The Chaco is one of the most remote regions in South America, yet development of its natural gas has created significant benefits, and challenges, for its peoples and environment. While extractive industries like natural gas can spur investment in infrastructure and create jobs, Bolivia’s history provides a stark warning on the fleeting benefits of economic growth based on export commodities.
During the 16th and 17th centuries, Bolivia played a crucial role in the emerging world economy.
While today Bolivia is one of poorest nations in Latin America, during the colonial era, it played a crucial role in the world economy. The great silver mines of Potosí, the richest in history, produced 25% of all silver mined between 1500 and 1800. The city of Potosí grew to over 100,000 by 1600, making it larger than Paris or London at the time! During this period, Bolivia, or Alto Peru as it was known at the time, was part of the Spanish Empire. The Spanish used its colonial power for mining, generating revenue for the empire through taxation on silver.
The wealth generated in Bolivian colonial mines helped make Spain the preeminent power in Europe in the 16th century. Meanwhile, mining had tragic consequences for the indigenous peoples of the Andes. To keep labor costs low, the Spanish instituted a rotational labor draft that forced thousands of indigenous Andeans into the toxic environments of mines and refining mills. Thousands lost their lives due to accidents, work-related illnesses, and overwork. Moreover, the use of mercury to refine silver led to the contamination of water resources near mines.
The incredible wealth generated in Bolivia during colonial times did not create a lasting benefit to the local population.
Ultimately, the incredible wealth generated through colonial mines did not create a lasting benefit to the local population. Silver flowed across the Atlantic to Spain in treasure fleets organized to discourage piracy. Even the Spanish empire failed to derive lasting benefits from New World resources, as constant wars in Europe drained the Spanish treasury and drove it into bankruptcy by the late 1600s. Instead, the silver produced in the Americas served to balance the growing trade with the Far East and China, where consumers had little interest in European goods.
While one must be careful in drawing historical comparisons, colonial silver mining provides a cautionary tale of what can happen when resources are developed without regard to people or place. The Chaco of modern day is another example.
Hydrocarbon development in the Chaco has contributed little to a more dynamic or equitable economy.
In the mid-twentieth century, the regional economy of the Chaco began to shift to hydrocarbon production due to the discovery of important oil reserves, and production has been consistent ever since. Today, about 70% of Bolivia’s natural gas production is located in the department of Tarija, and the majority of that production originates in the Chaco. Yet despite more than 70 years of production, hydrocarbon development has not contributed to the creation of a more dynamic or equitable economy in the region.
The national hydrocarbon company, Yacimientos Petrolíferos Fiscales Bolivianos, or YPFB, has controlled the development of hydrocarbon resources in Bolivia since 1952. Although this means that control of resources is in Bolivian hands instead of those of foreign corporations, the nation depends on exporting natural gas to maintain its recent economic growth. As a result, there is pressure to develop resources quickly and to disregard the concerns of local people. This can produce tragic consequences. For example, in 2018, a leak in an oil pipeline contaminated drinking water and killed fish and crabs in a watershed near the town of Caraparí in the Gran Chaco. While the official account denies that the leak affected the population, local leaders have protested, claiming that 1,200 people became ill as a result of the spill.
It is vitally important that Chaco communities have a voice in the direction of resource extraction in the region, as Bolivia seeks to balance community interests with national development strategies. By improving access to educational opportunities, promoting self-determination, and fostering a cadre of young leaders, the Chaco Fund aims to help communities face this challenge head on and, perhaps, turn the page on Bolivia’s long history of extractivism.