Ecuador under the hammer

Ecuador is a watershed nation. It is virtaully spilt in two by the Andes mountain range – to the west the Pacific, to the east the cradle of the Amazon. The country has 8.1m hectares of pristine rainforest, protected by the mountain range on one side and the impregnability of the jungle itself on the other – the Ecudorian Amazon is the deepest part of the rainforest. It is also one of the most biologically diverse patches of land in the world.

Everyday, new species and types of trees are being discovered in the region. Yasuni National Park in eastern Ecuador is estimated to have one of the richest concentrations of species in the world – there are more bird species there than in all of Europe. It would take a team of scientists 400 years to identify the estimated one million species of insects living there. But since 2007, it has been known that as many as one billion barrels of crude oil lie beneath the jungle floor.

And that is where the trouble – and the opportunity – lies. There are already a number of active blocks being explored within the boundaries of the Yasuni National Park, but Ecuador has recently announced plans to auction off up to three million hectares of unspoilt rainforest to Chinese oil explorers. Quite apart from endagering the rich flora and fauna of the region, many tribes – some of which live in complete isolation in the jungle – are susceptible to being removed.

Though the announcement of the auction was met with widespread protests by environmental and indigenous groups, Ecuador finds itself in a difficult situation. Around a third of the population still lives below the poverty line. Ecuador has long known that it is an oil rich country, but has struggled to convert that natural wealth into development.

Oily business
According to the World Bank, although the country grew tremendously during and after the oil boom of the 1970s, poverty has remained widespread. The report does not make for easy reading: “The distribution of wealth is skewed and close to four million Ecuadorians, about 35 percent of the population, live in poverty. Another 17 percent are vulnerable to poverty.” The notion that oil money will be all the cash the country needs to finally emerge from the grips of poverty makes the temptation to drill all the more difficult to resist.

“Ecuador is willing to establish a relationship of mutual benefit; a win-win relationship,” declared Ecuador’s ambassador to China in the opening remarks of a bidding event at a fancy hotel in Beijing. Attending the event were representatives of some of China’s most important oil companies, including China Petrochemical and China National Offshore Oil. It is certainly a ‘win’ situation for petrochemical companies; China’s insatiable thirst for fossil fuels has meant every drilling opportunity is a golden one. And Ecuador has a lot of oil to offer.

But the auction of the blocks has been fraught with contention. Before the final stop in Beijing, Ecuador’s authorities had been on a roadshow to introduce the auction. Events in Houston, Paris and Quito were all met with angry protesters and indigenous activists. The auction has become so controversial that Amazon Watch – the vociferous California-based NGO – has gotten involved, suggesting the deal might be in direct violation of the investment guidelines China issued in late February.

Quantifying the value of the rainforest… is problematic

The document states: “It is advocated that, in the course of active performance of their responsibilities of environmental protection, enterprises should respect the religious belief, cultural traditions and national customs of community residents of the host country, safeguard legitimate rights and interests of labourers, offer training, employment and re-employment opportunities to residents in the surrounding areas, promote harmonious development of local economy, environment and community, and carry out cooperation on the basis of mutual benefits.”

Indigenous concerns
There are seven indigenous groups inhabiting the region who claim they have not been consulted or consented to the developments. For the local inhabitants, the oil developments are incompatible with their way of life. When the auction was announced last October, a group of indigenous associations released an open letter requesting international companies abstain from bidding in the offending blocks. It read: “We demand that public and private oil companies across the world not participate in the bidding process that systematically violates the rights of seven indigenous nationalities by imposing oil projects in their ancestral territories.”

The government has not been sympathetic to the complaints of the native population. “These guys with a political agenda, they are not thinking about development or about fighting against poverty,” said Ecuador’s Minister for Hydrocarbons, Andrés Donoso, in an interview. “We are entitled by law, if we wanted, to go in by force and do some activities even if they are against them. But that is not our policy.” He added Ecuador was not just courting Chinese oil companies, but admitted that – because of their resources – if it came to a bidding war, they would be the likely winners.

Narcisa Mashienta, of Ecuador’s Shuar people, said: “What the government’s been saying as they have been offering up our territory is not true; they have not consulted us, and we’re here to tell the big investors that they don’t have our permission to exploit our land.”

The Ecuadorian authorities are marketing the auction as an opportunity for development. The southeastern Amazon region, just below the national park, is estimated to hold up to 1.6 billion barrels of oil, and the country expects bidding for the 13 blocks currently open to bring in $1-1.2bn. The drilling blocks will be accompanied by vast investments in infrastructure as pipelines and roads are built, generating many jobs. But the indigenous population being displaced maintains the price to pay for this development is too high.

Quantifying the value of the rainforest – both as the rightful territory of its indigenous inhabitants and as a vast natural resource – is problematic. While oil developments will certainly bring opportunities and developments to the country, it is unclear how much of it will filter down to the lower echelons of the population, including the native tribes of the region. It is also important to note that, while there is a wealth of oil in the country, it is a finite resource that will come in lieu of the infinite riches and benefits that can be found in the Amazon.

Ecuador is undoubtedly at a difficult crossroads, but it must remember that foreign investment in oil, though easy and lucrative, is not the only way to bring development.