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Will There be an Equitable Reallocation of Profits?

The Untapped Potential of Paraguay’s Petroleum

by MATEO PIMENTEL

US consumers constitute an indispensible milieu for the consumption of international oil and its products. It is no wonder, then, that oil producing nations have perhaps little choice when it comes their respective, competitive international viability within the context of the global energy game. As the Cuban poet and revolutionary hero, José Martí, once said, “the nation that buys, commands; the nation that sells, serves.” The reality is that sometimes the marginal agency of oil nations oversteps its bounds. Consider Iraq; over a decade of instability and strife has left hundreds of thousands dead, or yet to die, and the Yankee polemics surrounding Iraq’s current status invariably invoke oil. “Yes, yes,” babble the politicos shamelessly, “women and children are dying each day; but, what of the oil—is it safe?” Indeed, in some cases such as Iraq, profit drives the American government to war in the name of liberating untapped profits for private interest. Yet, in other cases of plunder, rather than pillage, for developing nations to even gain access to US markets proves categorically imperative for the future of their economies. Some of these nations would extract all petroleum, and perhaps at any price, simply because a globalization of capitalism-contrived poverty has indentured them and predisposed them to do so. And while not every case is truly as deplorable or abominable as Iraq, the economic reality for any nation looking to sell its oil is such that the US essentially remains “the hand that feeds.” To the highest bidder goes the oil.

One up-and-coming country located in the Heart of South America epitomizes the developing world need to sell oil in the bare bones hope of economic growth. Paraguay, a country with the landmass of Germany but a fraction of its population, is currently busy exploring its potential oil stores. Fingers are crossed so hard that they are turning blue. Nor does Paraguay fear any overt invasion like Middle Eastern nations do; subversion is the anthem that the US hums in Latin America.

One of South America’s two landlocked countries, Paraguay was not so long ago run by military dictatorship. Within little more than twenty years, it has paved a tumultuous road toward what many hope will prove a blossoming democracy for a small nation of many landless poor. Undeniably, Paraguay’s political and economic future is largely caught up with what it stands to find apropos its allegedly substantial amounts of petroleum. Obviously, pending policy concerning oil and trade will invariably shape Paraguay’s future in rapidly approaching years.

Jose-Pablo Buerba, a political economist from Mexico City, recently spent months in Paraguay meeting with several of the political intelligentsia who are responsible for Paraguayan statecraft. Buerba suggests that Paraguay views its political and economic transition as one of modernization. He also notes that leadership in Paraguay espouses a rhetoric suggestive of the fact that Paraguay views its current economy as “young.” Given so much of the political upheaval within recent decades, this projected paradigm makes a good bit of sense. And while monetary devaluation has perhaps not plagued Paraguay like some other nations in South America, the country nonetheless seeks to further democratic stability that might ensure long-term economic stabilization. Certainly, noteworthy amounts of oil would help ensure this to some degree.

A few big name British firms that sell their petroleum products in the US are excited about survey finds in Paraguay. Some estimates portend that Paraguay houses at least 1.1 billion barrels of extractible oil. For an ocean-less country landlocked in the middle South America, future profits from such stores promise a huge boon to the economy. Buerba notes that Paraguay is considering public-private partnerships (PPPs) to ameliorate certain infrastructural deficits that arise from Paraguay’s lack of sea access. There is no need, however, to outright assume that Paraguay intends to completely privatize any oil coffers, as it already has policy in place (laws of fiscal responsibility) that ensure state entities do not overspend or indebt the country past a specific limit. One overarching concern is indebting the nation all in the name of cheapening extraction for foreign private interest.

While many oil producing nations and their governments rely on their respective regulated economies to supply US demand, the effects of trade with the US differ from one nation to the next. Paraguay is not immune to this fact, especially not if it stands to become a big player in the oil game.

As is the case with many poorer nations lacking refining and extraction technologies, Paraguay is free to involve itself with big oil’s private firms so that they can might to the US as easily as possible. Or, they are free to sit on their wealth. Yet, despite any PPPs laws that Paraguay has developed to safely capitalize on extraction, the underlying purpose of such laws is also to attract foreign business. In some cases, nations end up adopting not the best partnerships or bids, but the cheapest, which seldom have the best interest of a given nation in mind.

Ultimately, what makes Paraguay unique in the current global energy game, is that the overwhelming share of Paraguay’s energy comes from hydroelectric generation at the Itaipu Dam (on the border of Brazil and Paraguay). Paraguay itself does not depend on petroleum for energy like American markets have shown the US to do. Furthermore, Paraguay only utilizes about a fifth of its generation capacity—according to what the government tells Buerba. This also means that, with improvements in distribution, Paraguay might eventually further capitalize on hydroelectric energy while also profiting from its oil. For now, Paraguay remains rich in generating energy but lacking, to some degree, in major areas involving infrastructure.

For many nations today, a nation’s ability to attract foreign business directly affects the ability to trade. This is the truth that looms precisely on Paraguay’s petroleum horizon. The byproduct of this contrived standard answers to the name of “deregulation.” And yet, what many governments like that of Paraguay can do is choose to help their people achieve an equitable reallocation of profits. Radically democratic distribution of incoming wealth—especially from oil—can replace the US model, which is the  stratification of revenue, coupled with fostering welfare capitalistic policy that divide poor, working class against itself. The first option has quite socialist ends, but ones that can truly develop a democratic country; the second is part of a long and doomed experiment with economic liberalization that renders many poor nations servile to private foreign interest despite their wealth in oil commodities. Ultimately, the economic benefits that stem from trade with such avaricious markets as those in the US can help developing nations like Paraguay, nations that hopefully seek to further democratize their societies in the 21st century. Democratically, the people can benefit from foreign consumption. The political potential of such economic maneuvering might surpass the potential energy locked inside the hydrocarbon bonds that give rise to them in the first place! But the government must first and foremost have the people in mind when dealing with capitalism’s greediest entities.

Mateo Pimentel lives on the Mexican-US border. You can follow him on Twitter @mateo_pimentel.