Extractive Industries in LATAM: Towards a Future Model of Energy and Resource Use

Good afternoon and welcome back and now we will start with panel three, Toward a Future Model of Energy and Resource Use So up until the recent years climate issues were considered to be a distant matter that only few large carbon emitters needed to handle. rEcently this has been shifting to consider tackling climate issues as a more collective duty and their responsibility. The Paris agreement not only represented this historical consensus but also materialized the idea that the transition to a low-carbon economy is unavoidable. In this panel we aim to explore how investors and companies engaged in Latin America’s extractive industries address the opportunities and challenges embodied in aligning their internal objectives with larger national programs that aim to increase energy efficiency, renewable energy sources, carbon neutral technologies and the integration of these two with conventional methods of exploration, development, and exploitation of resources. Our panelists today will be Ms. Daniele La Porta, Mr. Andres Flores, Ms. Camille Gaskin Reyes and Mr. Tomas Gonzalez. Ms. La Porta is a senior mining specialist with a World Bank group in Washington, D.C. In this role she manages projects in Colombia, Sierra Leone, Romania, Brazil and Liberia. She also co-leads the bank’s knowledge products on innovative ideas such as mining and climate change, deep-sea mining and the preparation of innovative public-private partnerships in the water and mining sectors. Mr. Flores is director of climate and energy and as such he is in charge of design, coordination and implementation of the agenda related to these two thematic areas within the program of work of the World Resources Institute in Mexico His focused topics include mitigation of greenhouse gases and adaptation to climate change, energy efficiency and clean energy. Ms Camille Gaskin Reyes from Georgetown University has a PhD in Urban and Regional Planning and extensive experience in development policy and practice through her 25 year career in the Inter-American Development Bank in economic analysis, sustainable development, project appraisal and risk assessment. She has also worked providing technical services to development banks and NGOs in Latin America and the Caribbean in policy analysis and sustainable development. Mr. Gonzalez is an economist from the Los Andes University and has a PhD in economy from the London University. He has worked in BP Colombia that operates several oil fields and acted as the minister for mines and energy in Colombia from 2014 to 2016. And as a moderator we have Olivia that is a second year McCourt public policy student in the McCourt School of Public Policy and comes in representation of the McCourt energy and environment. Thank you hi good afternoon I have a presentation I’m not sure Sorry about the PowerPoint presentation I know these can be painful at some times but since our report relies heavily on some modeling and the graphs kind of speak for themselves. I thought it would be very interesting to bring this and show you a little bit folks Well you know when in all these climate discussions and during the Paris discussions that led to the Paris agreement and all these scenarios of projections in terms of where we need to be in terms of global warming very little has been said and not much attention has been been paid in terms of what are the material implications for this low-carbon future, what are we talking about here So we knew that there would be a shift in terms of what minerals and metals would be demanded to deliver on this low-carbon future but we weren’t sure what minerals and how much. So in order

to answer a bit of these questions we prepared a report that basically looked at this aspect of the climate change discussion and challenge. So before I even go and explain what the report presented and how we came about some of the conclusions I think that from the start it’s very important to say that a low-carbon future will be more material intensive. There is a very substantial material side to it and I will explain why and also for the bank it was important to understand where these materials were coming from because as we know a lot of these minerals and metals are mined in resource-rich developing countries so for us from the World Bank’s perspective as where these minerals are what sort of development will it require. So we needed to ensure that these countries would benefit from the extraction of these minerals, that there is zero net positive carbon footprint to this extractio,n and also that there is security of supply not only security of supply but that this supply chain is transparent, responsible and ethical. So really quickly this presentation is why I’m going to show you why a low-carbon future will be more made our intensive, what does this mean for resource rich countries and producer companies, let’s not forget that the industry will play a key role in delivering this low-carbon future for the mining sector and the need for a climate smart mining approach and what are the way for what’s the way forward and what are the recommendations. So everybody knows without metals there will be simply no low-carbon future possible. If you look at what it takes to build one three megawatts turbine it’s a lot more steel, a lot more copper oops sorry and a lot more of minerals. For the electric cars we’ve all been following in the news how important you know securing the supply chain is for delivering on electric cars, if you look at electric hybrid cars they take up they use twice as much copper as a non hybrid car, not to mention all the other minerals and metals we’re hearing about cobalt and how difficult it has been for the industry and for car producing companies to secure you know the cobalt that they need to prepare their batteries for the hybrid cars, so there’s a lot of discussion going on there. But for us it was um anyway we’ll get there So the report examines the implication of changing material requirements for the mining metals industry as a result of the low-carbon future. So special focused again on how can resource rich developing countries best position themselves to take advantage of the evolving commodity market. So in order to do that we use the International Energy Agency’s ETP 2016 scenarios, so we used the six degree scenario, the four degree scenario and the two degree The six degree was mostly our baseline to compare what sort of technology would be used under each of these scenarios which sort of you know low carbon technology and what were the mineral implications for each one of them. I’m not going to go in much detail on the methodology because it would take a lot of time but I’ll be glad to answer questions afterwards if there are any and regarding this. So the technologies we studied were wind, onshore and offshore, solar and battery storage. So it’s very important to say that different technologies have different metal demands and that there’s a lot of uncertainty in this regard because I mean technologies change and we don’t really know how they are going to be changing it but how fast they’re going to be changing but it doesn’t really matter because you substitute one mineral, one metal for another at the end of the day the materiality of this technology or whatever technology you choose is still going to be there. So we selected a few minerals and metals, we could not do for everything, I mean we had to focus and be very specific so we selected to look at aluminum, copper, chromium, iron, lead, manganese, nickel Sorry guys I didn’t turn this thing off So steel and zinc and looking at each technology and what sort of minerals and metals. So if we look here at the solar PV you know very popular technology solar panels or everywhere these days

but if you look at the percentage of increase from the six degrees scenario, the six degrees scenario would be like business as usual comparing to the four degree and the two degree, you can look for example cobalt 1,200 percent increase in the demand for this specific mineral. So and I could show you several graphs the same sort of response we got for wind, we got for batteries with different metals, but the demand is significantly more under these scenarios for these technologies that we looked at. But for us the bank it’s not we’re not into mineral projection and I mean not so much we look at it but mostly in terms of how do we understand that so that we can help our clients better develop and better and better prepare for what’s coming in terms of the mining sector. So so we did a little bit of research in terms of where were these resources and what’s what kind of reserves were there It was not an exhaustive exercise there was still a lot more to be done but we basically mapped the most relevant minerals and metals and where these resources were. But anyway in terms of Latin America. Latin America has and has been the region that produces a lot of these metals that are essential for a low-carbon future, however there is a lot to be done in terms of continuing to be a preferred destination for investors. If we look at the investment attractiveness from the Fraser Institute from 2015-2016, Latin America is not faring very well It’s only ahead of Asia and they selected Argentina here for some specific region because I guess the country is now back very much so in terms of attractiveness to investors so a lot could be done here and that’s a whole different discussion on how to improve attractiveness for the mining sector for investors, but it’s just important to say the Latin America will be an important player in supplying all these metals and minerals that will be needed for a low-carbon future. So there’s our you know the opportunities there the whole demand for new minerals but on the other hand there are also all the challenges associated with all this extra mining that’s going to be taking place, so how do we address the carbon footprint of the industry? So on the industry side a lot has already been done and the industry is adapting, they know they need to adapt and they are, so new models of extraction, energy and water efficiency, you know reduction in methane emissions, use of some more data, carbon capture and storage. So industry is doing but for us at the bank that question was also ok so industry is leading all this innovation but is there a role for government, is there a role you know for governments to really provide the enabling environment so all this can happen, this is for us what really was important. So part of this challenge in addressing all this extra mining that will be required for a low-carbon future I mean part of it is integrated landscape management and planning including infrastructure, we have to remember mining is not just a mine site it is also very much the infrastructure associated to it. So there’s I mean we could we could go on and on about all these challenges here and then we don’t have time for that but it’s just to highlight that it is one of the important challenges going forward So conclusions toward a climate smart mineral and metals industry, so meeting the Paris climate target will require a radical restructuring of energy supply and transmission systems globally. The clean energy shift will be significantly more material intensive. This will probably open up new mining frontiers with new opportunities and risks, technology choices matte,r need for a flexible approach, the footprint implications of the materiality of clean energy needs to be factored into the climate change and minerals development strategies of countries and companies. We cannot overlook this anymore this discussions on climate change do need to take this into consideration, so for us we see very clearly a need for a multi-stakeholder approach where we have governments, industry, mining and metal

community, climate change. sustainable development community coming together in order to address all these challenges Thank you. Okay thank you Daniele. Thank you very much good afternoon to everyone. I’m going to speak here more from a policy perspective which is my area of greater experience I’m probably greater expertise, and I would start by saying that when I when I got the invitation I when I read the notes of the seminar and the panel, it asked the question it said a future model of energy use and a future towards a future model of energy and resource use and then I read what it said underneath and there was almost an exclusive emphasis on emissions, on the role of companies and on climate change And although I think it’s that’s very important it’s really important for Latin America, I don’t think when it comes to a future of energy that you should focus exclusively on that on that on a region and that you should have a prominent space for policy, all this is certainly going to be very very important in what happens in the coming decades in Latin America. So when you ask yourself what about the role of policy, what should policy do, then I think you have to step back a little bit and think what energy for at the end of the day what’s the great is the most important role energy can play in a region. And I would say energy is an ideal vehicle for two things: to promote growth and to reduce poverty. So when you think energy in those terms then you have to see what are the things policy energy policy should focus on for the coming for the coming time for the coming decades, and I think there are at least four areas additional areas besides climate change and emissions the use of renewables that you should focus on. The first has to do with security of supply, one cannot forget that we need to ensure security of supply. Look just at El Ni√±o Latin America is a region that disproportionately uses or compared with regions uses a lot more of renewable energy in terms of hydro specially large hydro projects to generate electricity; it’s probably seventy eighty percent of its electricity generation might come from from water compared to other regions of the world. And when you look at El Ni√±o, usually El Ni√±o puts a lot of pressure to the electricity system in a region. Very recently there were blackouts in Venezuela, there were blackouts in Panama, a couple of years ago there were blackouts in Brazil. So our energy systems, our electricity systems are still not resilient enough. If you want to promote growth you need to ensure that every time a company needs to turn on an oven or needs to turn on the lights or needs to use electricity the electricity is going to be there otherwise it’s going to be very difficult to have sustained growth it’s going to be very difficult to plan it’s going to be very difficult to be competitive in terms of investment. Also you have to think that the focus here cannot be solely or uniquely on supply which is also what happens in many of these discussions, you start talking about renewables, you start talking about climate change and you almost always confine this discussion to that area. I think we need to focus on the other parts and the other links of the chain, so in order for electricity to be available for companies and for households you need to ensure there’s proper transmission, you need to ensure this property distribution, you need to ensure this proper commercialization, and you need to ensure the regulatory framework is there to make sure the investment takes place, there is access to networks and that people are charged what they need to be charged and not more and not less but not but not more. So it’s very important to focus on that as well Second access. This is something that is sadly very frequently absent from energy discussion energy policy debate. When you think about access the evidence is overwhelming and maybe Daniele who works in the World Bank has seen this repeatedly but the link between energy access and development is very very very strong and I can give you anecdotal the data’s there but I can give you anecdotal evidence. When we did in Colombia a program to give energy access to a poor community in the Pacific coast of Colombia, which is probably the poorest part of the country, it was very interesting because once they had access to electricity, to reliable source of electricity they could do many things. First, they could cook, women mainly do the cooking so when women could cook instead of having to go

out and pick wood to turn on a fire and cook they could spend less hours cooking and finding and finding a source of fuel for the food, to prepare their food and they could spend more time trying to participate in the labor market, so it was very good in terms of that. Second when you’re not cooking with wood, then your health improves, the health of women and the health of children, which they are the ones that take care most of children are women, so we have improvements in health. The men which were usually fishermen but they fished they collected the fish and once they they ended up their day of fishing they needed to take the fish to the consumption center, so use all the gasoline in their in their motor boat to get to the consumption center When you have the opportunity to have electricity then you can have a fridge and you can store a large amount of fish and then you can take the fish a lot of fish to market in a single trip. So income increases, efficiency increases, productivity increases. For children, children now have light to study during the night so educational achievement also raises. I could go on and on, you can you can refrigerate vaccines for example that’s very important in terms of health, you can put lights to communities to streets in communities at night then they become safer. So I could go as I said on and on and on but the evidence is very clear The problem is that when you look at Latin America and you make a rough estimate and there are many calculations of these around 30 million people a little more a little bit more than 30 million people don’t have access to electricity That’s a population the size of Peru, that‚Äôs larger than the ten biggest U.S. cities, you take Los Angeles New York and all the ten largest U.S. cities didn’t have 30 million people so that’s the amount of people we have without electricity in Latin America. And it’s probably an understatement because a lot of people have access to electricity but only for a certain amount of hours a day or they have access to unreliable sources so they have cuts, not lot of frequency. Then you have to think what the contribution to growth under reduction of poverty and the reduction of inequality by the way Latin America we take the top 100 or the 100 list of income distribution in the world and you look at the at the worst ten countries in the world, eight of them are from Latin America. So we have a big problem there so we cannot neglect thinking about access when we think out the feature of energy policy. Thirdly efficiency and that’s probably one of the largest contributions any topic can make to a more sustainable and more environmentally friendly use of electricity it will focus on efficiency Usually the discussion goes to prices are we charging market prices or not, are our prices competitive if firms don’t have access to energy at competitive prices it will be hard for them to compete and create jobs, but it’s not only prices it’s also quantities. Quantities a consumption in Latin America at least in Colombia which is the country which for which I know the data the best, consumption is not done efficiently at all. It’s incredible how industry, how transportation, we have cars, we have buses, we have mass transportation systems with old engines that are not very efficient, so that’s waste that’s pure waste. We did an estimate in the case of Colombia and we think that with energy efficiency measures in conservative estimates we could reduce demand growth by at least one percentage point a year, an energy demand growth. That’s huge, there implies building less new generation projects and this involves a better use of resources. And fourthly, taxes. We cannot think of policy without thinking in terms of taxes and this is this is a tricky one because there are important trade offs there. If you think about minerals and hydrocarbons in Colombia in the first part of this decade from 2010 to 2015, the money we got from royalties and taxes from mining and hydrocarbons that includes coal means one of the largest producers of coal in the world, we got so many resources that we were able to pay for around 30 percent 30 cents of every dollar the government invested in those five years So in a way coal and oil and natural gas paid for roads, they paid for universal access in health, they paid for free education and for free basic education in Colombia, we were able to pay for access so that all 1200 municipalities we have in Colombia could have internet access. So from non renewable sources of energy, we had a lot of resources that allowed us to invest in reducing poverty, on increasing competitive competitiveness, and having a stronger

economy. So we need to think about taxes we need to think also what we subsidize and what we don‚Äôt. If you look at fuel prices across the region only a few countries follow market prices; fuel is heavily subsidized in in Latin America, it doesn’t make any sense from economics point of view it doesn’t make any sense doesn’t make any sense but we still have very large subsidies. In Colombia we we follow without some smoothing mechanism but we follow market prices and when you look at Venezuela when you look at Ecuador, probably Venezuela is the strongest case Venezuelan gasoline is a hundred times cheaper, a hundred times cheaper. That not only creates a lot of problems with smuggling and criminality and but it also is a very inefficient use of resources, so we need to ensure that market prices are prevalent across all energies. And the other side of this is renewables. In renewables some countries have taken the approach to to subsidize in some way or another renewables to have certain targets for renewables and I think that’s that’s that’s a respectful way of doing it. In Colombia the way we’ve done it and some other countries follow the same pattern for the same policies, is we’ve tried to let technologies develop and compete on their own merit because subsidizing renewables is not a sustainable way I think of making sure we get all the benefits renewables can bring and as a specific example I will just mention biofuels. In Colombia we have a big discussion on biofuels, we don’t have market prices for biofuels, they don’t truly reflect the opportunity cost and I’m not sure what we’re paying to biofuel producers reflects the benefits we‚Äôre getting in terms of environmental benefits, in terms of jobs in agriculture etc. So we need to ensure that we follow market prices we get an efficient use of resources. And finally of course when it comes to taxes and subsidies we should ensure and here there’s a big role for companies as well we need to ensure research, we need to ensure we are able to get the technology to continue seeing the falling prices we’ve seen for renewables, we need to ensure we have the mechanisms to spread renewables as fast as we can when the technology allow renewables to be increasingly competitive so we can we can replace as much of a very costly and efficient sources. So to round up I would say when we look at the future of energy and we think about the future of resources we need to think hard what’s the role for policy and we need to take into account that it’s not only climate change it’s only emissions that’s very important certainly. But I’m not sure that should be the primary focus of policy, it should be there, it should be important that we need to make sure we have we give access to electricity, to reliable sources of electricity to a lot of the population that still doesn’t have it That’s their the road to live poverty to be lifted out of poverty. We need to ensure security of supply so we can ensure competitiveness growth and jobs for the people that need it. We need to ensure we focus on efficiency that’s probably the single the largest source of environmental and sustainability benefits in the energy sector in the region and we need to make sure our tax and subsidy policy reflects market prices taxes what should be taxed and invest the proceeds of these taxes on growth. So I will leave it there and will take questions later, thank you. Good afternoon, thank you very much to the organizers for the kind invitation to speak to you today. My presentation my speech is going to focus mostly on the energy sector and I’m going to do some of the some of the links the clear links to climate policy at the global scale and then I’m going to focus most of my examples to Mexico which is the case that I know best. I think that some of the challenges that I will speak about and some of the possible opportunities apply to other countries in Latin America and certainly to many other countries around the world that are facing the same challenges and and in the face of climate change. I will start with my punchline, the economy is not moving fast enough to achieve the global target of two degree centigrades that was set at the Paris agreement and the energy sector as part as a large part of the economy and in many countries the largest contributor to emissions is either not moving fast enough no it’s not moving at at the pace that would be required to to meet this

global target. So there’s the need to scale and there’s a need to move at a faster pace as I was saying towards increased use of renewables, towards energy efficiency and towards actual implementation. There’s a lot on the Paris agreement for instance put there by the parties by the country countries in that 194 countries that signed the agreement, but moving from there to implementation has been a major challenge and it is not as I said happening. The International Energy Agency projects that industrial energy demand in the use of oil for instance for transportation especially will still increase significantly in the next following years at least until 2022 and that is too late probably to solve the climate crisis at least with the ambition that was said at the agreement, in the agreement. This is true especially in developing countries, in many major economies and developed countries of course energy consumption has been the coupled from economic growth and that is because transition has already taken place and we are producing with in a cleaner way we are using more advanced technologies but in developing countries that is not the case and there are many of those who have no resources to to make the change fast enough. So that their economic growth is closely linked to energy consumption but also as countries develop there’s a tendency also to use more goods and services, of course if we have a larger middle class, we will tend to your more cell phones, more vehicles, more appliances in the house and that will make us relatively larger consumers of energy in per capita terms. So my example from Mexico. Mexico set a goal that is very ambitious 32 percent reduction in greenhouse gases by 2030 related to business as usual and that relies a lot on shifting the energy sector. Mexico has 60 percent of its emissions coming from energy use and energy generation 60 percent. That is closest to what a developed country has I think in many countries in Latin America, Brazil for instance, most of the emissions come from land use changes still but in other countries Mexico is an oil producer and it’s relatively industrialized a lot of emissions relying on energy from the energy sector and that’s the reason why it has to be dramatically changed But regardless of climate change I think there are many reasons as as Tomas was mentioning for promoting this transition and for doing it faster Let’s forget about climate change, these changes that that are being proposed would have implications for social well-being I mean they would help abate poverty which is a major concern. In Mexico close to 40 percent of the population lives below the poverty line, but they would also help economic development and would help in a way environmental protection in general not only for climate protection but also at the city level for instance, at the level that is of concern for the population who breathe the pollutants emitted by power plants for instance, by vehicles using gasoline. So there are many reasons to move in that direct that direction and we I hope that that is the other punchline. I mean it makes sense to push for this transition even though there are barriers to it I mean that it has costs, I wouldn’t deny that I am not that naive. Investments required are large and it also requires a change in mindset among stakeholders in the sector which is not an easy thing to do. As I said Mexico is has set ambitious targets, one of those has to do with increasing penetration of renewable energy in the energy matrix so Mexico has said they will achieve 35 percent penetration of renewables by 2024 and that is in the law in the climate change law and concerning the energy reform that was published three years ago. That is a substantial change and we are not getting there soon enough and I don’t know if we will get there we will see that change happen in the next 10 or 15 years, we’re only at 20 percent now. And doing that implies, I mean the long-term ambition that Mexico has by 2050 is to reduce emissions to 50

percent of what we have in year 2000 in absolute terms, that would mean that every person in Mexico would emit per capita terms two tons per year of CO2. We are now emitting six tons per year, so you can imagine what were shift that is in how we produce and how we consume. And actually Mexicans are the average citizen of the world, we have about 1.5 percent of global emissions of greenhouse gases and we have about 1.5 percent of the global population, so in other words every person in the world emits six tons, 6.5 tons, around that number, per year and we would all have to get to two tons per year if you want to get in a trajectory that sets us towards meeting the Paris agreement goal of 2 degrees centigrade. Even less than that if you want to achieve 1.5 degrees centigrade which is also set as a target in the Paris agreement by those who would suffer most the consequences of climate change, which the island states the AOSIS negotiating group. I totally lost my train of thought and my notes but I will try to conclude just by saying that there are many challenges to meet these targets and so we have to be mindful of those challenges and try to to tackle those if we want we are serious about tackling sufficiently enough and with enough urgency the climate challenge. The first challenge is financing, we heard from that Daniele from the World Bank so and she knows a lot about this but but it is not only the lack of resources there’s a lot of resources put into the climate pot I would say there’s a commitment of a hundred billion dollars per year to be mobilized from developed to developing countries. But there’s also the issue of the lack of capacity on the side of the recipients to organize themselves, to put together proposals, to put together projects. There’s lack of coordination still. I worked in government for many years and since they when I heard that there was a lack of coordination and that’s that was year 2000, no 1993 I think I‚Äôm a little older than I think sometimes. 1993 so it’s 25 years almost and I think my memory doesn’t fail so that’s still a pending issue. Establishing priorities and co-benefits, I think that’s part of the analysis that we I mean you as students I think you can contribute to this, looking at what co-benefits can global policies and global measures have in at the local level because the people who take decisions at the end of the day are the local authorities in many cases and they want to see that benefits of what they do not only global but they’re also short-term and that they have good implications good benefits for the population they are accountable for There are also issues of analytical work, robust analytical work is still missing in many cases and that’s something we do at WRI in all over the world we’re trying to do that in Mexico. MRV I was talking about accountability measuring, reporting, verifying that what you get money for is done. Education and awareness raising major topic being here at a university at Georgetown University nonetheless and transparency and corruption still very prevalent in many countries and Mexico that’s the case unfortunately So those are my my ideas for starting the discussion thank you very much [Applause] So I’ll conserve my energy by sitting today because it’s Friday and I feel a bit a bit tired I’ve had a rough week. First of all thank you for inviting me and I’m very happy to be here this panel with these distinguished guests because I teach here but before I was in your shoes I was IDB for 25 years dealing with a lot of these tensions and problems and challenges and opportunities, so I know where you’re sitting but I also know I’m kind of putting on the academic hat so, while I really have that background. So I just wanted to not summarize of course but nothing I say today or now can be understood if we don’t look at what was said today this morning right so in the

course of today we heard about the tension between the need for the extractive sector, for energy development, the developmental need as well as you very clearly pointed out without electricity without energy people cannot develop themselves communities cannot develop. But also we have the tension between that need and the social, environmental and community impact so this is something that has to be navigated carefully. So I’d say that Latin American and Caribbean countries because we need to remember that Caribbean countries do not have many natural reserves or resources very few than with the exception of Jamaica or the DR, many of these islands are mostly tourism based, so they are importers of of hydrocarbons and they also have a different challenge. So they’re between a rock and a hard place how to navigate these challenges. We’re caught in the commodity export model since colonial times and now this has become intensified through globalization, deregularization and liberalization of the economies. So we have on the one hand the benefits of economic growth and on the other hand so the income, the revenue employment impact, the developmental impact, but on the other hand the cost and the externalities of the extractive industries, of the oil, of the hydrocarbon and other exploitative processes. This is not only happening in Latin America we look at Africa we’ll see the same type of tensions we’ll see the blood diamonds problem, we see the coltan in the Congo, we see the oil in Sudan, we see the origin of conflicts very much related to natural resource deposits as well as the resource curse that was alluded to this morning. And we see it in Latin America in Ecuador the Yasuni Park, to dill or not drill, we see the Commissaire project in Peru some of the issues that the IDB had to deal with, we see in Brazil the spills that were alluded to this morning. So in discussing all of this we have to think of how do we approach it and I was looking and thinking about how to frame this presentation and I thought of the word extractive which is the thing we’re talking about today so I extracted some letters from the word extractive trying to make it a bit more light so that you because we’ve heard today a lot of technical parts I want to come to the core of the problem. So the and also we heard this morning about the Chevron way, we heard the legal way, the human rights way, the IDB way the IDB was here too and I want to propose this sustainable way but before I get there let’s talk about the word letters I want to extract. So I’m gonna go with the letter C coming from extractive and I’m gonna kind of pinpoint the things that I think are important to come to this consensus of stakeholders that you talked about. It‚Äôs impossible to do it alone we have to get all the stakeholders, shareholders and the and the agents of development in one page and that’s the very difficult part So the first C I’m just going to say consultation, there’s a dire lack of consultation upfront with stakeholders in mining and extractive areas. That’s that’s why we have the conflicts later that takes us to the Human Rights Court that we heard about today. Compliance with contract sign that’s an important thing, governments are making contracts with companies and there must be monitoring of that compliance and sometimes there’s non-compliance Compensation for communities and conflicts conflict resolution mechanisms these have to be enshrined in the whole ability of the extractive industry to have a contract that is also equitable for the communities Don’t forget conservation, we haven’t talked much about this but I think you alluded a bit to the efficiency argument of trying to use resources efficiently and one of the aspects of that is also conservation pricing but also trying to figure out how you can save meaning not and I bring it to the next C, the climate change impacts. We have to be climate smart as you said I like that word very much. Right now climate change is something that’s an elephant in the room because why we have all these oil hydrocarbon assets you pointed out the implications for the Paris Accords for the greenhouse gases, we have to be thinking of how to reduce this there’s no way out of this and I think your presentation was interesting is that it’s a paradox almost because to reduce it

you have to mine more but you’re mining to bring in more sustainable ways of energy. That’s still left to be seen jury’s still out on that but I think it was an important point. So I did the C, right the R is the rule of law. Countries have to be transparent about their regulatory frameworks and stronger regulatory frameworks, right now we have a problem with the institutional setting of many of our countries they are just not prepared and equipped to manage many investments and yes sit at the table as equals with foreign companies, we sometimes have a lot of the skills that we need for negotiating and guess what happens we negotiate contracts that are really not in our benefits this is absolutely proven that we need technical assistance for this. Some countries are better than others they really good negotiators, others really need help in other words to be able to understand what are the benefits for the country with companies. I surely believe that that’s an important point. And how to get recourse for communities when they’re disproportionately affected There was once a politician in this country that said Tip O’Neill he said all politics is local, what happens when you have local confrontation, local conflicts, it will develop into a political problem and most countries know this so it’s better to negotiate well but to be able to monitor what you’re negotiating. The I I took from extractive is institutional governance frameworks, not only the contracts in negotiation, but sound institutional capacity. We have stop-and-go governments sometimes. four years and then another party comes own another government you’d start all over again working in the IDB for 25 years you always had to start back and again where were we okay and other government has come in your people. This is an impediment to development some countries are very good because they have a technical cutter and I must say Colombia has been very good on this you negotiate with people who are gonna be there in the technical capacity. I stands for indigenous peoples‚Äô rights, let’s not forget it that we have a lot of conflicts we have I just got a statistic of 327 mining projects in Latin America in the last five years we had 118 conflicts in 15 countries with Brazil the most affected with 21 conflicts in 34 communities local, indigenous and small farmer communities We have to be mindful of that so part of it is upfront thinking how you’re going to plan this and the consultation mechanisms. And that goes to the T the T is transparency. How many people in the country know what being signed in these contracts? someone asks a question this morning it should be completely transparent so people know where their resources are going to what is the what are the terms and conditions of contracts and what are the benefits accruing to communities. And transparency has to go to national state and local levels. Oftentimes communities are bribed or confused and they accept contracts without knowing exactly what they are accepting and you pick one group against the other, this would be solved by having a transparent framework. The other part of the T I think is technology which you said I think we have to be really more up to speed with a competitiveness in technology and technological advance for new for new energy technologies, this is lacking and technical assistance is needed for that. E is energy sources which you talked a lot about. I want to put E in as environmental management frameworks which need to be strengthened and E is efficiency as well and the part of it is to maximize economic benefits for the country and its population while minimizing the costs. This is what I would consider the E as an economic a complete element of economic growth. So A, I will bring the A which is an extractive I think there’s an A somewhere and I want to seek accountability, accountability of governments, accountability of companies, accountability of parliaments or two parliaments and oversight for elementary oversight and of the ministries in charge of either energy, mining, environment. Most industries kind of compartmentalize so they ought to be a bit more working together to see all parts of the picture the energy part and the as you mentioned very interesting the educational linkages, the environmental images in reported as well as the employment linkages. I worked in Colombia for a couple of years actually

was an energy project and I was amazed to see that bringing energy bringing electricity to very rural communities particularly a hydroelectric power, women were really big beneficiaries they started help to have small industries, they started catering companies, they were really using electrical, turning on the light having a fridge to improve their income that’s absolutely true right I mean it’s something that you can evaluate. And A also means alternative energy sources Let’s think about alternative energy as well I mean we have maybe some country would have hydrocarbons some countries do not. Barbados has nothing except a beach or a beach around an island which you can go around in an hour that’s what they have and they have to rely on that resource which is a natural sun, sand, beach, and import almost everything; they have to be concerned about an alternative path to renewable energy and policies that support that and many other countries. We have hydroelectric, we have and we have to be concerned about possible conflicts with displacement of communities or not because or say Patagonia are you gonna put hydroelectric dams there and you’re gonna or you’re gonna leave it pristine and go up north and put solar energy, these are alternatives to look at. We have geothermal, we have wind, we have solar, wave energy which is a big thing happening now and in the world, bioenergy this thing about batteries is an important one but then you have to worry about the lithium and all the other things that go with it, and responsibly and sustainably. So I would say the way forward has to be this sustainable way taking all of these into account. So I end by saying I want to use the extractive word again and I want to say extra take extra care about these things, be active and proactive in managing the resource base looking at the long term Government’s are notoriously short term, I have to repeat it because there’s a horizon within which you have things to do and four years come and go or five years and then the next one might take over you might have a longer run But be active in thinking of setting up a structure that is going to combat the structural impediments to sustainable developments. Today the complexities and nuances within you know extractive industries in Latin America Given our timing we’re coming up on on four soon but we still have time I want to go ahead and open it up right away to the audience for questions we have two microphones if you all could just line up we’ll take a few maybe we’ll start off with two or three and then we‚Äôll give our panelists a chance to respond. Hi my name is Liz Cordoba, I‚Äôm a student here, a graduate student. So I just wanted to perhaps it’s a silly question but I just wanted to hear from you your opinion what has have the most negative impact in Latin American countries, corruption or the lack of capacity and knowledge? It’s more or less related my first question was to what extent from my perspective I’m Venezuelan and I feel like a lot of our policy making is very improvised so I wanted to know if you guys could see any relation between political stability in a country and energy development and planning that was part of my question I feel like it’s more or less related to the previous one My second question was to what extent does the region see energy and this climate change issue as a cooperative issue? For example I know Paraguay has most of their energy comes from shared dams with Argentina and Brazil which are neighboring countries and I know that a lot of Paraguay has energy through these so but I wanted to know if there’s more of like a cooperative issue in terms of learning or energy production in the regions versus the world, thank you. Well I don‚Äôt know if I want to tackle the political part but I think it’s an important element. It it’s part of the longer-term sustainable thinking to have stable political frameworks because without that you’re only considering short-term gains or short-term thinking, and to have that stability of say energy

planning it’s not only energy but it would be agricultural planning and other areas. It’s absolutely necessary to have a system that’s in place, transparency, rule law, all these frameworks and they not only encourage investment in a transparent way, they secure the benefits of what you’re doing for your people on a long-term sustainable basis. Without that political and as a framework I don’t think we’re gonna be able to have this long-term vision, that’s just my take and I’ve seen it too in my own work. So stability and institutions a lot of times capacity problems. we have a lot of institutional capacity problems which are tired to the lack of stability why because when governments change, everyone changes so that you don’t have this cadre of continuing, technical, high class, educated people that are going to be carrying through with your 20 year or 15 year horizons and that’s unfortunate that’s one of the reasons. I think that for the case of Latin America, Latin America was one of the preferred destinations in terms of exploration for the extractive sector many years ago and the decrease that occurred is not so much only because of what was going on in Latin America, it was mostly what was going on in the market as a whole, commodity prices and then there was less money for exploration. So investors go to where they know it’s less risky, so yes corruption does play a role in increasing risk, the lack of capacity, also in the institutions in order to implement project and to monitor projects and all that work does play a significant role in Latin America, so I think that there‚Äôs a lot of room there to still work on these issues in many countries. I will probably say two things, the first has to do with cooperation the question of cooperation that was made at the end. I think that when you look at the nature of the energy sector there are some areas where you can have cooperation but there are other areas where you will certainly have competition, and it’s impossible to think that everything can be solved through cooperation. Let me point something regarding a statement Camille made. It’s very interesting when you look at communities when I when I worked at BP the oil company I saw communities from the side of the company. Then when I worked in government I saw it from up I wouldn’t say the other side of the table but from a different point of view because we had to deal with lots of issues especially in large projects and this may be controversial but one tends to think the model one has I would say the initial model one has is the community which is probably less educated which is behaving in a proper way and there’s a company that comes and tries to take advantage into a project of the community. And this certainly happens in a number of cases but there are other cases which is the other way around and we cannot rule the fact that communities behave strategically. Some communities see companies as a way out of poverty, some communities have a political agenda they and part of the political agenda is insuring hydrocarbons and energy and mining don’t move forward. I remember I remember once I was in a negotiation course and we had an exercise which was brilliant. We were divided into two teams and my team had to build with the worst blocks on the table and we had to build a tower that was there and the highest the tower there more points would get and the other team were given an instruction we didn’t know they didn’t know our instruction but we didn’t know theirs and their instruction was they would get more points if the tower what the short as possible. But we couldn’t start disagreeing because this would lower our score so conflict was the worst option for both but they were given the task of having a short hour and we were given the task of having a tall tower. It was very interesting because very quickly we realized that they were there started being very subtle but then we realized very quickly that they were in the task of not letting us build our tower and very soon we found out that it was very difficult to solve the problem to get to a solution without a third party that would help us find some way out. I think this happens a lot we need to recognize

when dealing with communities that they behave strategically a lot of the times and if we include this when we think the problem I think we’ll have a better chance of success when dealing with community company relations. Something only from this issue of shared benefits of projects and energy for energy reform is taking place in many countries and one of the arguments is that it will bring benefits to local communities but somehow we see that local communities are imposing those projects in many cases. Now there’s a right of representation and processes that would include the locals especially there are indigenous peoples among projects as sitting but still they oppose and the question remains why I mean and nowadays we see that projects in Mexico that the cases I hope best they do a social visibility analysis before doing any other analysis not even technical or financial, the first one they do is a social analysis because local opposition may kill the project very easily and there are no set terms I mean a consultation process at least according to the Mexican regulation can go forever and it is not very clear who can and cannot participate in that process of which need on both sides before abusing. I mean some companies come and they give out some presents, small presents to the community and think that that’s enough benefit children and the communities also sometimes to try to get maximize their own benefit through the system. So it’s an interesting question I think it would make for a nice Georgetown University thesis at some point. Just a quick thing on corruption that just occurred to me, if you look at corruption you might even say it’s a tax on the poor in a sense, because look at the money look look at the revenue base, the royalties that some of the countries have been able to get and you mentioned what Colombia has done with some of them but if there is a widespread corruption it’s not accruing, the benefits are not accruing So this attacks on poverty and on development because it’s going at the pocket some of these pockets and if you look at what has happened in some countries what have they got to show for all the welfare they’ve had so that that to me is the open question as to how transparency and and looking at contracts and the terms and conditions which everyone can see would be appropriate so that you can kind of minimize this this type of corrupting influences of the resources which is what happens Hi my name is Gioninna Romero and I have one question and then the other one is kind of a question. The first one is we were thinking about this conference and one of the if you read of the title it says the way forward but we are actually worried about how to include the different voices in Latin America, how are we going to include especially the voices of the minority groups that have been forever excluded in the countries and within that context of course I’m interested in the Colombia case For example Colombia is in a key moment right now within the with the peace process and we hope that is successful but is there a way that Colombia is going to include these communities, thinking about a new way of energy so they are not relying on illegal mining? Is there a way that Colombia is going to do this in the process? And another thing I was hearing all of you and I kind of understand that there is a kind of a stalemate in your discussions so some of you are saying that all communities do behave strategically and for sure I understand they do but I don’t think they have as much power as as as you guys are saying because I’m a human rights lawyer and I’ve worked with a bunch of cases and I don’t I don’t see how indigenous communities for example in Brazil, indigenous communities in Peru, La Curva del Diablo case, how they are benefiting from and acting strategically other than reacting to some but something that already happened. So one of the things that community should be consulted and I don’t think that is happening and yes they behave strategically once something happened. So I would like some clarifications on where is it that they’re behaving strategically because I think it’s una reacci√≥n posterior, it’s not previous, it’s not before the the company starts the

project. Thank you Hi my name is Camila. I’m a second year MBA student. Thank you all for being here My question has to do with like the other side of the spectrum so certainly this transition to a more efficient energy and a low-carbon economy is gonna have an impact on the private sector and I mean they’re gonna incur in some risks in terms of adjusting and transitioning to this new type of economy a new type of existing basically. So what do you think the role of the private sector is and in this in does the public policy sector has something to to do in order to smooth the private sector transition for this or do you think it has to be more of a private led a private led effort? Thank you. Hi my name is Thomas Seeger, I’m an alum. So to the extent that the United States has hit its carbon emissions targets is because in large part because it’s been using more natural gas and so my question is to what it how can Latin America make use of this shale gas revolution? Let me start with the with the questions on Colombia. I think the peace process should benefit mainly a lot of the poorest Colombians, a lot of the poorest Colombians which are the ones who live the farthest away from the developed areas and city centers And this will happen in two ways One is specifically by design if you look at the agreements the agreements have a lot of investment in agriculture a big chunk of the 300 so pages of the agreement dealing with what needs to be done agriculture to improve access to land, to have a better registry of lands, have better information, have credit so it’s specifically by design was agreed on that way and that should definitely help rural areas and some of the poorest people. But also when you have peace, peace should open up for investment areas that before disagreement were not open to investment Maybe some larger companies and companies mining companies knew how to do best with investment with security issues but nor are hydrocarbons nor mining are labor intensive activities and these other types of investment should definitely better for benefit from a better security climate and if we see those companies moving in we‚Äôll definitely see jobs being created at the local level where we want the poorest of Colombians to benefit. Regarding the question of strategic behavior I would stress this again I’m not trying to say it’s very hard to generalize here so I’m not trying to say that always communities being a strategically or always companies take advantage, you have cases of both. I’ll tell you two examples on my direct experience of strategic behavior by communities which was which were done prior to projects and not after the projects. The first one has to do with the community cuts of consultation processes especially with indigenous communities. There was a strong protection by the law that makes sense of course or the strong protection and sometimes when they don’t want a project or when they want to increase what they get out of the consultation process, they just extend the project over time, they don’t let themselves be consultative. They don’t let themselves be consulted, they just don’t show up, they say they will be at some place from meeting and they don’t show up they don’t show up they fail to reach an agreement on purpose because the longer the companies have to wait usually the higher development, cause the higher get the cost of carrying out a project I‚Äôve seen this several times Another example had to do with it with a drill with drilling an exploration project in the plains of Colombia and some local communities decided to make a big thing saying that they were going to drill in Ca√±o Cristales, for those of you who don’t know Colombia, Ca√±o Cristales up is a jewel, it’s a place that cannot that hasn’t been really developed for tourism because it was Institute’s it’s a small river that had seven colors because it has some vegetation that changes colors it’s very pretty. And when they were able to successfully put this in the public discussion people went panicking people went panicking and the Ministry of the Environment in the end said we’re going

to revise this permit even though it was not going to be any drilling close to Ca√±o Cristales. So you can you can do a lot of strategic behavior being being smart and trying to advance your agenda problem is that it has might have negative externalities. And then regarding the shale revolution I definitely think I know Argentina has vast reserves, I don‚Äôt know about Brazil but I guess it has vast reserves and I’d like to think in terms of hydrocarbons and in terms of mining, this is the wealth of the subsurface that will pay to reduce poverty in the service. So we need to get out these resources. I‚Äôm convinced it can be done in a sound way in the case of Colombia where we have good environmental regulations it’s not complete but we have good sometimes stronger than here sometimes stronger in Canada. But we need those resources because there’s a very easy dynamic here if we want spending we want all the spending in education and development and we don’t want more taxes, we need to want oil and minerals. Can I just come in on on the gas also I‚Äôd love to respond a little to that. First of all I think that in these climate discussions it’s been recognized that gas will be a transition fuel where we move from fossil fuels to cleaner and greener energy technologies I think it is the only way in some in most cases. But in terms of the the shale gas, it’s a new technology and as all new technologies there are high risks associated to it, so I think it’s that you need to approach these things with caution it’s the precautionary approach you know and it might make sense in the United States for example where you have you know industry standards are very high but maybe in other parts we still need to develop those industry standards and also the technology needs to evolve so that we can extract these resources in a more you know sustainable and efficient way. In regard to this last issue in the question of shale gas, I mean Mexico is both benefiting already from shale gas and imports from the U.S A lot of the gas Mexico consumes for electricity generation for instance comes from the U.S. and it is very cheap, it is on a level of $3 per million BTUs which is making alternatives and the transition to renewables for instance harder than it was before. And we see that the externality as it is with oil or fossil fuels is not considered in pricing, so I’m sure there is an externality somewhere in the U.S. as a consequence of extracting this soil that is not reflected in the price but it is affecting the markets. We have a lot of resources in Mexico I hope we wait a little bit to test the technology and see that we do it correctly when those resources are exported they required the technology system and a lot of water something that Mexico doesn’t have especially in the areas where shale is present and environmental impacts that can be can be tremendous. So I know it is a transit because natural gas is considered a transitional fuel where we move to renewables but some of us believe that we can probably make a transition shorter and move faster And renewables I mean are they learning for renewables it’s advancing very fast so some are really achieving competitive prices even without any stimulus from governments. I know there’s a question on the private sector. Of course I mean if we look at the U.S. I mean national policy has shifted a lot since the last few months as you know but the states for instance local governments are doing still their share, assuming a commitment and the same goes for the private sector There are some areas, some sectors that may be resisting the change, some sectors may lose with the transition but several owners are pushing harder than governments. I just wanted to finish perhaps by going back to the indigenous question that Gioninna right mentioned. I think it’s a good point to make and we have to be really conscious of it not

only in the work but also in the academic part too. I used to work on many projects in the Amazon, also in Peru and Ecuador to some extent, so I have I had a lot of dealings with indigenous communities as IDB approaches them with the government to try to get projects done. I feel that if you look at it from their point of view which I tried to always look at and I think I succeeded, they have their history to look at so what we might think or someone might think they’re gaming the system their history tells them do not trust. We have been conned before and duped before so if we give in in their mind their their resource base their land, their water is their survival, so they’re always concerned and with right concerned that if they yield too quickly or if they say yes they could be expelled eventually and history proves that, history proves it. And particularly in what’s happening the Amazon the logging and then the cow ranching and in Central America it eventually ends that they have to be retreating further and further and losing their base. So when you look at this and their own history will tell them this, then you have to understand their concerns and build in this social impact assessment, this what I call the the viability is this project viable or not or so is it going to cause so much risk to talk about risk and reward there’s social risks involved there are environmental risks, but social risk is so important it may not be to the advantage to have a project which will require so much risk and also cause cultural damage We have to evaluate and put a value on it and usually development projects do not give it the adequate value, so this is just why I think what she asked is extremely important because you see it eventually and if we see it they can see it and so they’re cautious and they gamed the system that’s right I would too. I agree with your last point and I and I would say that’s why process is so important and I would think that the problem is solved in a way or mitigated at least when process is done a proper way and you have a strong government, a strong third party, that ensures rights are protected on both sides. But we don‚Äôt do enough good diligence on this that is absolutely sure. We wait until it develops into a problem. IDB I’ve had many instances my own projects were suspended because we have it crisis. So I want to I want to touch a little bit back on that the question of the role of the private sector in thinking of the premise our panel today. One of you know the things that was thought about when when setting up the discussion was how companies like Exxon are now you know becoming more self-aware more aware and readily accepting me the challenge of climate change, discussing transparency and publishing reports on how that might affect portfolios and one of the questions about, you know, the way forward with Latin America and the extractive energy industries and thinking of Daniele’s point this will come together if we give Daniele’s point about the increased demand among the other minerals. So how can we think about or do you have any do either any of you have anything to say about how these other extractive industries and companies might also follow the steps that these oil companies and and publicly addressing this and accepting this move, I mean the world’s changing we have social pressures, we have economic pressures, we have policy pressures all saying we need to address climate change, we need to transition. What are other company is doing and when we imagine will be the way forward for the other parts of the extractive industries? Maybe I can take that one and well I think that it’s caught I mean it’s no given I mean it’s a given sorry among industry be it the oil and gas industy or the mining industry that transparency is not only a nice thing to have, it is a necessary thing to have these days, especially for we’re talking about corruption and diminishing risk. So I think both the industry and governments and civil society have come a long way in terms of improving transparency, we look at the extractive industries transparency initiative, EITI So the EITI has one for me that one is the best things the EITI has which is the multi-stakeholder group It brings together industry, government and civil society and the objective is to really not anymore only just look at payments from industry but really look

at the whole sector and assess transparency in a more you know holistic way. I work in Sierra Leone. Sierra Leone ten years ago contracts nobody knew what was going on in these contracts. Everybody was taking you know the elite was taking a piece of everybody had their little piece and nobody that you know knew what really what was in these contracts. Today Sierra Leone has a public repository where you can go online and see every single mining contract that has been signed so I think it’s and I see many countries going that way so I think we‚Äôre on a good path to improve, we‚Äôre not there yet, but we have started a good process I think there are lots of lessons to be learned from the oil and drilling industry and the mining sector as we transit to the natural gas and then hopefully to solar wind and wave energy and we should be able to harness those lessons learned and apply it for the future Latin America as a region does not do that too well, they kind of forget their lessons. But I think there’s hope in that there may be a push to do this and the other thing I think we need to get is technical assistance for better enforcement. So you may have a very good contract with a company or mining corporation but the enforcement is not there because the technical capacity is not there so the companies will have a spill and then they’ll just do a quick thing and they’re back in business but if you had enforcement and monitoring and that’s something that’s of technical assistance and a lot of it could be done by IDB, World Bank and other places to be able to put those structures in place to monitor what’s happening so that communities do not feel that they’re in the wrong side and they’re getting the impact and nobody is out there to help them, nobody’s gonna be there for them There has to be and sometimes it could be a third party to be out there, to regulate, monitor or it could be the strengthen environmental or social agency of the government that is that is independently and not beholden to the mining industry or the mining minister or whoever else is calling the shots and that’s your balance of power within a government. The environmental people are usually not as powerful as the others I know that from experience. Great with that I’m going just for time‚Äôs sake I‚Äôm going to draw this to a close. Let‚Äôs thank our panelists again. Dear honored guests, on behalf of the organizers of this event and the Georgetown Por Colombia chapter, it is our pleasure to make a few closing remarks and express gratitude to all those who helped make this event a reality. Every year the Georgetown University Latin American Conference aims to promote interest and spark dialogue about the policies and dilemmas faced by Latin American countries throughout the Georgetown community. We would like to thank our distinguished speakers for taking the time and interest to be here with us today It has really been an honor to hear your perspectives and expertise on such a pressing issue in our societies as our extractive industries. Hello everyone as president of the Latin American Policy Association, I am very thankful to have had the opportunity to co-sponsor this event with the members of Por Colombia and the Georgetown an Association of Mexican Students. We would also like to thank the Center for Latin American Studies for their cooperation, sponsorship and support. The role of extractive industries in the region plays a crucial role in its economic development and it is imperative to focus efforts on ensuring that this industry is guided towards a sustainable development model. I am certain that if we continue the efforts to spread the word on the importance of sustainable development we will find a way to generate positive changes in our respective countries, promoting unity in the region as we try to define what the future will look like for extractive industries. Thank you once again for your participation. We hope to see you again next year Finally we would like to invite you all to join us in celebrating the closure of this conference, a reception in Arrupe Hall Please let’s give one last hand to our panelists, thank you for being here [Applause]