December 12, 2013
Gold does not always glitter
While not as drastic as the Brazilian mining giant Vale’s decision to scrap its multi-billion potassium venture in Mendoza last February, the slowdown in the construction of the Pascua-Lama gold-mine confirmed by Canada’s Barrick brings to the fore some key problems such as Argentina’s difficulties in attracting overseas investment and the crisis of regional economies (a factor in last Sunday’s adverse electoral results). It would be unfair to attribute Barrick’s decision solely to flawed policies of the Argentine government — the biggest obstacle to this binational project actually lies on the other side of the Andes where a Chilean court has lodged an environmental injunction (an area where the Argentine authorities adopt a far more indulgent attitude towards mining interests) while a 21 percent fall in the world price of gold undoubtedly weighs more heavily than any local factors. Yet the fact remains that in more general terms Argentina is almost the only Latin American country to have a lower stock of Foreign Direct Investment than in 2003 despite the “won decade.”
In any case, wherever the blame lies, the consequences must be faced by Argentine provinces with thousands of jobs at risk — the Pascua-Lama slowdown confronts San Juan with the need to avert the trauma suffered by neighbouring Mendoza with the Vale exit and compounded by the steady loss of jobs in the wine industry as vineyards struggle with an unfriendly exchange rate (the impressive electoral success of Radical Julio Cobos in Mendoza last Sunday should perhaps not only be attributed to the virtues of the former vice-president). Federal Planning Minister Julio De Vido rejected the Pascua-Lama suspension and said that he would not “permit... speculation with market conditions” but such rhetoric cannot bend market realities — the project’s workforce has been halved since March.
The illusion that the state can dictate investment does rather more to explain why Argentina has slid down the regional FDI rankings in the last decade at the expense of regional economies. The Pascua-Lama suspension is obeying a global trend with cost-cutting in at least 10 Barrick ventures around the world (including a closure in Peru, an outcome which it would be rash to provoke here). Instead of an outburst of economic nationalism, De Vido might be wiser to approach both the Chilean and San Juan provincial governments for a joint stance — nothing seems more misplaced than electioneering the week after an election.