CHAPTER 1 A New Model or a New Form of Imperialism? Capitalist development and imperialism today in the Americas can best be described in terms of what economists have termed ‘extractivism’ (economic development based on the extraction of natural resources such as fossil and biofuels, minerals and agro-food products extracted in a process of ‘large-scale investment in land acquisition’ (or, in the discourse of critical agrarian studies, ‘landgrabbing’).! As noted in the introduction to the book there is nothing new about this. Both extractivism and the associated strategy of primary commodity exports have long played an important if inglorious role in the history of capitalism and imperialism, which has always meant pillage—the plunder and looting of a society's wealth of natural resources, and the transfer of this wealth to the centre of the system for the purpose of capital accumulation or simply to enrich the holders of power. Capitalism and imperialism have always relied on the prerogatives of private property, as well as the enclosure and privatization of the commons and the dispossession of direct producers, not to mention the exploitation of both natural resources and labour, and the exercise of class and state power in the interests of capital. However, after the end of World War 11 in conditions of a collapsing British empire and the system of colonial rule, governments in both the north and the south (the development state) turned towards a new development strategy of economic growth based on import substitution industrialization and the exploitation of the unlimited supplies of rural surplus labour generated by the capitalist development of agriculture. To facilitate and advance this process, the theorists and architects of capitalist development elaborated a strategy to encourage the proletarian- ized and impoverished peasant farmers (the rural poor, as they are termed in development discourse) to abandon agriculture and migrate to the cities in the search for work—to capacitate them for entry into the urban labour market and to integrate them into the modernizing process of capitalist development. 1 The term ‘land grabbing’ (large-scale investments in land) re-emerged on the international stage in the context of a spike in global food prices in 2007/2008. But since then the discourse has begun to merge with the literature on ‘water grabs’ and the ‘resource grabs’ of extractive capital (Sosa & Zwarteveen, 2012; White et al., 2012).20 PETRAS AND VELTME YE, This state-led development strategy was pursued for several decade (the so-called golden age of capitalism in the 19508 and 19608) until marke: constraints and a crisis of the states at the centre of the system led to 4 major paradigmatic shift in development thought in the direction of free market capitalism and a fiscal crisis of the states at the centre of the sys tem, which brought a new generation of social conservatives and economic neoliberals to power. Through a strategy of armed force in the form of mili- tary coups and juntas, and a new world order based on free market capital ism and the finaneialization of global production, a new neoliberal mode! of ‘structural reforms’ in macro-economic policy became the dominant paradigm (neoliberal globalization). However, several cycles of neoliberal policies and ‘structural reforms’ that led to the destruction of the forces of production in both agriculture and industry on the periphery of the system also brought about a powerful resis- tance movement and forces of change in the neoliberal model of free market capitalism. In the vortex of these forces government after government in Latin America, both those with a continuing commitment to the ‘Washington consensus’ on the virtues of free market capitalism and those that rejected neoliberalism, turned towards natural resource extraction as a strategy of economic development—the ‘new extractivism’ as it is termed in Latin America, with reference to the ‘inclusionary activism’ of the postneoliberal state formed under these conditions. Both ‘inclusive development’ and m’ emerged as a fundamental pillar of the economic model con- structed in the changing conditions of the new millennium, and pursued by an increasing number of governments—especially in South America—in their national development strategy and policies.* The conclusions that we draw from our research into the dynamics of the ‘extractiv’ new extractivism associated with this new model, and our reflections on the country case studies in this book, are here presented in the form of ten theses. 2 According to Claudio Katz, an important Argentinean Marxist economist, the model put into place throughout Latin America over the past two decades has five pillars: agricultural exports, open pit mining, large-scale resource extraction, the maquilla manufacturing sys tem, and tourism and remittances, as a correlate of forced migration (Minga Informativa de Movimientos Sociales, 17 May, 2013). We would agree with Katz's assessment except that it fails to include one of two key pillars of this model, namely, the ‘new developmentalism strategy of poverty reduction designed to bring about a more inclusive form of (capitalist development.A NEW MODEL OR A NEW FORM OF IMPERIALISM? 2 Thesis 1 The New Geoeconomics of Capital in Latin America Although global flows of capital over the past three decades of neoliberal glo- balization have become increasingly speculative in form and disconnected from the production process? it is nevertheless revealing to trace out the changing pattern of capital flows, especially in regard to north-south flows of FDI and ‘resource-seeking’ capital, which have increased dramatically in recent years. A review of these flows (see Table 1.1) shows that over the past decade, and especially since 2005, they have moved away from manufacturing and high-tech information-rich services towards the extraction of natural resources, both renewable and non-renewable, including fossil and biofuels for energy, precious metals and industrial minerals, as well as agrofood prod- ucts and the ‘large-scale acquisition of land’ for the purpose of accessing these resources directly (as opposed to trading them)—or, in regard to the govern- ments involved, the food and energy security needs of some countries. A close look at these flows of resource-seeking capital points towards a major shift in their destination—in the geoeconomics of their global distribu- tion. Not only has Latin America, especially Brazil, been the recipient or desti- nation for much of this capital but the changing pattern of capital flows reveals a major reconfiguration in the structure of global production, a structure mod- ified by the continuous but changing flows of capital. TABLE 1.1 FDI in South America and Mexico (1990-200, annual average flows in usp billions) 1990-1994 1995-2000 2000-2005 2006-2010» 2011 Sth America 8.9 47.2 37.9 69.1 nid Brazil LT 21.8 19.2 34.6 66.7 Argentina 2.9 10.7 43 6.4 6.3, Chile 1.2 5el 5.0 12.6 17.6 Colombia 08 2.6 3-7 8.0 14.4 Peru 0.8 2.0 1.6 5.8 79 Venezuela 08 364 25 -3.7 nd Mexico 5.4 11.3 22.7 21.7 17.9 SOURCE: CEPAL (2010: 45); UNCTAD (2012); ZIBECHI (2012). 3 It has been estimated that less than five per cent of the capital accumulated today and in recent decades has a productive function, i.e. is used to finance the growth of the economy.PETRAS AND VELTMEYER ‘The so-called ‘global financial ¢ triggered by the 2007 sub-prime deba cle in the Us served as a sort of watershed in this regard but the process can be traced back to the early 20008 and the ‘primary commodities boom’ provoked by the growing demand for precious metals and by China and other ‘emerging markets’ for energy, industrial minerals and agrofood products (Cypher, 2010). In 2010, for the first time since UNCTAD kept records, since 1970, developed countries in the global north received less than half of global FDI flows (until the late ig80s they attracted 97 percent of investments). In 2005, developing and emerging economies in the global south attracted only 12 percent of global flows of productive capital (FD1) but in 2010, against a background of a sharp decline in capital tlows in the world, these economies in the aggregate overcame the 50 percent barrier (CEPAL, 2010). Looking more closely at the geopolitics of these capital flows, it is evident that South America was the des- tination of choice, and this because, as Rail Zibechi (2012) argues, FDI was evidently attracted to the huge reserves of natural resources (metals and industrial minerals, hydrocarbons or fossil fuels, soy and other forms of biofu- els, and agrofood products) that the governments of the day were anxious to open up for exploitation by foreign investors in order to take maximum advan- tage of the economic opportunities provided in the form of additional fiscal revenues. Under these conditions Latin America changed from being a relatively mar- ginal location for north-south capital flows (about five percent of the world total) into an important and dynamic destination. Between 2000 and 2005 Latin America received an annual average of usp 66 billion that grew expo- nentially up to Usp 216 billion in 201, which meant that it was able to attract 15 percent of all global flows of productive capital over this period (CEPAL, 2010: 45). The main datum here is the pattern of continued growth of investment flows to the region, which in the case of South America reached usp 150 billion in 2011, fifteen times greater in absolute figures than in the early 1990s. However, not all countries participated equally in these flows, a function of geopolitics as much as geoeconomics. Indeed it would seem that some countries— Venezuela, Argentina and Ecuador in particular, but also and less understand- ably, Mexico—have been ‘punished’ by capi explanation is very simple: Hugo Chave the base of a massive emigration of c: 1. In the case of Venezuela the nationalization policy was at pital that has not been offset by the relatively large investments originating in China and the much lower invest- ments of Brazilian capital. As for Argentina the mood of capital changed from euphoria under the Menem regime to substantial caution in the wake of the Kirchner regime's default in 2002 and its reluctance to heed the dictates of theA NEW MODEL OR A NEW FORM OF IMPERIALISM? 23 IMF regarding debt repayment and restructuring in the context of the worst crisis in the country’s history.* At the beginning of its sharp turn towards neo- liberalism in the early 1990s Argentina received twice the investments that Brazil received and in the second half of the 1990s FD1 inflows equalled those of Mexico, even though both economies are much larger than Argentina. After the 2001 crisis foreign investors began to beat a retreat although not to the same scale and speed as in Venezuela, and Brazilian capita—and to a lesser degree Chinese and Canadian capital—entered into the vacuum left by the retreating Us and European investors. The case of Mexico is very curious in that the government is clearly aligned with both the neoliberal policy agenda and us imperialism—and it has one of the most entreguista regimes in all Latin America, particularly as regards min- ing capital (no royalties, and an effective tax rate of 1.2 percent (Barcenas, 2012). At the time of the inception of NAFTA in January 1994 Mexico received up to 6o percent of Fp1 destined for Latin America. The subsequent with- drawal of capital from Mexico, or the evident reluctance to invest in a highly liberalised economy vis-a-vis Us capital, evidently relates to the changing structure of investment capital—for example, the dominance of resource- seeking rather than efficiency- or market-seeking capital—as well as political instability in that the withdrawal of capital quickened as of 2008 when the state began its dirty war against drug trafficking. The Latin American countries that today are the most attractive to capital include Brazil, the biggest economy in the region and very much open to busi- ness as far as foreign investments go, particularly as regards to what we term ‘agro-imperialism’ or agrarian extractivism (see Chapter 4), Colombia, the linch- pin of us imperialism in the region and long a supporter of extractive capitalism, and Chile, which continued to hoe the line of natural resource extraction and primary commodity exports, and free market capitalism, when other countries turned towards protectionism and regulationism. The attraction of Chile to capi- tal is probably a matter of geopolitics as much as geoeconomics, i.e. a matter of legal security provided by the state to the private property interests of foreign investors. However, the attraction of foreign investors to Colombia is more diffi- cult to explain, particularly given the low intensity but long-standing class 4 Argentina began a process of debt restructuring in 2005, three years into a solid recovery from the worst of the crisis, which allowed it to resume payment on the majority of the usp 8z billion in sovereign bonds on which it defaulted in 2002. A second debt restructuring in 2010, after six years of uninterrupted growth based on a primary commodities boom, brought the percentage of bonds out of default to 93%, although ongoing disputes with hold- outs remain.24 PETRAS AND VELTMEY¢; warfare and the high level of internal insecurity related to the protection oj private property and the operations of extractive capital in the country, Notwithstanding the high level of political insecurity in the country Colombia in recent years has displaced Argentina as a favourite destination point for foreign investment and has begun to approach the level of foreign investments in Chile and Mexico, even though the latter's economy is three times the size oj Colombia's. Only a closer look than what we have undertaken will allow us understand the reasons for this extraordinary interest of capital in Colombia, starting with the Uribe regime and jumping under the current administration of Juan Manuel Santos. Again, the answer is as likely to be found in the geopolitics as the geoeconomics of capital. Brazil illustrates the success of the geopolitical project to convert the coun- try into a global power and the interest of foreign investors in an economy that has been able in just a decade to incorporate close to 40 million people into the market. Receiving only half of the investments that Mexico attracted two decades ago today the volume of Fp1 inflows is four times that of Mexico even though the two economies are comparable in size. However, what distin- guishes the Brazilian case is not the growth of FD1, which currently positions it as the fourth largest destination point for Fp1 after the us, China, Hong Kong and the UK, but the quality of those investments. Until 2005, capital inflows had three basic locations: industry, which absorbed from 50 to 30 percent of total FD1 inflows; services, which absorbed 50-6o percent; and mining and agriculture, which accounted for less than ten percent of total FD1 intlows (SOBEET, 2011). However, several trends and ‘developments’ in recent years have dramatically changed this pattern. The strong demand for primary commodities on the world market, the expansion of large-scale foreign invest- ments in land for the purpose of agro-food extraction and the production of biofuels, and the rampant speculation in food and minerals as well as land, have wrought a profound change in the structure of FDI inflows: FDI in services have fallen from around half of total investments to 30 percent; the share of industry, where exports have lagged in recent years (partly as a result of the so-called ‘Dutch disease’), has fallen to 35 percent; while mining and agribusiness have tripled their share of FDI flow to 30 percent (Zibechi, 20: Thesis 2 Extractivism a Defining Feature of the New Economic Model The economic model used today by South American policymakers in current conditions (a reconfiguration of global economic power, a primary commoditiesA NEW MODEL OR A NEW FORM OF IMPERIALISM? 25, boom, the decline of neoliberalism, the emergence of left-leaning ‘progressive’ policy regimes) has two fundamental pillars: a focus on natural resource extrac- tion and primary commodity exports as a strategy of national development (eco- nomic growth), and a new development paradigm focused on poverty reduction and what has been termed ‘inclusionary state activism. As Eduardo Gudynas (2009) has pointed out in his summary of the South American version of this model (the ‘new extractivism’ and ‘new developmentalism’) it subscribes to the classical ideas of development as economic growth, modernity and material progress. But, he observes, it is a hybrid that has gone back to and revived an extractivist approach to capitalist development as well as a more inclusionary form of state activism: ‘progressive extractivism’ The resulting reconfigured mix of old and new ideas includes a belief in the comparative advantage of primary commodity exports, the private sector (foreign direct investment, the multina- tional corporation) as a catalyst of economic growth, a consensus on the need for ‘inclusive growth’ (a more inclusive form of development), and a belief in the need to bring the state back into the development process—to regulate the private sector operations of extractive capital and thus provide for a more equi- table and progressive distribution of the social product as well as the socially and environmentally responsible behaviour of the corporations that run these opera- tions.> This mix of old and new ideas regarding development and natural resource extraction explains the commonalities between the approach towards development used by the new postneoliberal regimes and their neoliberal prede- cessors. What unites them is a belief in capitalism as the operating system (although in need of reform) combined with a concem to achieve a better bal- ance between the market and the state than had been the case in the era of state- led development and the subsequent neoliberal era. This balance, it is believed, is secured by means of a judicious dose of foreign direct investment and a mix of market-friendly capitalist development, insertion of the local economy into 5 The latter has take form in the doctrine of ‘corporate social responsibility’ (csr), a platform of ethical principles elaborated by UN-based policy advisors in six UN agencies as part of a ‘global compact’ designed as a means of incorporating the ‘private sector’ (profit-oriented enterprises) into the development process and ensuring their adherence to sustainable development practices. The United Nations Global Compact, also known as the Compact or UNGC, is a United Nations initiative to encourage businesses worldwide to adopt sustainable and socially responsible policies, and to report on their implementation. The Global Compact is a principle-based framework for corporations, to bring them together with UN agencies, labour groups and civil society in a policy of corporate self-regulation (as an alternative to state regulation). The Compact was announced by the then UN Secretary-General Kofi Annan in an address to The World Economic Forum on January 31, 1999, and was officially launched at UN Headquarters in New York on July 26, 2000.26 PETRAS AND VELTMEYEy globalized production circuits and value chains, corporate social and environ mental responsibility, and a measure of nationalism and state activism. In other words, a mix of capitalism at the level of the economy and ‘socialism’ at the leve| of the state. Socialism in this specific context is understood to mean resource nationalism, state regulation, a new development paradigm, and the active engagement of both communities and civil society in the development process, Thesis 3 From Classical to the New Extractivism Gudynas in his take on the new extractivism notes that an extractivist approach towards national development is shared by both neoliberal and postneoliberal regimes in the region. But, as he notes and we emphasize this extractivism takes two different forms: one, exemplified by Colombia and Mexico, where the governing regime continues to follow a neoliberal path towards national development within the orbit of the Washington Consensus and Us imperial- ism; the other, represented by South American regimes such as Argentina, Brazil, Bolivia and Ecuador that have been described in terms of ‘progressive extractivism’ and ‘post-neoliberal developmentalism’. However, here a distinc- tion should be made between cases such as Argentina, Brazil and Chile, where public policy is geared to a model that could be described as ‘pragmatic neolib- eralism’ (a moderate and pragmatic form of post-neoliberal regulationism and progressive extractivism), and Bolivia and Ecuador, which, together with Venezuela, exemplify a more radical form of progressive extractivism, oriented towards what is understood by some as the ‘socialism of the 2ist century’ (Petras & Veltmeyer, 2009). In this regard it is difficult to place Peru, which, under the current Humala regime, is taking a path and implementing policies that is closer to neoliberal- ism than post-neoliberalism. Jan Lust (2014) in this regard describes the regime as ‘neoliberalism with state intervention’, but then this might also apply to Argentina (and Brazil and Chile), as well as Bolivia and Ecuador. The one dif- ference between the latter two post-neoliberal regimes and Peru under Humala is in the case of Bolivia the partial reversion of an entrenched neoliberal policy of privatization in the direction of nationalization and the socialization ot consumption if not production—or, in the parlance of the new developmen- talism, social inclusion. Another difference is that unlike Correa in Ecuador and Morales in Bolivia Humala makes no pretence of seeking to advance ‘socialism’ in any form, a stance that separates his regime from Bolivia, Ecuador and Venezuela, where governments have rallied around an anti-imperialis!ANEW MODEL OICA NEW FORM OF IMPRRIALINM? 27 alternative trade alliance (ALMA). In addition, Peru has been drawn into the ‘Pacilic Alliance’ a grouping of counties that are now locked into an imperial- ixt trade regime via a series of bilateral trade agreements with the us and Canada, In any ease, what defines post-neoliberalism (regardless of what form), in wddition to a policy of ‘inclusionary state activism, is anew form of association with global capital, together with a mild and limited dose of nationalization, and a continuing reliance on foreign direct investment as a source of capital, Thosis 4 Contradictions of the New-Extractivism The advent of a post-neoliberal state and construction of a new development model have generated a new and as yet unsettled debate about ‘extractiv- ism’—