetite for Peruvian affairs. This is a novelty as Peru and Brazil had traditionally turned their backs toward each other, with an – until recently – impenetrable Amazon rainforest disconnecting closer ties between Lima and Brasília. Since the advent of the third millennium, the global rally in commodity prices have made the once inhospitable Amazon basin increasingly look like a pricey target. All stars seem aligned for massive investments: growing Chinese appetite, gold bonanza, even rising timber prices and quest for hydrocarbons.

Brazilian Federal Propaganda at the Lima Airport:
Calling for Alignment or Subordination?

Even Brazilian Federal propaganda is invading the Peruvian magazine universe. Peru's widely read magazine Caretas recently featured a "separata publicitaria especial" on Brazil, 28 pages full of federal and corporate propaganda on the blessings of integration and litanies on "strategic partnerships," with paid advertisements of companies such as OAS, Odebrecht, Petrobrás, Queiroz Galvão and Vale.

In this occasional paper, I want to examine whether Brazilian incursions inside Peru are desirable. Should Brazil’s growing involvement in Peruvian affairs be interpreted as an avenue for healthy integration and sustainable development, or should it be feared as a dangerous neo-imperial incursion? Should Peru get rid of its historical distrust of its giant eastern neighbor? Should Russia’s relationship with its former satellite states and China’s incursions in Tibet be any compass? Based on my recent exposure trips to both ends of the Peruvian-Brazilian border, and across the wider Amazon basin, I want to highlight some opportunities and threats, arguments in favor and against increased integration. A deeper analysis seems warranted as there is no obvious answer readily available.

Table of Contents

1. Political Incursions: President Humala’s Brazilian Connection
2. Geographical Incursions: Brazil’s Pacific Export Route
3. Hydrological Incursions: Brazilian Dams in the Peruvian Amazon
4. Corporate Incursions: Brazilian Direct Investments in Peru
5. Financial Incursions: Brazilian Investments Flowing into Peru
6. Global Warming and the Amazon: Transcending National Borders
7. Conclusion: Avoiding Subordination

1. Political Incursions: President Humala’s Brazilian Connection

Peru’s biggest recent achievement has perhaps less to do with its exponential economic growth figures but with its smooth democratic transition. The exemplary handover of presidential power from García to Humala is a major accomplishment, especially if placed in a historic perspective. The outcome was anything but expected. At the outset of this year’s presidential elections, Humala’s prospects looked rather slim. In January 2011, four months before the elections, Humala trailed in fourth place in local opinion polls, far behind the main contenders for power, including former President Alejandro Toledo and former mayor of Lima, Luis Castañeda Lossio, with each 23 percent, and Keiko Fujimori, with 20 percent.

Political pundits argued that Peru was yearning for stability and continuity, no revolution. Peru’s stockmarket was rallying on this very prospect. Humala’s poor showing in the opinion polls at the outset of the campaign was directly related to his outspoken extreme leftwing ideas, which sounded much like the rhetoric of the Venezuelan President Hugo Chávez.

At a moment when most commentators downplayed the chances of Humala, an extreme makeover occurred. Humala’s fortunes in the opinion polls changed dramatically when he swapped his role-model from Chávez to Lula. By hiring Lula’s marketing campaigners Valdemir Garreta and Luis Favre, the presidential candidate Humala abandoned his radical Bolivarian positions, swapped his red t-shirts for blue shirts, even started wearing well-cut suits. He even launched a letter to the Peruvian people, (“Compromiso con el Pueblo Peruano”), resembling a similar letter written by Lula to his countrymen in 2002.

Humala’s surprising victory in the run-off against Keiko Fujimori on June 5 was initially greeted by distrust and panic. The Lima stockmarket knocked a record 12.4 percent off its main index. Panic on the Lima’s upper class neighborhood streets of Miraflores and San Isidro. These fears were hugely exaggerated. Dramatic falls in the financial markets became a buying opportunity as Humala’s new cabinet turned out to be a healthy mix of orthodox economists, pragmatic politicians and committed social workers.

In his inaugural speech, Humala talked about launching a conditional-cash transfer program, a program to fight childhood malnutrition and to implement a scholarship program for the poor to pursue tertiary education and the creation of a Ministry for Development and Social Inclusion. All these measures are long overdue and point at Humala’s well-balanced, moderate and gradual, consensual pragmatism. Especially Humala’s interest in promoting social inclusion scholarship programs deserves praise. The inaugural speech could be considered a Peruvian adaptation of the so-called Consensus of Brasília, which is a healthy combination of maintaining macroeconomic stability with a greater emphasis on the social inclusion.

Campaigning in the Amazon Basin:
Ollanta Humala 2011: the Great Transformation

President Humala has a unique opportunity to consolidate economic growth and include the poor, marginalized masses, which historically have been excluded from power and welfare, especially those living in the Andean highlands and Amazon wetlands. The more educated a nation, the more likely an economy will eventually be able to catch up and innovate. Humala understood the prime concern of the Peruvian people to better distribute income and to more equally divide the revenues of natural resources exploitation. His foremost challenge is to maintain the inherited macroeconomic stability, and aggregate social inclusion policies and sound environmental policies.

Going forward, President Humala should not inspire his policies on either the Toledo or García administrations, as both heavily relied on smoke-and-mirror decrees, designed at distracting citizen awareness. In February 2011, for example, former President García backed two emergency decrees in Congress, allowing accelerated bidding on 33 investment projects, by easing environmental regulations. Under the approved circumstances, the infrastructure projects in the Amazon would no longer require to obtain administrative authorizations. By ignoring pleas for indigenous consultation, public accountability and transparency got lost.

In sum, the success or failure of Ollanta Humala’s presidency will depend on its performance in addressing Peru’s urgent social problems, a better distribution of the growing economy and a decline in corruption and crime. By choosing Brazil as his first trip abroad as president-elect, Humala seems eager to side closer with the moderate leftist government of Lula heiress, President Dilma. How much Humala should borrow from Lula’s pragmatic playbook, however, remains an open question. Peru’s alignment to Brazil is not only emblematic in political affairs. As I will argue in the following chapters, Brazil's omnipresence can also be felt in areas such as logistics and foreign direct investments.

2. Geographical Incursions: Brazil’s Pacific Export Route

Historically, Brazil has disregarded or undervalued its easternmost borders. Until a few decades ago, Brazil’s enormous Amazon basin was rather underexploited and building river, land or train connections to neighboring countries like Peru and Colombia were downplayed or deemed irrelevant. Brazil’s population centered – and still centers – on its enormous coastline, where connections to Europe and North America are easier.

Brazilian efforts to logistically integrate the Amazon region initiated in the 1950s, when a special federal agency was created (SPVEA) to link Brasília with Belém (BR-153). In the 1960s, Brazilian state companies linked Cuiabá in the State of Matto Grosso with Porto Velho in Rondônia, a region erroneously considered as a 'demographic void.' The asphalting of BR-364 started as a 'penetration highway' aimed at decentralizing population and gain access to natural resources. The construction of BR-364 under the so-called Polonoroeste program was mainly financed by the World Bank. Brazilian generals expanded their presence in the 1970s by launching the construction of the Transamazon Highway (BR-230), along with an ambitious farmer colonization scheme. These federal 'development' initiatives have caused out-of-control social conflicts, led to a concentration of wealth, exploitative labor conditions and, most dramatically, led to the decimation of indigenous cultures.

The 1980s and 1990s witnessed the consolidation of conventional development schemes, as promoted and mostly financed by the Washington-based multilateral agencies such as the World Bank and Inter-American Bank of Development. Former President Fernando Henrique Cardoso (1994-2002) launched his Avança Brasil infrastructure program. The 1990s also saw the emergence of the Initiative for the Integration of the Regional Infrastructure of South America (IIRSA), for which multi-million loans are made available by the Inter-American Bank of Development (IADB). President Lula (2003-2010) accelerated the infrastructure integration scheme by launching his so-called Accelerated Growth Program (PAC) in February 2007, which is currently maintained by President Dilma.

According to a recent study of CIFOR, “the PAC has been marked by a reversion to conventional paradigms of economic growth, lobbying interests of powerful economic groups (such as construction conglomerates), patronage relations with regional political elites and the ‘politicisation’ of environmental licensing procedures.” Several of the PAC investments in the Amazon basin are opaque, lack social-environmental impact assessments and are deficient in multi-stakeholder dialogues.

Brazil’s federal infrastructure policies are increasingly reflecting the new geopolitical scenario. At the dawn of the 21st century, China has quickly displaced the United States as Brazil’s most important trading partner. In 2010 only, China accounted for $56 billion in trade flow with Brazil, which was an astonishing 25 times higher than in the year 2000. Brazil has avoided the international crises so far, not by becoming less bureaucratic or more business-friendly, but mostly due to its close trade links with China. In order to speed up even more its trade links with Asia, Brazil has started to look at shortening trade routes to the Orient. Instead of shipping its valuable commodities and natural resources across the Panama Canal or south of the African coast, Brazil has been investing in establishing a trade route over the Peruvian Andes towards the Pacific.

Just as California once changed the fortunes for the United States, now Peru seem well placed to change the destiny of Brazil. In the words of investment strategist Walter Molano: “Today, Peru is poised to become a new California by becoming an outlet for Brazil to move its enormous treasure trove of natural resources to the immense markets that lie on the other side of the Pacific.”

The Interoceanic Highway nearby Tarapoto:
Downhill racing towards Brazil

The insatiable Chinese appetite from Brazil’s natural resources has created enormous opportunities for Peru, which itself has also recently signed a trade pact with the Asian powerhouse. The so-called Interoceanic Highway will connect two of the world’s most promising emerging markets, China and Brazil. At the present moment, the southern Peruvian port of Ilo is the most important trade link, but eventually four other ports are expected to improve strategic links between Asia and South America. Brazil’s natural resources like to soy, iron ore, grains and even cattle are expected to be increasingly transported to Peruvian ports. In the long term, even electronic cargo from the manufacturing plants of the free-trade zone of Manaus is expected to pass through the Peruvian ports instead of the Panama Canal.

Bridge over Río Madre de Dios in Puerto Maldonado:
A Golden Gate to Prosperity 
or Road to Deforestation?

The first interoceanic route, which runs from Brazil’s midwest, from the state capitals Cuiaba (Mato Grosso), Porto Velho (Rondônia) and Rio Branco (Acre), via Xapuri, Assis Brasil, to the Peruvian bordertown Iñabari, Cuzco, Arequipa and downhill to Ilo, is a matter of fact. After over forty years of planning, the interoceanic connection was officially inaugurated in December 2010. The last missing link, a bridge over the Madre de Dios river in Puerto Maldonado, was fixed mid-September 2011. A flow of 400 Brazilian trucks is soon expected to cross the city each day. The link has already unleashed an avalanche of illegal Wild West-type settlements.

The second interoceanic route is planned to run from Rio Branco, the state capital of Acre, via Cruzeiro do Sul, to the Peruvian town of Pucallpa, which in turn is already linked by road to Lima. Brazilian authorities are currently asphalting the final parts of Highway BR-364, between Cruzeiro do Sul and the Peruvian border. The connection further up to Pucallpa so far only exists on paper and is highly controversial. The road would cross the Serra Divisor, one of the most biodiverse spots on the face of the universe. In Acre, not only palm oil plantations are being introduced at a record pace to feed the growing overseas biofuel market, but also genetically-modified soy plantations are making inroads.

Illegal Goldmining at the Interoceanic 
Highwaybetween Cusco and Puerto Maldonado

The infrastructure project has also unleashed a gold rush. Peru’s Madre de Dios province is witnessing an avalanche of illegal gold mining. The opening of a highway between Cusco and Puerto Maldonado has attracted thousands of internal migrants in search of gold. Illegal settlements along the highway are popping up at a record pace. Guacamayo is considered one of the biggest illegal gold mining sites in the world. With gold prices globally hitting record highs, the gold bonanza has become particularly attractive. As of 2011, Peru has become the sixth-largest gold producer. Although most of its production comes from the Andean highlands, a growing portion comes from artisan mining of the Madre de Dios riverbanks, which harbors huge quantities of alluvial gold.

The artisan gold mining and illegal roadside settlements are also fastening deforestation in Madre de Dios. The newspaper El Comercio reports that 302’154 hectares have been deforested in Madre de Dios until 2010 as a direct consequence of logging, burning and illegal mining. As of 2011, it is estimated that 30’000 people are working in businesses related to mining only in the area bordering the Tambopata National Reserve.

Yet another disastrous side-effects of the gold bonanza is the destruction of fish habitats. The Madre de Dios river basin is already polluted to such an extent that its fish is no longer edible. Restaurants in Puerto Maldonado are only serving fish produced from artificial fish farms. Mercury, which is mostly imported via Spain, is notorious for entering the food chain, causing neurological disorders. This could be a prelude to a public health disaster. The long-term consequences of uprooting aquatic wildlife, depletion of fish stocks and degradation of soil quality deserve more academic scrutiny and proactive public policies.

Community Vigilance at Río Shishinahua in Loreto:
Inspecting Against Illegal Logging and Biopiracy

At both ends of the Peruvian-Brazilian border, there is a relatively weak law enforcement regime. The state is mostly absent. Historically these areas belonged to the rainforest, with hardly a state presence. As the region has an under-resourced police force, lacking a well-functioning criminal justice system, it has become a paradise for drug trafficking and resource plundering.

In sum, the interoceanic links will come at a huge cost. From the environmental viewpoint, the unintended consequences of asphalting pieces of rainforest are dramatic as it increases illegal land settlements, deforestation and resource plundering. Asphalt is historically a major culprit of forest devastation. Forest fires are already on the rise in the eastern part of the Brazilian state of Acre. The Madre de Dios / Acre / Pando corridor is becoming notorious for violence and brothels, huge supplies of chainsaws, Spanish mercury, US-manufactured guns and bulldozers.

3. Hydrological Incursions: Brazilian Dams in the Peruvian Amazon

In addition to the interoceanic highway, the other large issue in Peruvian-Brazilian relations nowadays is the construction of hydro-dams in the Amazon basin. In order to safeguard its exponentially rising energy demand, Brazil is increasingly looking to its western neighbors, especially Bolivian and Peru, to guarantee future energy supplies. The South American giant is expected to need 50 percent more electricity in the next decade.

Brazil is eager to push deeper into the Amazon basin to generate its electricity supply. Controversial hydrodams are being built on the Madeira River (Santo Antonio and Jirau) in the State of Rondônia and the construction of an even bigger one has recently started on the Xingu River (Belo Monte) in the State of Pará. As these domestic power supplies are not enough, the Dilma government recently renegotiated the contract of the Itaipu dam with Paraguay. Negotiations with the Bolivian government to construct huge hydro dams further upstream the Madeira River are also underway.

Brazilian hydro-electricity plans to push into Peruvian territory are even bigger. These plans are not new. After five years of bilateral negotiations, Brazil’s former President Lula signed a strategic deal with Peru’s former President Garcia in Manaus on June 16, 2010, envisioning the construction of several hydro dams in Peru, all financed by Brazilian public money, aimed at serving Brazil’s southeastern industrial and residential markets.

The first and most emblematic bilateral plan is to construct a $4 billion hydro dam on the Inambari River, not far from the border connecting the Peruvian region of Madre de Dios with the Brazilian State of Acre. The geographical location seems perfect as the river comes down from the Andean altitudes and pushes down through a narrow ravine. The Inambari dam is planned to be build in a few years time with a schedule installed capacity of  2’000 megawatts, which would make the fifth largest on the continent. The construction will be led by a Brazilian consortium called Egasur, which is made up by the Brazilian federal power holding group Electrobrás, Furnas and São Paulo-based Construtora OAS.

Santo Antônio on the Rio Madeira in Rondônia:
Brazilian Hydro Dams Soon Coming to Peru?

The construction of the Inambari dam is not without its controversies as the agreement has mostly disregarded environmental impact studies and downplayed the importance of local consultations. Opponents also argue that the construction would violate the rights of indigenous communities. There is no doubt that the planned dam, which includes a 30-year concession and a 413-square-kilometer schedule reservoir, will severely change the ecological cycle in the Madre de Dios province. There are also negative side-effects from the global warming perspective, as the proposed dam will destroy a huge area of carbon-dioxide-absorbing rainforests.

Closer scrutiny to the Inambari project is warranted also because several other Peruvian-Brazilian hydro dams are in the pipeline. The other fives dams projected nearby the borderline include the Sumabeni (1’074 megawatts), Pakitzapango (2’000 megawatts), Urubamba (900 megawatts), Vizcatán (750 megawatts) and Chuquipampa (800 megawatts). The overall budget tops $16 billion dollars.

President Humala was hardly sworn in when he already faced a serious challenge in a region where he obtained most votes. Indigenous Quecha movements have been organizing manifestations against the constructions of the Inambari dam, which threatens to displace up to 3’000 people from 70 indigenous communities. Prior to Humala’s inauguration, indigenous the Aymará led Natural Resources Defense Front with support from the National Federation of Communities Affected By Mining (CONACAMI) staged a massive protest in another area of the Puno province, in favor of revoking the Santa Ana silver mining concession, which the previous government has granted to Canada-based Bear Creek Mining Company. Indigenous communities claim that the exploitation will irreversibly pollute Lake Titicaca and its neighboring river basins. The Vancouver-based company has already filed for a court injunction in order to regain its mining license and is contemplating further legal action against local authorities under the Canada-Peru Free Trade Agreement. Prior to the elections, the government also suspended the Southern Copper’s $1 billion Tia Maria copper mining project in the Arequipa province after several protesters died in violent police clashes.

It remains to be seen how Humala will deal with the hundreds of pending mining applications. Indigenous consultation, environmental impact studies and economic feasibility studies should be a prerequisite. Peru is a signatory of the United Nations Declaration on the Rights of Indigenous Peoples, which was adopted by the United Nations General Assembly on September 13, 2007. Article 10, for example, declares that indigenous peoples are entitled to their land and must be consulted in regard to anything affecting their territorial claims.

Peru’s 1993 Constitution moreover states that the country is a diverse and multicultural nation, which safeguards “the right to cultural identity” and “upholds customary law and special jurisdiction (indigenous and peasant justice), alongside with other rights for peasant and native communities.” Such declarations ought to be taken into consideration when dealing with hydro dams in ecologically sensitive areas. In addition, Peru is signed the International Labor Organization’s Convention 169, which highlight the importance of prior consultations as a prerequisite for enacting measures affecting indigenous ancestral territories. Environmentalists are opposing the construction of hydro dams, calling for permanently cancelling concessions.

As if these pressures were not enough, President Humala will be equally put under pressure by his Brazilian friends, who are eager to tap into Peruvians energy reserves. Choosing between the legitimate demands of indigenous and marginalized communities, which form his electoral voter’s base, and these political pressures and financial investment schemes of his Brazilian friends, can become yet another defining moment of his government.

4. Corporate Incursions: Brazilian Direct Investments in Peru

Brazil’s emergence as an economic powerhouse has direct implications for Peru. Brazil is not only pursuing a more aggressive foreign policy agenda, as can be witnessed at the G-20 and prestigious BRICs and its aspiration to become a permanent member of the United Nations Security Council, it has also become more outspoken in its foreign direct investments plans. Brazil’s local development banks and multinational firms have turned their eyes on a new and precious prize: Peru.

Former President Alejandro Toledo, who ran Peru between 2001 and 2006, opened up Peru’s Amazon basin for corporate involvement. He was the first Peruvian president granting major energy concessions across the region. Toledo’s administration was followed by President Alan García’s reign, which expanded on Toledo’s neoliberal policies. When Humala took office, over 40 percent of the Peruvian Amazon has already been divided up in energy concessions.

In 2008, President Alan Garcia granted corporate licenses to explore natural resources in the Amazon basin, including oil, natural gas and timber. The privatization of natural resources is part of the 2008 framework of the United States – Peruvian Free Trade Agreement. Former President Gracia argued that the foreign companies are bringing fresh capital considered a prerequisite to develop Peru’s interior.

As of September 2011, Brazilian multinationals have committed billions to Peru. The most visible ones are Odebrecht and Camargo Correa, Brazil's largest construction and engineering firms, which are constructing the interoceanic highways. The natural resources giant Vale operates a port concession in Bayóvar. The petrochemical firm Braskem and steel group Gerdau also started investments in Peru.

The most visible Brazilian corporate presence in Peru is Odebrecht. At the outset of the third millennium, this construction company had 460 members and a backlog worth $3.1 million. At the end of 2009, this number of employees had risen to 8'000, with its backlog surpassing $520 million. For 2011, the company projects earnings in excess of $1 billion.

Brazil’s Odebrecht has also financed the construction of a Christ Statue in Lima, which resembles the famous statue overseeing the Guanabara Bay of Rio de Janeiro. There is no consensus in the streets of Lima, however, whether the statue is a universal symbol of salvation or demonic foreign intrusion. Odebrecht might have donated more than $830’000 towards its construction, locals see the Corcovado replica more as unsuitable, excessive and spoiling the landscape.

Yet another very active Brazilian firm in Peru is the state-controlled oil company Petrobrás, headquartered in Rio de Janeiro. Brazil’s oil giant operates in Peru since 1996 but has significantly increased its investments in the last couple of years. Currently, the company produces 16’000 barrels of oil in the so-called X Lot in northeastern Peru. It recently obtained 14 additional exploration contracts for wells in Peru’s Marañon, Huallaga, Madre de Dios and Ucayali river basins, and also off Peru’s coastline.

The major Peruvian prize of Petrobrás, nevertheless, is in the area of gas exploitation. In October 2010, Petrobrás announced that it discovered gas in the Picha 2X well in Block 58 in Peru’s Cuzco department, which may hold 1.7 trillion cubic feet of recoverable natural gas. This follows another major discovery in the Urubamba 1X well in 2009. The discoveries in Peru only are enough to more than double the firm’s foreign natural-gas reserves. The state-controlled firm also continues to explore for gas in the Camisea field, which is expected to be Peru’s largest gas field.

Peru, which has the largest chunk of the Amazon basin after Brazil, has now granted around 70 percent of Amazonian territory as concessions for oil and gas exploration. There are tremendous opportunities for multinational firms as the country contains the world’s second-largest producer of copper, zinc and silver, besides huge proven reserves in gold, lead and tin.

Although extracting commodities is a very capital-intensive business, multinational corporations should prepare themselves for a more outspoken Peruvian stance on resource windfall taxation. Expropriation, as has been witnessed lately in Venezuela and Bolivia, would be a bridge too far. It is only too natural, however, that sky rising commodity prices are nurturing resource nationalism but this should not alarm overseas investors. The Humala administration should not change concessions half way down the road or fiddle with royalty and taxation regimes. Firms like Petrobrás, Odebrecht and Camârgo Correa ought to convince their Peruvian hosts that they can contribute to sustainable development, recruit and train locally and reduce their ecological footprint at the minimum possible. Without showing humility and contributing to local welfare, foreign companies will be regarded as neocolonial thieves.

On August 25, 2011, prime minister Salomón Lerner announced in a speech to Peru’s Congress that the government will demand a greater share of the commodity extraction. The additional windfall tax, which will add over $1.1 billion, the equivalent of 0.7 percent of its GDP, to government revenues, was less punitive than Wall Street pundits feared. Foreign multinational firms with huge investments in Peru like BHP Billiton, Freeport McMoran, Glencore and Xstrata seemed all relieved by Humala’s decision. Under the new legislation, Peru will maintain its competitiveness with Chile. The multinational mining industry is planning to invest a massive $42 billion in direct investment until 2016.

5. Financial Incursions: Brazilian Investments Flowing into Peru

Not only corporate direct investments, but also financial ones are flowing from Brazil into the Peruvian Amazon. This is relatively new as both Brazil and Peru were until recently depending on multilateral investment programs, rather expensive trade financing and scarce direct investment mostly coming from the United States, the European Union and Japan. In the case of the Amazon, the most visible actors were the World Bank and the Inter-American Bank of Development. Both have a long and highly controversial track-record in the world’s largest river basin.

At a time when both the World Bank and Inter-American Bank Development are raising more doubts about the role of huge infrastructure financing programs, there respective role has become less relevant. Both institutions are increasingly being scrutinized by their own shareholders, European non-governmental organizations and internal monitoring teams. Their poor environmental track record has led to a bad reputation in countries the developing world, including in countries like Brazil and Peru, where multilateral development financing is often equaled to white elephants.

Right at a time when these multilateral development agencies are improving their environmental due diligence, developing countries no longer need their money. This is rather ironic. New development actors are appearing in the investment arena. In the case of the Amazon, Brazil’s National Social-Economic Development Bank (BNDES) and Chinese lenders are increasingly providing the necessary financial resources for infrastructure projects in the Amazon basin.

Neither financial sources coming from China nor Brazilian federal loans are undergoing the necessary social-environmental due diligence, which nowadays is the norm at both the World Bank and the Inter-American Bank of Development. As being argued by Marc Dourojeanni, “the case of the Southern Interocanic Highway in Madre de Dios repeats, almost 40 years later, what the World Bank and IDB did in Rondônia and in Acre in Brazil on the other side of the border.” According to this former World Bank advisor, “to build roads without regulating the ownership of land, without financing the agricultural and farming development, without avoiding unnecessary deforesting and without protecting the sanctuaries of biological diversity such as when building large hydroelectric power plants without caring for the basins that generate water, are all examples of collective suicide.”

In sum, the BNDES plays the role as the principal source of large-scale, capital-intensive investment schemes. Its role is highly controversial as its funding policies lack transparency and is based on top-down decision making. It moreover prioritizes an investment approach based on economic growth in detriment of an ecologically sustainable development path. The bank prefers investing in transportation (asphalt), in agribusiness (large-scale beef processing facilities) and energy (controversial hydodrams such as Jirau, Santo Antônio and Belo Monte). Such an investment style should not belong to a “social-economic development bank.” The true vocation of the BNDES should be in the area of promoting green economies, payment schemes for environmental services and renewable energies. Unfortunately, the BNDES under Lula and Dilma is becoming irrelevant in the sustainable development debate.

6. Global Warming and the Amazon: Transcending National Borders

The issue of global warming might be the most complex and incomprehensible challenge humanity has ever faced – and even ignored or downplayed by many US politicians – but there is a growing global awareness that it ought to be placed more prominently on the political agendas and corporate business plans. This holds especially true for Peru and other Andean countries, as these geographies are among the most vulnerable to climate change.

Peru is home to around 70 percent of the ice glaciers located in tropical latitudes. Under the current business-as-usual scenario, these glaciers are melting at a record speed, which will have tremendous repercussions for the availability of drinking water, agricultural irrigation and energy supply. In the last couple of decades, 22 percent of Peru’s glaciers have vanished. Peru’s shrinking glacial endowment will have tremendous impact for the country’s arid coastal region, including Lima. Peru’s capital city, with a population approaching nine million, is already the world’s second largest desert city, after Cairo. As of 2011, the Andean nations rely on glaciers for around 70 percent of their electricity supply. Strategic plans how to mitigate these problems are long overdue.

The causal link between deforestation and climate change is increasingly becoming evident. According to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change, deforestation and forest degradation contribute to approximately 17 percent of anthropogenic greenhouse gas emissions. Deforestation itself causes the release of several harmful greenhouses gases, including nitrous oxide, methane, and nitrogen oxides. From this perspective, the rainforest ought to be seen as an air conditioner, which cannot be replaced or repaired once it is damaged.

As climate change has global repercussions, the policies to revert climate change cannot only be financed by Peruvians and Brazilians. The financially powerful North American and Western European agribusiness lobbies, for example, should realize that Peruvian and Brazilian efforts to protect the Amazon and keep their forests standing generate substantial global benefits. Both nations, however, are not receiving enough financial support from free-riding wealthier countries. This is a paradox which ought to be addressed. The international community should compensate Peru and Brazil in their effort to avoid deforestation. As it is in the interest of the entire planet to conserve what is left of the largest rainforest, a global financial mechanism ought to be put in place.

Payments for ecological services is not only desirable, it is just and fair. Financial mechanisms to pay for standing forest should therefore be a key issue on the agenda at next year’s Rio+20 Earth Summit. Both Peru and Brazil should assume a leadership role is pushing this issue.  

7. Conclusion: Avoiding Subordination

The Peruvian and Brazilian Amazon are at a crossroads. Social, political and economic incursions, new trade links and migration flows are quickly altering their landscapes. Both countries’ citizens are becoming more affluent and therefore consuming more. This is already putting increased pressure on their forests and relatively abundant water resources.

The interoceanic highway, the multi-billion commodity extraction and hydro-electricity investment plans are not only linking the two nations’ geographies but also their destinies.  Brazilian incursions into the Peruvian Amazon too often reflect a failure of policies and investments geared towards more broadly-shared social and economic benefits.

As correctly argued by Marc Dourojeanni, “the large and increasing amount of proposals and decisions on large public infrastructures and use of natural resources of the Peruvian Amazon is not correlated with the very limited information that is available to society, including to the population that will be directly affected.” This former senior assessor of the World Bank complains that “the official information, if any, is fragmented, confusing, untimely, and invariably presents only the point of view of the promoters, whether they are governmental or private.” He therefore concludes that “the lack of transparency is one of the main causes of the grave social conflicts that each time with greater intensity breaks out in the Peruvian jungle.”

The hydro-electricity dam agreement signed by the former presidents García and Lula, for example, are not a guarantee for future clean energy supplies, as they made you believe, but will instead cause an avalanche of negative social and environmental disasters, including forced displacement of indigenous peoples, such as the renowned Ashaninka nation.

Human Settlements along the Interoceanic Highway:
Lawlessness Ruling Madre de Dios

Recent local development in Eastern Acre and Western Madre de Dios provinces are worrisome. The area, which until not so long ago was South America’s least populated and most inaccessible area, only reachable by boat or plane, is now mostly at the mercy of corporate greed, short-term fortune seekers, speculators and increasingly organized crime. Not only via satellite surveillance but also by driving along the Interoceanic Highway, it becomes clear that destruction is underway in massive scale.

Anthropologists and environmental law enforcement officials are urgently needed to bring order to the chaos. Irreversible damage can be afflicted upon the Madre de Dios upper watershed, one of the most important sources of the Amazon basin, with unimaginable knock-on effects further downstream. Only 15 percent of Peruvian territory is under a protected status, there is room to increase this number.

The rather chaotic integration of Peru and Brazil is the logical outcome of badly planned – or even unplanned – investment strategies of public and private actors, in which public consultation are mere window dressing exercises. Peruvian authorities need to modernize its Penal Code and urgently include illegal gold mining as a delict. Illegal gold producers and traders ought to be accused of fueling devastating the environment. Peruvian authorities should consider launching something similar to the international Kimberley Process Certification Scheme (KPCS), which establishes clean export, import and internal controls mechanisms. In addition, laws related to the forest should not only be assessed and enforced by the Ministry of Agriculture, as is still the case, but also by Peru’s Ministry of the Environment. The country should equally increase the number of environmental law enforcers, especially in Loreto, Puccalpa and Madre de Dios, the regions where Brazilians are making incursions.

A promising sign is Peru’s adherence to the Extractive Industries Transparency Initiative, which aims at making the mining industry more accountable to public and government scrutiny. Peru’s natural riches should not be sacrificed at the altar of greedy, short-term Brazilian-Chinese trade interests.  If Peruvian authorities are not stepping their presence along the interoceanic highways, then its pristine biodiverse Madre de Dios, Ucayali and Loreto provinces will soon look like endless genetically-modified monoculture pastures, which are aggressively advancing in the Brazilian states of Rondônia and Acre.

Río Huallaga in the Peruvian Amazon:
from Insignificant Backwater to Invaluable Asset

Going forward, a zero-deforestation policy is a sine qua non for guaranteeing a sustainable development regime at both ends of the border. Human migration flows, construction companies and extractive commodity firms all pose a serious threat to upset the fragile ecological balance in the crystal border area between Peru and Brazil. If government agencies at both ends of the border continue to adopt a laissez-faire attitude towards grilagem (illegal land invasions) then deforestation will not be reversed. National and local governments should be wary to welcome often well-intentioned corporate ‘development plans’ to the regions. The plans are not in the wider public interest, lack transparency and multi-stakeholder dialogue.

Highway BR-364 nearby Mâncio Lima, Acre:
Brazilian Tax Money for Asphalting the Rainforest

Both Peru and Brazil should question the long-term advantage of exporting its natural resources to China. Chinese imports of Brazilian beef generate huge money flows and create thousands of jobs. However, the environmental footprint is not fairly priced in. In addition, Chinese consumers are not as concerned as North American and Western European consumers to ensure traceability to so-called zero-deforestation areas, where the production of soy and beef are prohibited. China is currently the biggest importer of Brazilian cattle hides, which are used to produce shoes, furniture and even cars. The end-products are ironically being imported in Brazil and carry the label “Made in China” and not the “Made in the Amazon,” which would make more sense. Neither Brazil’s long-term interests are not served by catering to Chinese growing demand, nor is Peru’s outlook enhanced by being the preferred broker of the bilateral Brazilian-Chinese trade. In this sense the IIRSA runs the risk repeating Brazil’s great historical mistake: exporting natural resources without adding human value.

In sum, it remains highly doubtful whether multiple Brazilian incursions into Peru’s Amazon basin is more a blessing than a curse. Under the current business-as-usual scenario, the negative risks are outweighing the positive opportunities by a wide margin. The integration as currently witnessed in the border regions of Acre and Madre de Dios reflects the incapacity of traditional political models to respond to legitimate demands for great social inclusion, environmental equilibrium and economic equity. The unsustainable integration path calls for a paradigmatic shift. There is a huge discrepancy between Brazilian federal and corporate propaganda campaigns and the reality on the ground. Peru’s coastline might see a surge in corporate activity, profit outlook and employment opportunities, the country’s vast interior and its ancient cultures, however, will be uprooted, its natural riches are most likely being plundered and its biodiversity devastated. If Peru and Brazil are to be taken seriously as forest stewards, then they should excel in expanding smart grids and solar arrays, interoceanic fast train connections, essential for future generations in a post-carbon world, instead of subsidizing diesel-guzzling trucks crossing the Andes. The interoceanic integration as currently being undertaken is dramatically integrating the economic frontier of deforestation.

* This article has originally been published as Swiss Consulting Group Occasional Paper # 20. The original version in pdf format, which includes footnotes and references, is available here).

Brazil's New Forest Code – A Costly Own Goal

Brazil’s Congress yesterday sacrificed its most precious asset – the Amazon rainforest – at the altar of its powerful agribusiness lobby. This is a tragic setback for a country, which is trying to reconcile forest stewardship and economic expansion. Right at time when global public opinion is reassessing its take on the nation - Brazil is in vogue, its Congress overwhelmingly voted in favor of a new controversial Forest Code. As there is much at stake, especially for future generations, close scrutiny is warranted.

Cattle advancing in the Amazon

There are many reasons to be disappointed. First and foremost, the nation’s medium-to-long term economic interests are jeopardized. The country's economic outlook is put at risk by recklessly glorifying short-term agribusiness gains and greed. Brazil’s new Forest Code sends the wrong message that agricultural output is correlated to more deforestation. Brazil’s national media obsession to pitch the agribusiness lobby against environmentalism, production against protection, is false and misleading. As a sophisticated agribusiness superpower, Brazil can easily quadruple its agricultural output just by applying modern techniques and intensifying land use, there is no need to cut down one single tree. The question is not more land, the main issue is better existing land use. By easing restrictions on clearing forests along riverbanks and on the tops of hills, for example, more might be produced in the short-term. However, in the medium term, this will only exacerbate soil erosion, water shortages and forest fires, which will negatively affect all of us, including farmers. The new Forest Code is a Pyrrhic victory for the agribusiness lobby.
  
Secondly, the debates in Brazil's Congress have revelead that its members are out of touch with its scientific community and citizens they represent. Brazil's most prestigious scientific bodies - the National Academy of Sciences and the Brazilian Society for the Advancement of Sciences - are opposing the new code. By a wide margin, Brazilian citizens are convinced that a so-called "zero deforestation" policy is in the nation's best interest. This trend became clear during last year's Presidential elections, when the Green Party candidate, Marina Silva, obtained a surprising 20% of the votes. This trend is likely to consolidate. In countries like Switzerland and Germany, environmentalists have become mainstream and are governing cities and provinces on a pro-business platform.
  
Brazilian politics, in return, is still mostly dominated by old-school clientelism. Aldo Rebelo, who was the chief architect and rapporteur in the Congress for the new Forest Code, belongs to Brazil's Communist Party, which received unconditional support from the more right-wing agribusiness lobby and conservative old land barons. This is an awkward, surreal coalition. Brazilian politics is like playing the violin: carried by the left hand, conducted by the right hand. The music played is out of tune, and jeopardizes Brazil's quest for symphonic harmony. 

There are many more paradoxes in Brazil's surreal political environment. Mainstream political parties, such as the social-democrats (PSDB), supposedly the opposition, voted en masse in favor of the new Forest Code. The already fractured PSDB is likely pay the price at future elections, as at is increasingly out of touch with its urban voter's base. Since Fernando Henrique Cardoso left power in 2002, his party has been out of touch with the voter's base. 

Yet another paradox is the fact that Congress members representing the Amazonian states voted also massively in favor of the new Forest Code, maintaining the false assumption that a square kilometer of clearned land has a bigger economic value than standing forest. Congress members from Brazil's largest state, Amazonas, seem more interested in expanding the controversial Free Trade Zone of Manaus than valuing its rainforest. Brazil's leading governing party, the Worker's Party (PT), is deeply divided internally on the forest issue. The only party that has consistently voiced its concern and opposition to the new Forest Code is Marina Silva's Green Party. Her party seems best placed to make electoral gains in the future.
  

Logging: Legitimizing the illegal

Thirdly, by providing amnesty for illegal deforestation, Brazil is sending a wrong message to its people, especially to its law-abiding citizens. Under the new code, small-scale landowners, who make up the majority of Brazil’s farmers, will be exempt from having to replant deforested land. The most controversial item in the new code is that farmers with land up to 400 hectares are granted amnesty if they illegally cut down trees before July 2008. By legitimizing the illegal, the country is reinforcing the overall global perception that it is a land of weak law enforcement, governed by impunity.

Today’s amnesty will only stimulate future misbehavior. It is no coincidence that the voting of the new Forest Code took place at a time when illegal logging is again on the rise. According to Brazil’s National Space Research Agency (INPE), about 593 square kilometers of forest was cleared during March and April 2011, mostly in the State of Mato Grosso, compared to just 103 square kilometers in March and April 2010. The recent trend of falling deforestation rates seems to be broken.

Fourthly, Brazil will increasingly face overseas consumer pressure. It is likely that the soy and beef moratoria, which are already in place, will be expanded as conscious consumers overseas have no interest in contributing to deforestation. Supply-chain certification is also likely to be enhanced. Multinationals operating in the Amazon basin will also come under rising consumer scrutiny. Brazil’s Congress just handed a powerful argument to the European Union farm lobby to contemplate new trade barriers and tariff walls. European and North American opponents of importing Brazilian ethanol were granted more ammunication to their protectionist arguments.

The Amazon: Last Frontier

Local Brazilian corporations might receive substantial funding from Brazil’s national development bank (BNDES) but they will face more market scrutiny, end-investor boycotts and funding restrictions from institutional asset managements firms, such as insurance companies and pensions funds. Brazil's private banks, such as Bradesco and Itaú Unibanco, both signatories of the Equator Principles, will have to double their due diligence efforts in order to comply with global sustainable financing standards. Both banks have no interests in being regarded as the bankers of deforestation. Looking at the heavy global media coverage of the Brazil's new Forest Law, it is clear that the naming and shaming of the culprits of rainforest destruction will rise.

Fifthly, by weakening its forest legislation, Brazil will have a tougher time to comply with international climate change legislation. The dichotomy over what is economic growth, what ought to be considered development or progress, reflects a wider global debate, in which many countries are trapped. Reducing deforestation would confer tremendous benefits to Brazil by lowering its carbon output and hence upon the level of global warming. The Amazon is crucial not only for Brazil and its neighbors, but also for regulating the global climate. As recently argued by a INPE-Hadley report, “any changes with the [Amazon] basin – be they climate change, land use changes, or a combination of the two – are likely to have far-reaching consequences for the operation of natural systems and the people they support.” In addition, the UK-Brazilian scientific report highlights that “the hydrological cycle in the Amazon suggests that it recycles as much as 50% of its rainfall, and that if as little as 30% of the Amazon is cleared, it will be unable to generate enough rainfall to sustain itself, leading to a positive feedback loop of more forest loss and less rainfall.” By easing rules of conservation in the Amazon, the new Forest Code is likely to hasten the process of global warming.

Dark clouds over the Amazon

In sum, Brazil's new Forest Code is a costly own goal as it goes against the country’s long-term economic interests and geopolitical ambitions. According to the BBC World News, the new Forest Code is "retrograde." Brazil's desire to showcase its conservation expertise at next year's UN Earth Summit - Rio +20 - has received a serious beating. Countries like Bolivia and Peru, even nations as far away as Congo and Indonesia, might have to look elsewhere to better protect their natural heritages. This is rather sad as no country was more visible, engaged and proactive at last year's UN Biodiversity Summit than Brazil. It is rather tragic that as of 2011, the international United Nations Year of Forests, the Amazon forest is still regarded as worth more dead than standing. If Brazil's want to safe its face for hosting next year's Earth Summit, its Senate and President Dilma Rousseff should veto the new Forest Code as just endorsed by the Congress.

Connecting Suriname to Brazil – Avenue to Economic Development or Highway to Forest Destruction?

Government officials of Suriname and Brazil are conducting negotiations to build a road to directly link their nations. Suriname and Brazil are currently the only two South American nations not directly connected by land. At the present moment, the countries are connected by land, either via Guyana in the west (Boa Vista - Lethem - Georgetown - Nieuw Nickerie) or via French Guyana in the east (Oiapoque - Cayenne - Saint-Laurent-du-Maroni - Albina).

The masterplan is to connect Paramaribo via Pokigron, in Southeastern Suriname, via the Tumucumaque Park and Pedra Branca do Amapari, located at the existing highway BR-210, to Macapá, the capital of the Brazilian State of Amapá. The 625-km long Tumucumaque Park, which covers 3'867'000 hectares, is not only Brazil's largest protected area but also the world's largest protected continuous piece of pristine rain forest.

Interest to build a Trans-Amazon highway is coming from both sides of the border. Since the election of President Desi Bouterse earlier this year, the Brazilian government has been eager to advance economic cooperation. In seminar recently held in Paramaribo's Torarica Hotel, Brazil’s Ambassador to Suriname, José Luiz Machado e Costa, has offered cooperation in strategic areas such as infrastructure, energy, education and announced incentives for small-to-medium size companies. Brazil's Instituto de Pesquisa Rodoviária (IPR), Departamento Nacional de Infraestrutura de Transportes (DNIT), the Institutional Security's Group of Brazil's Republic Presidency (GSI) and the Superintendency of the Tax Free Zone of Manaus (Suframa) are all currently engaging in feasibility studies.

Suriname's President Desi Bouterse and his Mega Combination, which holds 23 out of 51 seats in parliament, have often highlighted the multiple benefits of a direct link to its southern neighbor during the presidential campaign. First and foremost, there are important economic benefits to be made. A highway would open up a vast area to commerce and other economic activities. The Precambrian rocks of the Guyana Shield hold huge proven deposits of diamonds, gold, silver and platinum. In addition, it holds huge reserves of industrial minerals such as bauxite, copper, iron ore, manganese, tin and zinc.

Its major bounty, nevertheless, might well reside in less well-known minerals such as beryllium, kaolin, nobium, tantalum, titanium and zirconium, which are essential for applications in modern aerospace, automobiles, computers and oil and gas drilling equipment. All these natural deposits belong to the Surinamese government.  It is no coincidence that the World Bank recently ranked Suriname as among the 17 potentially richest countries.

Under Suriname's current legislation, only around 16% of forest lands is earmarked and managed as protected areas, including Multiple Use Management Areas, nature reserves and national parks. In addition, around 15% of national forest coverage is reserved for commercial exploitation, such as forest logging, hydropower and mining concessions. Some 55% of its forest lands, however, mostly located in the south, has not a special allocation yet. The Bouterse government is eager to exploit these riches.

A second reason for establishing a direct link is political. As of 2011, Suriname will no longer receive Dutch development aid. When Suriname gained its independence in 1975, the Netherlands pledged the sum of 3.5 billion Dutch guilders as development aid. This program has now come to an end. Some might deplore the termination, but the new government is not regretting the move. According to Bouterse’s political assistant, Winston Lackin, Suriname will only benefit from cutting off aid ties with its former colonial power. According to Lackin, Dutch development aid has not delivered on its promises, "it has only perpetuated dependency." Suriname's discontent on how the Dutch booted Suriname into independence still runs deep.

Like most other South American nations, Suriname will increasingly look at Brazil and China for trade ties. Instead of continuing entertaining rocky relations with its former colonial master, Suriname has more to gain from bilateral negotiations with these two rising powers. There is no doubt that Brazil and China are eager to exploit opportunities and capitalize on Suriname's rocky diplomatic relationship with the Dutch. Also France is poised to take advantage as its overseas territory, French Guyana, is well-positioned to become Suriname's main commercial entry point into the European Union.

A third reason is related to Suriname's population. The Bouterse government argues that the lack of a land connection to southern Suriname represents a significant barrier to migration to the central and southern part of the country. Around 95 percent of its relatively small population of less than half a million live in the Coastal Plains and hardly anybody ever visits its interior. Suriname has one of the lowest population density in the world, only 3 people per square kilometer. There are no major roads into the jungle and it is one the most densely covered countries with pristine rainforests on the face of the universe.

A more profound assessment, however, makes the paving of a direct link between Suriname and Brazil less obvious or attractive. Are Suriname's and Brazil's interests really served by carving a tarred road through virgin rain forest territory? Does Suriname's continental destiny hinge on the road’s asphalting, as its recently reelected President Desi Bouterse makes us believe? Linking the two nations would have huge repercussions for the northeastern part of the Amazon basin and Guyana Shield, not only environmentally, but also politically and socially.

Logistically Unnecessary

Even from a strict logistical viewpoint, many question marks ought to be raised. The geographical area is sparsely inhabited. The Atlantic Ocean is still relatively close, which makes a highway unnecessary for cargo or freight. Moreover, Suriname's existing East-West Highway is not used to its full potential and capacity with passengers suffering assaults and harassment. There are not even bridges crossing the Courantyne River to Guyana and Marouini River to French Guyana. Logistical disadvantages to engage in a North-South Highway seem to outpace economic benefits by a wide margin.

Short-Term Economic Gain

Although there are many proven reserves of natural resources in the areas surrounding the proposed highway, there is no evidence that the extraction enhances overall prosperity. Historical evidence suggests that the endowment of natural assets for a given country has only positive social side-effects if the prevailing levels of governance and law enforcement are solid. In the case of Suriname, there is no reason to assume that the private gains will be larger than the overall social losses. A middle ground ought to be found between on the one extreme, a long period of neglect, and at the opposite end, a reckless gold rush. A major challenge for Suriname is how to deal with the available riches and avoid the natural resources curse.

The most likely scenario is that Chinese business groups will continue to dominate the market for Amazonian products. Commodities are characterized by raw natural resources rather than value-added manufactured goods. Under this business-as-usual scenario, the Amazon will continue to be subject to market fluctuations, perpetuating the boom-and-bust cycles, which is a typical feature of the region ever since it was first discovered by overseas European pirates.

Devastating Environmental Impact

Any highway linking the two nations would cross a delicate ecosystem, to date one of the best preserved virgin rain forest territories in the world, a biodiversity hotspot. Suriname is situated on the Guyana shield, a massive granitic formation of the pre-Cambrian era, near the northern terminus of the world’s largest continuous area of unspoiled, uninterrupted tropical rainforest. Suriname totals 146’101 square kilometers, of which still nearly 90 percent is covered by pristine rainforests, with a rate of destruction of under 0.1% annually. By bringing tar to the forest, this dynamic would change.

It is worth reiterating the impressive numbers of Suriname. According to a recent study of Conservation International, Suriname has 200 species of mammals, 674 species of birds, 152 species of reptiles, 99 species of amphibians, and 790 species of fishes. As most of its rivers flow directly into the Atlantic Ocean and are not part of the Amazon or Orinoco drainages, Suriname’s associated fauna is mostly endemic and has therefore huge intrinsic value. Its dense rainforests still host animals that are increasingly threatened at the other edges of the Amazon, including the Giant River Otter (Pteronura brasiliensis), Lowland Tapir (Tapirus terrestris), Giant Armadillo (Priodontes maximus), American Manatee (Trichechus manatus) and the Blue Poison Frog (Dendrobates azureus).

Paving a highway across these fragile areas, resulting from an intentional or conscious choice of governments and corporations, would inflict permanent damage. By cutting an substantial area, not only carbon would be released into the atmosphere, the affected areas would also no longer absorb carbon in the future. Critics might say that the area affected in southern Suriname and northern Amapá and Pará is relatively small. However, the areas form an integral part of a wider mosaic which ought to maintain its natural equilibrium.

Secondly, the water cycle would be negatively affected. The Amazon basin is the largest freshwater hydrological system on the face of the universe, containing the world's largest underground aquifer. Southern Suriname is located at a strategic area of the Amazon, where the evapotranspiration cycle, driven by Atlantic winds, starts. Less trees means less cloud formation, which in return causes less rain and more fires. By interrupting or interfering with the Amazon water cycle, remote agriculture areas as far away as Texas, the Chaco and the Rio Plata basin will be affected. Scientists already warn that the tipping point for causing major irrevocable changes in the Amazon basin is not far away, which would dry out the rain forest and turn it into grassland savannahs.

Inauspicious Historical Precedents

Although historical experience is a relatively poor predictor of future behavior, some important lessons can be drawn from Suriname's track record. The biggest human incursion in the rainforest occurred in the 1960s, with the completion of a dam in the Suriname River at Afobakka to fuel aluminum smelters of Suralco/Alcoa. This resulted in the formation of the hydroelectric reservoir Lake Brokopondo. This artificial lake destroyed 1'560 square kilometers of pristine rainforest.

In the 1990s, several gold mining companies made incursions into Suriname, equally causing loss of rainforest and, worse, mercury pollution. The area around the Bakhuis Mountains has become notoriously polluted. Issues concerning mining regulations are increasingly making headlines in the parliament and newspapers. During the presidential campaign, Bouterse opposed a proposed terms of an investment by Newmont Mining, arguing that it amounts to exchanging the country’s natural bounty for a mere “apple and an egg.”

Brazil's track record is even more worrisome. In South America's largest nation, there is a direct correlation between highway corridors in pristine rainforests and rising wildfires, more deforestation, forest fragmentation, species extinction and increasing migration flows. Asphalt is historically one of the worst villains of deforestation. Experience learns that transnational highways increase the density of secondary roads. Deforestation will lead to land speculation and colonization along a grid of primary and secondary roads, leading to a fishbone pattern. The human dimension of expanding highway corridors is moreover historically linked to increasing incidence of alcoholism, prostitution and the spreading of contagious diseases.

The paving of a Paramaribo - Belém corridor would facilitate human migration from the so-called Arc of Deforestation in the Brazilian States of Mato Grosso and Tocantins to new frontiers in the so-called Calha Norte (States of Pará and Amapá). The paving would provide additional impetus for appropriation of public land by both small squatters and by grileiros (large-scale illegal claimants), at both ends of the border of Suriname and Brazil. Local authorities will have a huge responsibility to mitigate the impact of bringing asphalt to the forest.

Jeopardizing Indigenous Communities

Future rainforest stewards

The land area which nowadays forms the nation of Suriname historically belongs to a wide variety of indigenous peoples. The Arawaks are considered to be its first inhabitants. Later on, other indigenous peoples arrived such as the Akurio, Caribs, Trió,Wayarekule, Warrau and Wayana. The relatively small remaining Amerindian population posses an intimate and invaluable knowledge of foods, fibers, medicines, and other useful forest plants.

All across the Americas, indigenous communities have not only historically been the best curators of the continent’s natural assets, they have also been the best custodians of their intrinsic value. Indigenous communities have the rain forest as their natural habitat, which is intrinsically part of their cosmovision and economic survival. It is unlikely that the centuries-old stewards of the Amazon would welcome road asphalt into their areas.

As the proposed Trans-Amazon highway would cross indigenous territories, it is a precondition to map, define and secure forest tenure rights of Maroon and indigenous communities. These communities ought to be treated as a special class of stakeholders, who are in fact rights-holders under both national and international law.

Plundering and Illegal Occupation

A major preoccupation of the Surinamese government, which is widely shared by its population, is how to deal with illegal Brazilians, which are increasingly invading central and southern parts of the country in their reckless quest for natural resources. After being expelled from the gold mines in the Brazilian State of Pará (the infamous Serra Pelada open-pit mine) in the 1990s and from French Guyana in the early 2000s, Brazilian gold-seekers, the so-called garimpeiros, are increasingly crossing the Litani and the Maroni Rivers into Suriname.

Illegal trespassing is increasingly causing frictions and clashes. In December 2009, a dispute between Brazilian gold prospectors and a local Maroon community in Albina, a town of 5’000 people located on the border with French Guyana, ended up in a bloody riot in which a shopping mall was looted and dozens of innocent citizens were killed. The Albina riot does not bode well for the future. Brazilian garimpeiros are notoriously bad stewards of the environment as they pollute river streams. Mercury and cyanide is used to leach the mineral gold from the bulk ore, with devastating health consequences for downstream Maroon and indigenous communities, including neurological birth defects and leukemia.

For the first time in Suriname's young history, the contentious garimpeiros issue dominated Suriname's presidential election campaign earlier this year. Measures to enforce environmental laws against illegal garimpeiros are long overdue.

Facilitating Illegal Trafficking

The paving of a direct link between Suriname and Brazil is likely to increase illegal trafficking between the two countries, both notorious for weak law enforcement. Suriname is often accused for facilitating drug trafficking and for providing trans-shipment for arms-for-drugs dealing. Suriname is also increasingly being used as a transit point between South America and Europe for human trafficking. In many cases, Brazil is the main intermediary (drugs), manufacturer (arms) or provider (prostitution) for these commodities or illicit trades.

According to a recent report of the US State Department Trafficking in Persons Report, "Suriname is a destination and transit country for men, women, and children from the Dominican Republic, Brazil, Guyana, Colombia, Haiti, Indonesia, Vietnam, and China trafficked for the purposes of commercial sexual exploitation and forced labor." It moreover argues that "Suriname is also a source country for women and children trafficked within the country for sexual exploitation and forced labor, as well as women trafficked transnationally for forced labor."

The same dreadful conclusion was drawn at a conference on human trafficking organized by the Suriname Bishop's Conference, under guidance of Bishop Wilhelmus de Bekker, which was held in Paramaribo in November 2010. In the final statement of the conference, the Surinamese delegation committed itself to a more proactive approach to enforcing national and international laws, and improvement of its border control mechanisms.

Law enforcement is Suriname's Achilles heel. The Inter-American Children's Institute argues in a recent study that Suriname's main obstacles reside in "limited institutional capacity both on government and non-governmental organization’s level; lack of specialized and trained personnel, lack of community awareness and lack of appropriated legislation." The paving of a Trans-Amazon highway would only put additional pressure on the authorities on both sides of the border.

Unresolved Disputed Areas

Suriname has a long-running conflict with both its eastern and western neighbors involving land claims. French Guyana is claiming the area between Litani and the Maroni Rivers. At its western front, Suriname claims a triangle of land along the Kutari River in a historic dispute over the headwaters of the Courantyne River.

Guyana is currently seeking arbitration of the United Nations Convention on the Law of the Sea in order to resolve the issue. It is unlikely that a highway could cross these disputed areas. Only 15 kilometers of the borderline between Brazil and Suriname is not crossing indigenous territory or environmentally protected areas.

The remaining border territory on the Brazilian side belongs to Tumucumaque Park, which covers almost the size of Switzerland. The park is famous for several endemic species, especially fish and aquatic birds, but also for its jaguars, sloths and freshwater turtles. The park is also home for three indigenous peoples. Besides the Tumucumaque, it belongs to the Waiapi and the Rio Paru d’Oeste people.

There is no doubt that the paving of a highway, regardless of the exact route, would cross a variety of disputed or restricted areas, which in turn will accelerate loss of biodiversity, cause legal disputes and endless lawsuits.

Controversial Multilateral and Corporate Financing

Business links between Suriname and Brazil are already sharply on the rise due to the paving of a road over the Oiapoque River, which links the northeastern edge of Brazil in the State of Amapá with French Guyana. The rehabilitation of Macapá - Cayenne Highway, co-financed by the Inter-American Bank of Development, will also improve trade and transportation links between Paramaribo and Belém. The paving is part of the controversial Initiative for the Integration of the Regional Infrastructure of South America (IIRSA).

Private financial institutions and global investment banks won't be eager to provide financing as they are allergic to reputational damage and will have to comply with the Equator Principles. Construction companies, however, won't be depending on the mood and goodwill of international capital markets as financing will be readily available from public sources. Brazil’s National Social and Economic Development Bank (BNDES), under Brazil's new incoming developmentalist President Dilma Rousseff, will be interested in increasing infrastructure funding in the Amazon basin. Opaque Chinese investment vehicles will also be interested to participate.

The fact that most funding will come from public and not private sources makes the investment process less transparent and accountable. Brazilian and Chinese development lenders have a poor environmental record, enjoy weak governance and compliance structures and often turn a blind eye to civil unrest or protests. In general, multilateral discourse regarding the construction of highway corridors systematically overestimates the benefits and underestimates its impacts. The financing agencies, nevertheless, should be fully aware of the synergistic nature and negative side-effects of their investments.

Preliminary Conclusion

The most likely scenario is that the planning of a Trans-Amazon highway from Paramaribo to Belém will go forward, driven by the development vision of President Desi Bouterse and incoming Brazilian President Dilma Rousseff. Both have a developmentalist agenda primarily motivated by short-term economic and financial gains, mostly disregarding or downplaying long-term negative impacts. Both presidents have clearly opted for a growth model in which the state assumes a predominant role in economic planning and execution. Their main argument is that there are no viable alternatives to a highway and that the region cannot be denied its right to development.

In my opinion, however, there are legitimate concerns that short-term economic advantages do not weigh up to a manifold of long-term negative consequences. By partially tarring the forest, Suriname has much more to lose than to gain. The debate should therefore shift and focus on alternatives to building a highway.

Toward Viable Alternatives

In the first place, the purpose of the highway, which is to facilitate transport in the region, including from factories in the far-away Manaus Free Trade Zone, would be better served by enhancing the already existing ports of Paramaribo, Macapá and Belém. French Guyana is investing millions of its euros into modernizing port facilities in Paramaribo and Macapá as its capital, as its capital Cayenne lacks a deep water port. There are no plausible economic arguments to justify a new highway.

In the second place, Suriname is well-positioned to monetize on carbon credits on avoided deforestation schemes. There are economic and financial arguments that the pristine forest is more valuable that the alternative use of the land. There is a need to raise awareness at the global level that sustainable forest management can equal or even surpass economic gains from deforestation. There are plenty opportunities in the area of sustainable forest management, including the creation of additional protected areas, ecotourism, sustainable timber and non-timber forest products extraction, payments for ecosystem services (PES) and forest carbon, reduction of emissions from deforestation and forest degradation (REDD). These mechanisms should be able to generate enough cash flows to sustain or compensate forest communities. Unfortunately, carbon sequestration and avoided deforestation projects have so far only been funded by the voluntary market.

At the moment, the monetary contribution of the forest sector to the public finances of Suriname is less that 3% of its Gross Domestic Product. The forest economy employs less than 4% of its population and exports derived from forest-related goods and services are less than 1% of the total national exports. Potential sustainable forest production and services ought to be much bigger. If the Amazon basin and Guyana Shield are global assets worth preserving, then it is only reasonable that the Surinamese stewards are being paid for their efforts.

Instead of financing a controversial highway, multilateral development agencies should rather focus on long-term strategies. For example, Suriname deserve priority assistance of new funding opportunities offered by the World Bank, such as the Forest Carbon Partnership Facility (FCPF) and its Strategic Climate Fund (SCF). Unfortunately, these mechanisms are relatively small with insufficient pledges to seriously make a difference. At the present moment, there is a serious mismatch between the urgency of calls for sustainable forest management and the financial support available from these agencies. Moreover, international environmental organizations and multilateral development agencies so far have not been successful in creating effective market-based mechanisms to pay for ecosystem services.

A broader debate should also involve the latest developments in international law. The precautionary principle, for example, states that if an action or policy has a suspected risk of causing harm to the public or to the environment, then - in the absence of scientific consensus that the action or policy is harmful - the burden of roof that it is not harmful falls on those taking the action. This principle of law implies that there is a huge social responsibility to protect the wider public from exposure to harm, when scientific investigation has found a plausible risk. There are good reasons to argue that in the case of the highway Brazilian and Surinamese federal authorities should make the application of the precautionary principle a statutory requirement.

A wider public discussion on the desirability of building a highway is a sine qua non. A major step toward solving an issue is usually realizing that there is something serious at stake. Not only politicians and corporate analysts, indigenous community leaders and policy think tanks, but also investigative journalists and bloggers, have an extraordinarily important mission to raise awareness of possible scenarios. Indifference and ignorance are the worst enemies of progress and development.

As local financial resources in Suriname are limited, corporate giving and strategic philanthropies should consider funding research and development. Suriname’s sole university, Anton de Kom University, has an excellent track record of research. The university deserves to be better equipped to study and monitor it own backyard.

Suriname is notoriously absent or underrepresented on the international environmental and diplomatic scene, mainly due to a lack of human resources. However, not only Suriname's diplomatic capacity is to blame. The proliferation of forest or climate change related public and private processes - from GEF, UNFCC, UNFF, COP, FAO-NFP to CBD and others - causes confusion and is detrimental for smaller nations such as Suriname. This is rather tragic as Suriname ought to be rewarded for protecting its carbon reservoirs, safeguarding its biodiversity sanctuary and for being a so-called high forest cover, low deforestation rate (HFLD) country. Action is warranted as a Paramaribo - Belém highway corridor could potentially become the grandest and most expensive of white elephants in the Amazon basin.

The Bumpy Road from Zanderij to Pokigron in Suriname:

Paving the Brazilian Garimpo Highway?

* This article has originally been published as Swiss Consulting Group Occasional Paper # 19. The original version in pdf format, which includes footnotes and references, is available here). A revised version has also been published at the online guardian environment network O Eco Amazonia in English, Portuguese and Spanish.