“Everyone wants to come to Brazil, and if we are not strict with [Chevron], this place is going to turn into a pool of oil.” – Carlos Minc, Brazilian Environmental Minister, Financial Times
The oil spill 230 miles
“Everyone wants to come to Brazil, and if we are not strict with [Chevron], this place is going to turn into a pool of oil.” – Carlos Minc, Brazilian Environmental Minister, Financial Times
The oil spill 230 miles off Brazil’s coast last November was, when compared to other international environmental disasters, relatively small and easily contained. What captured the world’s attention was not the spill itself, but the Brazilian government’s reaction. Domestic and international criticism concerning the penalties levied against Chevron focused primarily on the disparity between the leak’s size and the nearly $20 billion in fines currently being fought over in civil court. For many who believe the government has over-stepped its bounds the penalties against Chevron stem from the populist and nationalistic ideologies to which it adheres.
The critics fear that the clouded, ideologically driven fines will be a disincentive for foreign corporations looking to invest in Brazil’s domestic market. The Brazilian government is, rightfully, not as pessimistic about its ability to draw in international investment. Newly discovered oil fields off the Brazilian coast have the potential to produce 50 billion barrels, which would generate massive revenues for any corporation able to receive drilling contracts.
With many national oil companies throughout the world already vying for rights to drill, the willingness of Western oil companies to take part in the venture will not deter Brazil from the developing the fields and funding the nation’s modernization programs it began in the mid-1990s.
Transforming Regional Markets
Since Argentina’s collapse in 2002, many Latin America’s markets have become increasingly interested in maximizing country specific advantages that will further regional integration and economic growth. Shifting economic priorities has led to national and regional growth. Even with its economic successes, Latin America’s progress has drawn the ire of many free-marketers, for many countries had to shed portions of the neo-liberal policies – which had been dictated to them through loan programs managed by the World Bank and the IMF – they rigorously adhered to for decades, in order to achieve success.
The region’s movement away from some of the underlying principles defining Western-style capitalism has prompted captious remarks from the international community; however, the focus on positive-sum strategies for the region is the reason Latin America is becoming increasingly prosperous (with discussions of a Latin American Consensus), while the West remains uncertain on how to properly institute austerity programs. What many critics fail to realize is that comparative advantage is a widely ignored tenant in a capitalistic philosophy that primarily functions within a zero-sum framework.
In An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith did believe that economic success could be achieved with investments in foreign markets; however, he also acknowledged that the progress made would be limited and untenable, due to external factors. He theorized that, as if “led by an invisible hand”, many of the investments and industries spent overseas would eventually return home and concentrate on the development of domestic and regional markets.
Latin America’s initial success can be attributed to the increasing demand for natural resources. However, if the countries of the region remain focused solely on that facet of their economies they would not have been able to develop an economic strategy beyond the near to medium term. Allocating finances from natural resource exportation and investing in domestic and regional modernization afforded the region the ability to progress beyond the previously self-imposed limitations; a shift from factor-driven to efficiency-driven economies.
The progress made throughout Latin America over the past decade may not have been the path taken by the international community to achieve success. However, it is not a complete divergence from capitalism’s underlying philosophies. Regional investments that have reinforced domestic markets have led to the achievements theorized by Adam Smith. For most nations, markets expanded while a renewed solidarity between countrymen and neighboring countries emerged.
The capitalistic structure espoused by the international community had been tried in the region, for decades, under the direction of international financial organizations. The policies and programs implemented played a significant role in the failures that have undermined regional development. Coerced into implementing market strategies the West would not have undertaken (particularly Argentina’s social security privatization during a recession), many c