Amazon Basin as one of the natural resources in South America
This research paper entails an economic analysis of the Amazon Basin as one of the natural resources in South America. In a bid to develop a comprehensive understanding of the role of the Amazon Basin in the economic growth of the Amazon Countries, this research takes into account the case of Brazil and Ecuador. First, the factors motivating degradation and deforestation of the Amazon Basin are evaluated.
Demand for economic growth from oil exportation comes out as the major factor motivating the Brazilian and Ecuadorian governments to consider extracting hydrocarbons in the Basin due to the presence of huge deposits, which can significantly stimulate the countries rate of industrialisation.
Degradation and deforestation of the Amazon Basin are also increased by increased demand for agricultural land and logging. However, this element presents a major challenge in the continued existence of the Basins ecosystem and biodiversity as such activities may also increase soil, water, and land pollution. Additionally, the countries economic growth and development due to other economic activities such as ecotourism are hindered.
The paper cites a number of alternative economic development models that Brazil and Ecuador can adopt in their quest to achieve economic growth without destroying the natural resources in the Amazon Basin. The main alternatives suggested include investing in ecotourism and carbon trading.
Introduction
Natural resources play a critical role in the economic growth and development of a country and various categories of natural resources can be utilised to stimulate economic growth. Over the past two centuries, the world has undergone unprecedented economic growth due to consumption of natural resources. The growth is associated with increased exploitation of such as minerals and fossil fuels.
Currently, most economies are under pressure to stimulate their economic growth. Consequently, the exploitation of natural resources occurs without considering the aspect of environmental protection.
Moreover, the finite characteristic of most natural resources presents a challenge with regard to whether the natural resources will sustain the economic growth. The world is currently experiencing a high rate of population growth, hence exerting pressure on natural resources. Consequently, natural resources are increasingly becoming scarce.
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The demand to achieve a high rate of economic growth has led to uncontrolled extraction of natural resources. Consequently, most countries that depend on natural resources have reached a point where their ecosystems have become very fragile.
The Amazon River Basin is one of the most important natural resources in South America. It is estimated that the basin covers 44% of the total land area in South America or 6,100,000 km2. The basin extends into Venezuela, Bolivia, Colombia, Peru, Guyana, Suriname, Ecuador, and Brazil (Bastida 3).
Currently, the Amazon Basin faces a number of environmental issues. The economic analysis of the Amazon River Basin in this paper focuses on the role of the Amazon Basin in the economic growth and development of Brazil and Ecuador by conducting a cost-benefit analysis of deforestation and degradation of the Basins ecosystem. The alternative strategies that Amazon Basin countries can adopt are also evaluated.
Analysis
Factors stimulating deforestation and degradation of the Amazon Basin
The Amazon Basin comprises very delicate ecosystems that have been developed over thousands of years. However, the perception towards the region has changed tremendously over the past few decades. The change has arisen from discovery of the Basins potential with regard to hydrocarbons.
The Basin is characterised by substantial deposits of hydrocarbons, which has motivated most countries within which the Basin is located to engage in deforestation in pursuit for the hydrocarbons. This aspect presents a major challenge to the Basins. The extraction of hydrocarbons has increased five times over the past eight years.
It is estimated that oil companies were granted over 52 million hectares of land within the Amazon Basin to explore and extract hydrocarbons by the end of 2007. The allocation of land varies from one country to another.
Seventy percent (70%) of the allocated land is located in Peru, 10% in Ecuador, and 13% in Brazil (Bastida 6). Moreover, 5 million additional hectares have also been granted for hydrocarbon extraction in Ecuador, which represents that largest proportion of the Amazons ecosystem that is set for exploration.
The aggressive extraction of hydrocarbons in the Basin is motivated by demand for high economic growth. Oil revenue has been the major source of economic growth for most countries within the Amazon Basin; moreover, countries within the Basin are focused on stimulating their economic growth by increasing their oil exports (Bastida 5). Peru and Brazil have invested in aggressive exploration of oil within the basin.
Case studies
Mining in Brazil
The Brazilian government focuses on increasing its hydrocarbon extraction within the Amazon Basin. The country is experiencing a significant increment in demand for energy due to the high rate of industrialisation (Baer 7). From 1970 to 2007, Brazil depended on oil imports in stimulating its economic growth. However, the Brazilian government discovered substantial oil reserves in the Amazon Basin.
Consequently, the National Petroleum Agency has been allocated $36 million to aid in the exploration of oil and gas in the region. The government also intends to invest in Urucu-Manaus project, which entails a 400-miles pipeline within the Amazon Jungle.
Moreover, the government intends to construct a petrochemical complex within the region in order to maximise the economic benefits of the pipeline. However, these projects will be located within the fragile Amazon Basin.
The Brazilian government projects that the oil exploration projects and the petrochemical industry will enable the country to attain an outstanding rate of economic growth. The Brazilian government is of the opinion that the oil exploration projects within the basin will benefit the citizens directly.
For example, the government holds that the Urucu-Manaus pipeline will be a source of employment to a large number of citizens. It is estimated that the project will generate 10,000 jobs employing approximately 500,000 individuals.
Road construction into the mining sites is also stimulating the rate of deforestation in the Amazon. For example, during the 1970s, the Brazilian government intended to construct a 2,000-miles highway across the Amazon forest. However, the project failed due to heavy rains in the region. However, huge tracks of Amazon land were destroyed during the implementation of the project (Bastida 12).
Mining in Ecuador
The oil industry has played a significant role in the improvement of the living standards of Ecuadorians. From 1971 to 1981, Ecuador ranked as one of the poorest countries in South America. However, the citizens living standards changed within one decade. The countrys Gross Domestic Product (GDP) increased from $1,602 million to $13,946 million, which represents an 8% rate of annual growth.
By 1973, the countrys economic growth was estimated to be 25.3%, which is the highest that the country has ever experienced. Moreover, the countrys foreign currency reserve increased by $508 million.
Due to increased oil extraction, Ecuador experienced a high rate of development within other economic sectors such as education and health as illustrated by the decline in the rate of child mortality and the illiteracy levels in the country.
The Ecuadorian government has also invested the revenue generated from the oil industry in other areas of industrialisation such as refineries, roads, telecommunication networks, and hydropower dams (Bastida 9).
Despite its economic growth, Ecuador was adversely affected by the international financial crisis that occurred during the 1980s. Oil prices in the international market declined substantially. Moreover, the countrys oil reserves declined significantly. In an effort to stimulate its economic growth again, the Ecuadorian government intends to revive its economic growth by increasing its oil exploration within the Amazon region.
One of the strategies that the government intends to achieve this goal is by exploring the Ishpingo Tambococha Tiputini (ITT) fields. These fields are located within the Yasuni National Park, which is a relatively volatile ecosystem in the Basin.
It is estimated that these fields have a potential of generating 920 million oil barrels, which is equivalent to US$ 700 million annual revenue. Moreover, the Ecuadorian government estimates that the revenue generated from the oil fields will account for 50% of the countrys budget.
The Brazilian government has implemented strict regulations with regard to logging within the Amazon Forest. Only the licensed parties are allowed to engage in logging activities. Logging is only allowed in designated areas; however, despite the control mechanisms implemented, illegal logging is widespread.
For example, in 2003, seventeen people were arrested for clearing ten thousand hectares worth of timber (Butler Para. 11). The logging roads within the Basin provide settlers with an opportunity to move deep into the forest in search for temporary farming land, building materials, and game hence exploiting and degrading the forest.
Commercial and subsistence farming
In addition to hydrocarbon energy, the high rate of deforestation of the Amazon Basin in Brazil is motivated by the demand for economic growth through agriculture. Huge tracks of land in the Amazon Basin in Brazil are cleared in order to give way to . In 2003, approximately 80% of beef exports into Europe originated from the Amazon (Butler Para. 6).
The demand for agricultural land, coupled with poor land tenure laws has increased the rate of environmental destruction in the Amazon. Foreign investors in the countrys ranching sector gain ease access to land in the Amazon.
Ranching is one as the major causes of deforestation and environmental degradation of the Amazon in Brazil. It is estimated that approximately 60% to 70% of deforestation of the Amazon Basin in Brazil is due to cattle ranching. Moreover, subsistence farming also ranks amongst the major causes of deforestation within the region.
Butler (Para. 7) is of the opinion that subsistent farmers in Brazil use crude methods such as fire to clear land in the Amazon. The fires spread deep into the forest and affect other economic activities. For example, some airports within the region are forced to close down due to the smoke arising from forest fires in the Amazon.
