Liberal Reforms Give Pollution a Boost

By Gustavo Gonzálezm, IPS, 27 July 2000

SANTIAGO, Jul 27 (IPS) - Liberal economic reforms implemented throughout Latin America in the 1980s and 1990s have worsened industrial pollution in the region, according to a study the Economic Commission for Latin America and the Caribbean (ECLAC) released Thursday.

But the region is not necessarily a polluter's paradise, but rather a natural resources paradise, which has meant heavy environmental costs, according to Claudi Schatan, ECLAC consultant and author of the report.

In her study, Schatan evaluates the cases of Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Mexico and Peru, which together represent 80 percent of Latin America's combined gross domestic product (GDP) and the same portion of the region's exports.

Exports are a determining factor in the environmental impacts of economic reforms initiated in recent decades, which were based on trade liberalisation, floating prices and incentives for foreign investors, says the ECLAC report.

With this framework, the researcher found that while these reforms reduced the relative weight of industrial output in the GDP of nearly all Latin American countries, they drove up manufacturing exports as a result of trade liberalisation.

The region's industrial profile did not change much compared to the 1960s and 1970s, with the exception of Mexico. Manufacturing represented 57 percent of its exports in 1980, and jumped to 77 percent in 1995.

In Latin America in general, says Schatan, this boom in exports is to blame for the increase in toxic emissions, not the redirection of production towards sectors that are known polluters.

Under the reforms of recent decades, the export-manufacturing sector placed greater emphasis on resource-intensive products, according to the report emitted by the regional agency of the United Nations.

The 69-page study indicates that industrial pollution from export production activity was much greater than pollution coming from the domestic manufacturing sector.

Industrial pollution caused by expanding exports grew 213 percent from the 1970s to the 1990s, which covers the periods before and after reforms were implemented, while pollution arising from manufacturing increased just 32 percent in the same period.

Schatan's study distinguishes between some traits particular to the region's larger countries - Argentina, Brazil and Mexico - and those of the nations with smaller economies.

For the region's three economic powers, the production and international sales of basic products continued to represent an important dynamic, but Mexico, and Argentina to a lesser extent, tended to evolve towards more advanced manufacturing.

In Brazil, however, high volume exports of pollution-generating raw materials intensified, while advanced technology exports grew weaker.

The other five smaller countries in the study distanced themselves from dirty industry, probably because their industrial structures could not compete with imports after market liberalisation processes were implemented.

Except for Costa Rica, these countries tended to specialise in simple manufacturing and greater use of raw materials, which indicates an erosion of protections for natural resources, warned Schatan.

The ECLAC expert emphasised that the increase in exports does not necessarily have a composite effect in terms of pollution impacts in Latin America, but rather a scale effect.

Counter to what environmental groups have said, Schatan suggests that the production of raw materials in the region does not respond to the comparative environmental advantage, in other words, the countries' lax environmental regulations.

The exploitation of raw materials is more a response to the abundant availability of natural resources and cheap labour, which does not seem to indicate the creation of 'polluters paradises' in the region, she said.

More than the fact that governments allow production that pollutes, what interests investors is taking advantage of the availability of natural resources, whose prices do not include the environmental costs of their unsustainable use or non-renewable nature, says the ECLAC study.

Though the Latin American industrial profile is not much different today than it was in the 1960s, the rise in per capita production in the region operates as a stimulus for pollution, just as occurs in wealthier countries.

Schatan points out that the World Health Organisation identified Mexico City in 1999 as the most polluted urban area on the planet. This is just one example of the urban-environmental problems facing most of the region's countries.

In 1998, annual carbon dioxide emissions in Latin America stood at 3.3 metric tonnes per inhabitant, while in Great Britain it was 9.2 and in the United States 20.8 metric tonnes.

But carbon dioxide emissions saw a growth rate of 4.7 percent this year in Latin America, compared to Britain's 1.2 percent decrease and a 1.9 percent increase in the United States, according to World Bank data.