Baixe Mineral Dependence of US on Latin American Resources e outras Notas de aula em PDF para Ciências Sociais, somente na Docsity! http://www.jstor.org The Mineral Crisis and U. S. Interests in Latin America Author(s): Robert H. Swansbrough Source: The Journal of Politics, Vol. 38, No. 1, (Feb., 1976), pp. 2-24 Published by: Cambridge University Press on behalf of the Southern Political Science Association Stable URL: http://www.jstor.org/stable/2128959 Accessed: 22/05/2008 16:14 Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at http://www.jstor.org/page/info/about/policies/terms.jsp. JSTOR's Terms and Conditions of Use provides, in part, that unless you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial use. Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained at http://www.jstor.org/action/showPublisher?publisherCode=cup. Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission. JSTOR is a not-for-profit organization founded in 1995 to build trusted digital archives for scholarship. We enable the scholarly community to preserve their work and the materials they rely upon, and to build a common research platform that promotes the discovery and use of these resources. For more information about JSTOR, please contact support@jstor.org. The Mineral Crisis and U.S. Interests in Latin America ROBERT H. SWANSBROUGH THE 1973 ARAB OIL EMBARGO shocked the world. The embargo forced many Western capitols to recognize their economies' growing vulnerability to the developing countries' control over the supply of essential minerals. The action awakened many Third World na- tions to the possible uses of their raw materials as a lever in the conflict between the have and have-not countries. The Arab oil embargo can thus be seen as the first shot in a new global struggle over the world's riches; the April 1974 United Nations' debate over natural resources was the first major skirmish. The battle will con- tinue. This study examines the United States' increasing dependence on foreign sources for the materials vital to American security and economic prosperity. Its thesis asserts that these national interests dictate that Washington assign a higher priority to our relations with Latin America. The analysis assesses the impact of rising mineral imports upon U.S. interests in and current policies toward the Western Hemisphere. It also evaluates America's long-range policy options to cope with the mineral crisis and ensure a steady supply of raw materials. WHO IS DEPENDENT UPON WHOM? Many Latin American spokesmen vigorously contend that the MINERAL CRISIS AND LATIN AMERICA 5 4-J . Z 6 4>2 0 00 10 0 10 I- 0 Ilt:v I- CD m 0 m 0 'Itt m 0 00 CD 10 00 0 _r.0 4-J 0 4-J 4-J $.40 Cd 0 co -CZ 'Itt co 00 1- 00 cq 0 0 cq Itt 't co m 00 0 C= oo co .- u 4-J CZ Cd C6 o o o o o o o C) co 00 C) m 0 co 0 0 0 "It co 't 'Itt C) I- 0 ;_. ;4 ce a cl CZ 4-J0 4-J U) C) 4 C) Co co O I- O co __q 'Itt 00 C-) >4 m m O 00 O I- co co 00 FD lz 4-J0 ;Ln 0 CZ k.. Z l ;Z) 4Q. 1) 0 0 00 c) 1- c) c) c) c) m V) O O cli r__q tn 10 "Zt (7) O 0 1.4 V) 4Q. C-) OC) CII 4-J c) 0 O O O cd cd cli O C) 0 C; cl oc M CII O I-q a c CZ co ol cq cd CZ z z C= 0c) Co 10 0 10 O 0 M oo oo m lo lo lo co >4 + 4-J 4-J Q 4-J CZ CZ CZ t cd :z C'S ;z CII CO Q0 1- 10 0 "Zt ol O 4-J 00 Q0 cli C) co t- cli Cd 0 10 10 10 I- Q0 0 ;.. 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United States imports of nonenergy minerals in 1971 cost $6 billion and the Department of Interior estimates that the cost of mineral imports will rise to $20 billion in 1985 and $52 billion by the year 2000.5 Exports of American manufactured products partially offset the burgeoning expense of foreign raw materials in 1973 and 1974 through devaluation of the dollar. In addition, expanding U.S. agricultural exports help pay the costs of raw material imports and offer a potent instrument in negotiations with mineral producing nations.6 United States industry also faces the problem of more competition and resistance in the acquisition of foreign mineral supplies. The mounting dependence on foreign raw material sources en- croaches upon United States defense interests. The President's Materials Policy Commission (often called the Paley Commission) sounded an early alarm in 1952 regarding future resource supplies to meet U.S. security requirements.7 They based their analysis on the assumption that another global conflict would not be a short war with "revolutionary weapons," a premise coinciding with the cur- rent Pentagon strategy of limited nuclear war. The Commission concluded that the U.S. mineral supply would be more vulnerable in a prolonged international conflict because of the greater reliance on foreign raw materials. Expanded Latin American mineral im- ports, combined with national stockpiles, would probably suffice for U.S. wartime needs, but only Canada and Mexico were viewed as secure outside sources. The vulnerability of American's raw material supplies from Africa and Southeast Asia becomes important 5 U.S., Department of Interior, Mining and Minerals Policy 1973, Second Annual Report of the Secretary of Interior under the Mining and Minerals Policy Act of 1970, (Washington, D.C. 1973), 50. 6 U.S., President, International Economic Report of the President, March 1975 (Washington, D.C.: Government Printing Office, 1975), 133-134. 7 President's Material Policy Commission, W.S. Paley Chairman, Resources for Freedom, Vol. I-V (Washington, D.C. 1952). MINERAL CRISIS AND LATIN AMERICA 7 TABLE 2 U.S. MINERAL IMPORTS, 1969-19(72 AVERAGES Imports from Western Hemisphereb (Percentage of total mineral imports) Percent Mineral Importeda Major Latin American Sources Canada Antimony 95% Mexico (20%o), Bolivia (17%) Insignificant % Aluminumc Bauxite 90 Jamaica (54%), Surinam (23%o), Guyana (7%), Dominican Re- public (7% ) Alumina 35 Jamaica (22%), Surinam (18%o) 0 Beryllium 53 Brazil (64%), Argentina (7%) Insignificant Manganese' 98 Brazil ( 33 % ) Insignificant Mercury 83 Mexico (17%) 59 Tungstenc 40 Peru (9%), Mexico (5%o) 61 Tin' 100 The U.S. imported 99% of tin concentrates from Bolivia. Insignificant Most metal imports came from Malaysia and Thailand Zincc 68 Mexico (24%), Peru (8%o), Honduras (4% ) 60 Leadc 36 Peru (21%o), Mexico (12%o) 29 Copperc 15 Peru (27%), Chile (22%) 31 Nickelc 90 No significant Latin American im- ports. (Cuba accounted for 82 6%1o f the world nickel produc- tion in 1973) Cobalt 100 No significant Latin American im- ports. (Cuba accounted for 6 6%o of the world cobalt pro- duction in 1973) Congressional Research Service, Library of Congress, U.S. Raw Material Resources Production, and Demand: Imports from Abroad, Congressional Record (daily ed.) Vol. 120, April 22, 1974, S6009. bCompiled from U.S. Department of Interior, Commodity Data Summaries, 1974, Appendix I to Mining and Minerals Policy (the Third Annual Report of the Secretary of Interior under the Mining and Minerals Policy Act of 1970), Washington, D.C., 1974. c Included in the list of the "basic 13" industrial raw materials needed by a highly industrialized society. 10 THE JOURNAL OF POLITICS, VOL. 38, 1976 U.S. Economic Prosperity Another national interest seeks to maintain an "optimum level" of United States trade with and investment in Latin America. This becomes an overriding concern as increased raw material imports drain American's foreign exchange reserves. The cost of these re- sources purchased abroad will continue to rise as global supplies dwindle and world demand spirals upward. William Casey, former Under Secretary of State for Economic Affairs, declared that the United States must increase its exports of high-technology goods, enlarge the returns on investments abroad and payments for Ameri- can technology, and encourage greater foreign portfolio and direct investment in the U.S. to pay for these mounting energy and min- eral imports.10 The United States enjoyed a 1974 favorable trade balance with Latin America of $1.1 billion. The region represents a growing market for U.S. goods; American exports to Latin America rose 38 percent between 1973 and 1974.1" In 1973 U.S. direct investment in the Western Hemisphere, excluding Canada, totalled $18.5 bil- lion, 66 percent of America's investment in the developing coun- tries.'2 Fear of expropriation, however, reduced the rate of growth for U.S. investment in the Western Hemisphere compared with investment in the developed countries. The need for increased U.S. trade and foreign investment en- counters the Latin American demand for preferred access to the United States market; the hemisphere's foreign ministers articulated this manifesto in the 1969 Consensus of Vifia del Mar. Venezuela's President Carlos Andres Perez pledged in his inaugural address to use Venezuela's oil wealth to help Latin America obtain "just prices for other raw materials and a just and balanced share of world trade."'13 Peru's President Juan Velasco Alvarado declared that the "lesson of petroleum will open the eyes of many people"; he felt that through unity the developing countries can win just prices for their raw materials and alter the relations of power.14 10 William J. Casey, The Department of State Bulletin, 69 (September 3, 1973), 325. 11 U.S., Department of Commerce, Survey of Current Business, 55 (February 1975), S 22-23. 12 U.S., Department of Commerce, Survey of Current Business, 54 (August 1974), 18. 13 Washington Post (April 13, 1974). 14 La Prensa (January 10, 1974). MINERAL CRISIS AND LATIN AMERICA 11 The Nixon Administration proposed the enactment of general trade preferences to serve U.S. objectives, mentioning growing energy and mineral imports from the developing nations. Despite the opposition of protectionist groups fearing competition from expanded Latin American imports, the Trade Act of 1974 establishes a system of generalized trade preferences for developing countries. However, Venezuela and Ecuador immediately denounced a pro- vision in the Trade Act excluding any OPEC member or nation participating in cartel arrangements. Other Latin American coun- tries joined the protest against alleged U.S. economic coercion, re- sulting in passage of an OAS resolution condemning the 1974 Trade Act and postponement of the scheduled March 1975 hemispheric foreign ministers conference in Buenos Aires. President Gerald Ford requested Congress in April 1975 to lift the restriction on Latin America's OPEC members, since they had continued to sell petroleum to the United States during the 1973 Arab oil boycott. The Administration's call for greater U.S. foreign investment also runs into organized labor's campaign for passage of the Hartke- Burke bill to stem the outflow of United States capital, jobs, and technology. The AFL-CIO argues that foreign investment exports American jobs and harms the U.S. balance of payments; they assert that foreign investment tax loopholes discriminate against domestic industry. Major American foreign investors respond that the de- fense of existing markets abroad compels them to invest in the developing countries. Multinational firms contend that the preser- vation of these markets, sales to American subsidiary companies, and repatriation of profits benefit the monetary posture of the United States. It appears that the growing demand for raw ma- terials will bolster the Administration's stress on foreign investment to help pay the accelerating expense of mineral imports. However, Latin America's resistance to traditional foreign investment will partially constrict the outflow of U.S. capital, especially in the extrac- tive sector. Ironically, the desire for more foreign investment in the United States clashes with rising American economic nationalism. Foreign investment in subsidiary plants in the U.S. and purchases of over 25 percent equity in American firms jumped from $700 million in 1972 to a record increase of $2.5 billion in 1973. The Nixon Ad- ministration, acknowledging that external capital may become highly visible in some U.S. industrial sectors and geographic re- 12 THE JOURNAL OF POLrIICS, VOL. 38, 1976 gions, warned against building a "maginot line against foreign in- vestment."''5 Fearful cries aimed at the concentration of foreign capital in key sectors of the U.S. economy sound like echoes of Latin American nationalist rhetoric. Congress responded by pass- ing the Foreign Investment Study Act of 1974. President Ford signed the Act but reaffirmed America's traditional open door pol- icy towards foreign investment. Fair Treatment of U.S. Property The United States traditionally seeks to protect American busi- nessmen abroad from discriminating legislation and expropriation, but attacks on U.S. extractive firms must be anticipated as mineral prices rise and developing countries take over their major sources of national wealth. Congress enacted several sanctions to deter unfair and uncompensated nationalization of properties owned by American citizens: the Hickenlooper Amendment curtails foreign assistance to regimes seizing American holdings without prompt and adequate compensation and the Gonzalez Amendment orders the White House to veto loans to offending nations from interna- tional agencies that receive U.S. funds. Former President Nixon announced his "presumptive policy" in 1972 regarding investment security in the developing world.16 When a country expropriated significant American investment without compensation, the pre- sumption was that the United States would not extend any new bilateral economic benefits to the expropriating nation and would withhold support from loans under consideration in multinational development banks. The 1974 Trade Act also excluded nations expropriating U.S. property without providing prompt and adequate compensation from receiving the tariff preferences. But a hardline approach cannot halt the spreading phenomena of economic nationalism in Latin America. Expropriation of high- profile American investment often gains a regime broad popular support; both houses of the Chilean Congress unanimously autho- rized the takeover of U.S. copper interests and all Peruvian political parties endorsed the Revolutionary Junta's seizure of International Petroleum Corporation. A survey of the Council of the Americas 15William J. Casey, The Department of State Bulletin, 70 (February 18, 1974), 172. 16Richard M. Nixon, The Department of State Bulletin, 66 (February 7, 1972), 154. MINERAL CRISIS AND LATIN AMERICA 15 Third World will increasingly clash with the raw materials im- perative. The international debate over maritime resources and territorial jurisdiction manifests this conflict.23 American firms seek congressional protection for the mining of manganese nodules from the deep seabed. These nodules contain manganese, nickel, copper, and cobalt; the United States spent over $600 million in 1972 im- porting these four minerals.24 Coastal Third World countries seek to extend their maritime jurisdiction up to 200 miles to exploit these resources deemed vital for economic development. Other poor nations want maritime resources under international jurisdiction so the benefits can be distributed among all developing countries. The political maneuvering within the United States pits the Defense Department, which advocates unrestricted access to coastal seas by endorsing a generous international seabed agreement, against the Interior Department, which advances a weak international regime with undersea mining licenses guaranteed by the U.S. government. The United States sought a 12 mile territorial limit and a 188 mile economic zone at the deadlocked 1974 Caracas Law of the Sea Conference. The industrialized nations wanted firm rules for deep sea mining in any new law of the sea treaty, while the de- veloping countries wanted preferential treatment through a strong international authority which sets its own rules. If a regime for deep sea mining is too restrictive, the United States may mine the manganese nodules through arrangements with nodule owning states lacking advanced mining technology or through consortium arrangements with other developed nations.25 The economic im- pact of America's mounting mineral dependency, combined with its political and security ramifications, buttresses the position of the hard mining interests. Political Development of Other Countries America's interest in fostering the growth of democratic institu- 23 See Seyom Brown and Larry L. Fabian, "Diplomats at Sea," Foreign Affairs, 52 (January 1974), 301-321; and Ann L. Hollick, "Seabeds Make Strange Politics," Foreign Policy 9 (Winter 1972-73), 148-170. 24 U.S., Department of Interior, Mining and Minerals Policy 1973, Appen- dices, Second Annual Report of the Secretary of Interior under the Mining and Minerals Policy Act of 1970, (Washington, D.C. 1973), VII-5. 25 Ann L. Hollick, "What to Expect from a Sea Treaty, Foreign Policy 18 (Spring 1975), 69. 16 THE JOURNAL OF POLITICS, VOL. 38, 1976 tions and respect for human rights may wither in the face of the mounting mineral shortage. President Woodrow Wilson and his successors often expressed the goal of promoting representative governments as the rationale for U.S. intervention in the domestic affairs of the hemisphere's republics; the Nixon Administration criticized the Alliance for Progress's paternalistic crusade to induce democratic reforms in the region. The minerals crisis will reinforce a pragmatic approach toward hemispheric governments whose po- litical and economic systems differ from the United States-especi- ally in the larger mineral-rich nations. Such a policy orientation counsels a non-ideological acceptance of the repressive military governments in Brazil and Chile as well as improved relations with Peru's revolutionary junta and renewed dealings with Cuba. The February 1974 Peruvian compensation agreement to settle outstanding claims for expropriated U.S. proper- ties represents such a pragmatic step; many American mining firms wanted the dispute ended so they could explore for oil and other minerals, despite Peru's stringent "rules of the game." The large Cuban deposits of nickel and cobalt may influence a U.S. decision to restore political and trade relations with the Castro regime. This non-ideological approach parallels recent American efforts to sign trade agreements with the Soviet Union and Peoples Republic of China to gain access to their vast underdeveloped supplies of natural resources. POLICY OPTIONS IN A MINERAL SCARCE WORLD An examination of the full spectrum of United States policy op- tions to cope with the mineral crisis becomes essential as the U.S. faces the prospect of reliance on foreign resources. The following discussion presents these long-range alternatives with a brief evalu- ation of the likelihood of adoption and costs of each policy as a means of securing Latin American mineral supplies to help meet U.S. security and economic needs. The United States may adopt similar policies toward other Third World producer nations. Imperialism On one extreme the United States can pursue a policy of im- perialism, whereby America employs its overwhelming military power in the hemisphere to seize and administer territories con- MINERAL CRISIS AND LATIN AMERICA 17 taining strategic minerals. The banner of the Monroe Doctrine can be raised to warn other major nations not to meddle within the sphere of influence of the United States. The policy parallels the Japanese effort to establish the Greater East Asia Co-prosperity Sphere to guarantee raw material supplies for its industrial and military expansion. Such a suggestion appalls most Americans, but this hardline ap- proach becomes more thinkable if the United States is cut off from extra-hemispheric sources during a prolonged war. If a Latin American nation refuses to supply the U.S. with a vital strategic commodity or sharply raises its price, this option will quickly sur- face. A possible scenario may feature a hostile government coming to power in Jamaica during a global confrontation. The 1973 Middle East war demonstrated how even in a conventional limited war enemy missiles will quickly destroy large numbers of aircraft. Since bauxite is critical in the production of jet fighters, the demand for this mineral may lead to a decision to isolate Jamaica with American Naval power and occupy the island with U.S. troops. Venezuelan oil is also vital to an American war effort, but Vene- zuela's size, geographic position, and military capabilities reduce the likelihood of direct U.S. action against a hostile Caracas regime. Obviously, an imperialistic policy incurs great costs. It will pro- voke violent reactions throughout Latin America and possibly a Third World mineral embargo, dramatic price increases, or supply cutback aimed at the United States; it may also result in consider- able American casualties. Therefore, military imperialism emerges as a last resort option, viable only during a prolonged international conflict. But one can speculate that a continued Arab oil embargo would have led some European nations to approach the United States about such an endeavor in the Middle East. The iminent economic and military collapse of Western Europe would perhaps appear more costly to U.S. interests than a military venture against the Arab oil producing states. Secretary of State Henry Kissinger indicated the possibility of U.S. military action if the industrialized world was strangled by the Middle East oil cartel.26 Intervention Covert and/or overt interventions offer other policy options for 26 Henry A. Kissinger, The Department of State Bulletin, 72 (January 27, 1975), 101. 20 THE JOURNAL OF POLITICS, VOL. 38, 1976 Flexible Mineral Supply Arrangements Another policy urges American businessmen to embrace new mechanisms for obtaining raw materials; such new modes encom- pass joint ventures, management contracts, and acceptance of fade- out agreements. The U.S. government may offer tax incentives and lower OPIC premiums to induce arrangements less subject to na- tionalist resentment. Washington also avoids involvement in hemi- spheric investment disputes on behalf of American companies. The Paley Report called for such "economic statesmanship," criticizing extractive firms which ignored the needs of the host country by concentrating on the "narrow objective of maximizing profits for the company." The 1973 Materials Policy Commission similarly recognized the imperative of new arrangements for mineral exploitation, favoring local participation; however, it wishfully rec- ommended adoption of a worldwide investment code, creation of an international insurance agency, and establishment of a global forum for the arbitration of investment disputes. The Commission suggested that American firms sell exploration and production serv- ices to developing country producers, negotiate service contracts to process discovered deposits, and sign marketing agreements to purchase a portion of the extracted materials. Perhaps Washington can follow the lead of resource-poor Japan, compelled to develop innovative methods for procuring raw ma- terials; Japan was the world's largest mineral importer in 1972.29 The Japanese techniques for obtaining mineral supplies stand out by their very limited capital involvement, relying primarily on long- term contracts and non-equity participation in local enterprises. The Tokyo government also provides technical assistance and capital for the infra-structure development of a Third World coun- try's natural resources while private firms contribute management expertise and foreign markets. Japan even insures long-term loans to foreign companies for the development of minerals exported to Japan under long-term supply contracts. Though a more flexible approach by American investors will avoid many disputes, the cumulated Latin American distrust of U.S. private capital particularly in the extractive field, makes the road ahead a rocky path to follow. Memories of the high-handed actions 2' Department of Interior, Mining and Minerals Policy 1973, Appendices, VIII-13. MINERAL CRISIS AND LATIN AMERICA 21 of American companies during the heyday of Dollar Diplomacy mar the recent efforts of U.S. firms to be good corporate citizens in the host country. Latin American nationalist pressures for greater control over the extraction and processing of their natural riches will certainly result in higher-priced U.S. mineral imports and, in some cases, even the complete takeover of mining joint ventures. Therefore, while this alternative offers one of the least costly options, it cannot assure American extractive companies of a warm welcome throughout the hemisphere. Self-Sufficiency This policy, suggested by the Nixon Administration's Project In- dependence in energy, calls for United States mineral self-suffici- ency. It stresses the development of technology and production to extract low-grade American ore, currently uneconomical to produce, and acceleration of recycling and substitution programs. The op- tion theoretically reduces the vulnerability of the United States to the demands of Latin America and other Third World nations; it assumes producer countries will irrationally hike their prices to a level which make it cheaper for the U.S. to develop its own re- sources. But a self-sufficiency program, when domestic reserves exist, en- tails considerable cost to the environment and a greater consump- tion of energy to extract materials from low-grade deposits; mineral processing presently uses approximately one-fourth of all U.S. energy.30 For example, the United States may decide to develop potential alternative sources of aluminum, especially from domestic high-alumina clays, to reduce America's dependency on Jamaican bauxite. The Interior Department states that the U.S. could be self-sufficient in aluminum now, "if a profit in its production were not required.' Aluminum prices currently spiral upward because of the energy crisis; non-bauxite production would boost these prices even higher. Such a program also involves the environmental 30 John D. Morgan, Jr., Assistant Director-Mineral Position Analysis, Bureau of Mines, Department of Interior, before the Subcommittee on Mines and Min- ing, Interior and Insular Affairs Committee, House of Representatives, March 29, 1974. 31 U.S., Department of Interior, United States Mineral Resources (Washing- ton, D.C. 1973), 39. 22 THE JOURNAL OF POLITICS, VOL. 38, 1976 problems of disposing of the red clay residue from alumina pro- duction and the question of land use. The Paley Commission recommended that for both security and economic growth, the principle of "lowest cost" should be adopted to meet America's mineral demands. The report suggested that cheaper foreign imports allow the U.S. to set aside reserves which can be tapped in an emergency. The 1973 Materials Policy Com- mission also endorsed the lowest cost approach, rejecting self- sufficiency as an unreal alternative. Secretary Kissinger repudiates an autarchy policy as leading to "even more vicious competition, the waste of resources, the stunting of technological advance, and most fundamentally, growing political tensions...."32 And the American people, except in wartime, will certainly refuse to bear the burden of higher priced or scarce consumer products (i.e. alum- inum cooking foil) and heavier federal taxes for military hardware (i.e. fighter aircraft) which this policy option presents. No-Growth Economy Some environmentalists and economists want the United States to adopt a no-growth policy to prolong the use of the earth's dwindling resources; this option also lessens America's reliance on mineral imports. A diminished U.S. military role in the world will probably accompany this policy; limiting the international commit- ments of the United States permits the conservation of materials used to maintain a global armed force. Advocates point out that the United States confronts increasing competition for its large share of the world's natural resources (almost 40 percent), espec- ially from Third World nations wishing to provide their people with a Western standard of living. Reducing U.S. raw material requirements creates hardships for mineral exporting countries that rely on the sale of these commodi- ties to the United States for most of their foreign exchange. Al- teration of American national priorities, such as cutbacks in the aerospace program, lower the demand for beryllium, bauxite, and other metals; producer nations may oppose these policy shifts by retaliating against American investments and exports. A no-growth policy also entails dramatic changes and sacrifices in the ac- customed lifestvle of mnost Americans. 32 Kissinger, 258.