Ecuador - Having it both ways

Jun 21st 2007 | QUITO
From The Economist print edition

To be green or to be rich, must that be the question?

THE Yasuní National Park in Ecuador's Amazonian rainforest is one of the most biodiverse spots on earth. In 1989 it was designated a UNESCO Biosphere Reserve. Under it lie the Ishpingo Tambococha Tiputini oilfields with estimated reserves of almost 1 billion barrels, representing almost a quarter of the country's total known reserves. Their exploitation could produce around $700m a year—a big temptation for Ecuador's leftist president, Rafael Correa, who is anxious to find a way to finance his new populist social policies. But he has also pledged to promote environmentally friendly policies, and this often clashes with his need for cash.

Some of his more radical supporters had hoped for a moratorium on new oil development and other environmentally unfriendly activities such as mining and logging. Instead Mr Correa seems to be leaning towards what he calls “development in communion with, not against, nature” to pay for his “21st century socialism”. Many even within his own administration are unhappy with this apparent betrayal of his green ideals. His minister for energy and mines, Alberto Acosta, an economist and ardent green, recently resigned after clashing with state oil-company officials over his plan for the oilfields.

Under this plan, launched this month by the president, the government would agree not to develop the oilfields in return for an annual payment of $350m—half the expected revenue from its exploitation. Paid by whom? Mr Correa talks of it being raised through “donations, debt trades and unexploited crude-oil certificates” from the “international community”. How it would in practice work is anyone's guess.

Some greens have hailed the proposal as “creative” and a “sign of the future”. But most people regard the whole idea as pie-in-the-sky. Why should anyone be willing to subsidise Ecuador, by no means the poorest country in Latin America, to keep its oil in the ground? Ecuador already spends three times as much on annual fuel subsidies, much of it feeding contraband, as it could expect to earn from the Yasuní oil fields. Furthermore, the donations would go more toward social programmes rather than environmental conservation.

Even Mr Correa does not seem convinced that the plan will work. Rather than cheerleading the initiative at its launch, he spent more time warning voters that the government might have to sink oil wells anyway. But he may earn some credit with environmentalists for trying. And if it does not work, he can always blame the outside world for being so stingy.

Ecuador also has rich metal deposits, mainly gold and copper, worth as much as $160 billion. But mining activities are still limited. Mr Correa says Ecuador will help to develop both its mining and its oilfields to lift itself out of poverty. But, as Mr Acosta liked to point out, this is a country that has produced about 4 billion barrels of oil, worth some $82 billion, since production began 40 years ago—and poverty is still a problem. Besides, those green issues, on which much of Mr Correa's appeal is based, will not simply fade away.