Lights, Camera, Extraction
Examining near-shoring and extractivism in Latin America
by taller ahuehuete
✎ 7 minutes
Overlooking the Gulf of California (also known as the Sea of Cortés), Puerto Libertad's strategic location on the west coast of Mexico offers advantages in terms of shipping routes for global capital. Compared to arteries transiting the Panama Canal, this advantageous location became a magnet of potential cost-conserving operational opportunities. Given its prime surroundings, liquefied natural gas (LNG) endeavors in Mexico garnered significant attention from prominent off-takers, including ExxonMobil, Shell, and the recently added Chinese distributor, Zhejiang Energy.
China's economic climb has transformed the Latin American export landscape. From 2000 to 2021, trade between China and Latin America grew from less than 2 percent to a record $450 billion. These exports primarily consist of commodities such as soybeans, copper, petroleum, and other raw materials needed for Chinese industrial development. Regardless, despite the familiar promises of progress and economic splendor surrounding global mega-projects, the LNG industry expansion in Mexico raises concerns of impending habitat destruction, air and water pollution, dispossession, and ecosystem disruption. Wastewater discharge and chemicals used in the production process will contaminate the already scarce water bodies, posing risks to aquatic life and affecting drinking water sources. And, incidentally, Puerto Libertad, Sonora has a desert climate, as per the Köppen classification.
And the Forty Thieves
Nonetheless, the Mexican firm Pacific announced a free-on-board sales purchase contract with Zhejiang Energy, committing to sell 1Mt/y (million tons per year) of LNG over 20 years. Considered the most advanced LNG project on the west coast of North America, the contract reflects a growing trend of Chinese LNG importers, including Qatar and the U.S., securing long-term deals with producers.
Last year, market volatility led to record-high Asian spot LNG prices, prompting importers to seek more reliable supply sources. In an interview with Reuters, Ivan Van der Walt, CEO of Pacific, declared this new agreement will allow China to meet the increasing energy demands of Zhejiang province, one of the largest regional economies in the country. Zhejiang, located on the southeastern coast of China, is one of its most developed and economically blossoming provinces, with key industries including manufacturing, textiles, electronics, information technology, and tourism. The region emerged as a hub for e-commerce, becoming home to Alibaba Group — one of the largest e-commerce companies — with headquarters in Hangzhou, capital and most populous city of Zhejiang.
China's economic engagement with Latin America is characterized by loans, trade dependencies, and foreign direct investments (FDI). Chinese loans to Latin America between 2005 and 2016 reached $141 billion, with the majority (80 percent) provided by the China Development Bank. These loans amounted to $74 billion secured through "loan-for-oil" collateral. Brazil has been the primary recipient of Chinese investments, followed by Peru, Argentina, and Chile.
China's Belt and Road Initiative (BRI) has gained traction in Latin America, with 21 countries from the region signing on to the initiative. This development aligns with its strategic objective of deepening the People's Republic of China geopolitical influence. BRI projects offer investment openings in various sectors, including 5G technology, energy production, transportation, and «safer» cities via surveillance technology. And despite resistance from countries like Argentina due to concerns over potential backlash from the United States, China continues to persuade Latin American heads of state to participate in these arrangements by presenting attractive investment packages. These often involve long-term Chinese engagement, paving the way for long-term economic dependency and potential loss of sovereignty for recipient countries.
The trade relationship between China and Latin America relies on primary commodity extraction. In 2016, 72 percent of Latin American exports to China were raw materials, compared to only 27 percent for the rest of the world. This imbalance reflects a general mode of economic compulsion, whereby Latin America must export its resources while China monopolizes the manufacturing sector.
Moreover, Chinese firms have increasingly replaced Western extractive corporations, perpetuating the well-known unequal ecological relation. This process mirrors the Western method of depletion of nonrenewable resources, leading to significant natural wealth outflows from regions of the Global South to China. Notably, China has protected its multinational corporations through 128 bilateral investment treaties (BITs), ranking second globally after Germany. These contracts provide legal protection for Chinese investments, ensuring the interests of PRC’s multinational corporations. Furthermore, the Asian nation-state’s growing diplomatic leverage in Latin America is tied to its campaign to isolate Taiwan. Beijing has pressured countries to sever associations with the East Asian territory, resulting in dwindling support for the island. Only seven Latin American countries currently recognize Taiwan, with recent switches by Honduras, the Dominican Republic, and Nicaragua.
Green, As In Guac
China is not the sole protagonist of this neo-imperialist trend. The European Green Deal, heralded as a transformative initiative to combat climate change and restore ecosystems, emphasizes the urgency for action while conveniently ignoring the historical burden inflicted by the Global North on «underdeveloped1» nation-states.
The deal sustains an apolitical narrative, aligning seamlessly with corporate interests while neglecting to address these disparities. This oversight merely perpetuates and exacerbates the plight of the marginalized. The European agreement depends on technological resolutions such as electric vehicles, solar panels, and wind turbines, veiled as instruments for sustainability. The path aims to simply substitute Wonder Bread for whole wheat, duplicating the exploitation-sandwich recipe. By circumventing the harms yielded by colonialism and capitalism, the measure eternalizes climate colonialism, a form of environmental exploitation that renders colonized zones unsustainable.
The US's pursuit of a "green industrial policy" paradoxically contributes to greenhouse gas emissions and hinders global decarbonization efforts. Its demands for international alliance membership while engaging in policies aimed at decimating competitors further highlight the incoherence of its economic nationalism. By leaning on strategies that perpetuate stagnation and global instability, the northern neighbor reflects the exhaustion of its own system and the futility of extreme economic nationalism. The dominance of primary commodity exports and the replacement of European and North American extractive corporations by Chinese firms parallels the Western extractive methodology, adding to the depletion of nonrenewable resources. The exclusion of China, the leading investor in clean energy technology, from global markets through protectionist policies in the West further undermines cooperative 'green' efforts. By forcing producers to operate outside the global productivity frontier, the US's destabilizing approach significantly increases the costs associated with decarbonization.
We've seen this film before
Given the scale and potential impact of the Mexico Pacific LNG project, its contribution to greenhouse gas emissions and climate change warrants critical scrutiny. According to a 2022 drought monitor report by Conagua (Mexico’s National Water Commission), several regions in the nation-state face critical droughts. In the case of Sonora, almost the entire territory accounting for 99.9% is affected by extreme water scarcity.
Last year, the Comités de Cuenca del Río Sonora (CCRS), — a community movement fighting for justice and reparation following a massive toxic spill caused by Grupo México — presented a report titled "The Road to Truth after 8 Years of Impunity in the Sonora River." Key findings included a significant presence of heavy metals such as lead, arsenic, and cadmium in residents of eight municipalities in the river basin. More than 95% of the population had detectable levels of lead in urine, over 50% of arsenic, and over 79% of cadmium. Certain municipalities showed 1-10% of the population fit the “high risk” and “very high risk” categories most prone to developing arsenicosis and neuropathy.
Over the past three years, the global supply chain landscape has undergone significant transformations due to the Covid-19 pandemic and subsequent geopolitical events. As the pandemic disrupted factories, halted production, and created logistical challenges, companies worldwide experienced the consequences of relying heavily on distant and centralized supply chains. With the Russian invasion of Ukraine, and mounting tensions between China and Taiwan, many companies are exploring the possibility of re-shoring their production to the United States or near-shoring to neighboring regions.
As countries like China and Vietnam faced prolonged shutdowns while the U.S. began reopening, the imbalance between supply and demand became evident. American brands experienced delays in receiving products, leading to empty store shelves and panic among manufacturers and retailers. Given the challenges associated with Asian supply chains, Latin American countries emerged as attractive alternatives. Major apparel brands, including Levi's, Nike, Patagonia, and Adidas, already have production facilities in these regions. Compared to the lengthy six-week lead time from Asia, Latin America offers global capitalists in the West a much shorter 10- to 14-day lead time.
Considering the potential economic growth wrapped in near-shoring and extractivism, one can’t help but rejoice at the news. After all, who needs drinking water in the face of progress, industry, and development?
By capital’s parameters.