The Brazilian president has come under fire after announcing possible funding for the Vaca Muerta gas pipeline in Argentina. The project is controversial for fracking gas and is considered a threat to the climate and indigenous peoples. After pledging to restore Brazil’s environmental leadership, President Luiz Inácio Lula da Silva surprised members of his own government and received criticism from economists and environmentalists when it announced the intention of the National Bank for Economic and Social Development (BNDES) to finance part of the Néstor Kirchner gas pipeline in Argentina.
The funding would cover a 467km stretch of the pipeline that will carry gas from Vaca Muerta in Neuquén province to Santa Fé province near the Brazilian border.
The intention to support the neighboring country in the so-called Vaca Muerta pipeline, Argentina’s largest infrastructure project, was expressed during the president’s trip to the country to participate in a summit of the Community of Latin American and Caribbean States (CELAC), the January 24th. In Buenos Aires, Lula spoke of the gas pipeline to defend the return of BNDES contributions to “help” the economy of partner countries.
Immediately, the Minister of Environment and Climate Change, Marina Silva, said she was unaware of the project and of the BNDES’ intention to finance it, but that the undertaking was complex and involved “significant socio-environmental risks which must be considered “.
Days later, Finance Minister Fernando Haddad said that “Vaca Muerta is a project that perhaps renounces this type of funding” and that “the environmental discussion on the use of shale gas should not be overlooked”. Nonetheless, he has defended the role of BNDES in funding engineering works in other countries.
“Binational Shame”
For Ilan Zugman, Latin America director of 350.org, an environmental organization whose stated goal is to end the era of fossil fuels, Vaca Muerta gas, extracted from one of Argentina’s poorest and most indebted regions, is a threat to the climate, the indigenous Mapuche and the Brazilian government itself.
“It is a binational shame”, says the climate activist, who considers Lula’s announcement as the first contradiction of the new government in the energy field, going against the grain of the actions taken so far to remove Brazil from the condition of “environmental pariah “.
Zugman draws attention to the risk that the BNDES will put its fingerprints on a “climate bomb”, given that the Vaca Muerta fossil gas is extracted with an environmentally controversial technique: hydraulic fracturing (or fracking).
past controversies
“The problem is not financing works abroad, but financing fossil energy”, Zugman points out. By mentioning “working abroad”, the director of 350.org alludes, albeit indirectly, to the controversial policy adopted in the past by PT governments, responsible for turning the BNDES into the preferred target of the opposition.
As of December 2022, the development bank had accumulated $1.04 billion in defaults on financed jobs in Cuba, Venezuela and Mozambique. The section of the Argentine pipeline requires $689 million.
Faced with the delay in payments to the BNDES in recent weeks, Lula accused former president Jair Bolsonaro of breaking diplomatic relations with Cuba and Venezuela, which is why he would stop accusing them.
The fact is that, in recent years, the bank has distanced itself from the foreign focus and dedicated itself to the green agenda. Aloizio Mercadante himself, the new president of the BNDES, has pledged to keep the bank in the direction of the energy transition – the environmental agenda, by the way, will be one of the points that Mercadante and the other Brazilian authorities should discuss with the government United States Special Envoy for Climate, John Kerry, visits Brazil this Monday (27/02).
The politics behind the pipeline
On October 31 last year, the day after Lula’s victory at the polls, Argentine President Alberto Fernández traveled to Brazil to visit him. Cornered by low popularity, Argentina’s president could see his re-election chances increase in October with the backing of the Brazilian government, his country’s biggest trading partner.
“Argentina faces a series of very serious macroeconomic problems, mostly chronic. All of this ends up affecting the popularity of the government,” says Marina Pera, researcher at Control Risks for the Southern Cone.
In Argentina’s weakened economy, plus the partnership with Brazil, the construction of the Vaca Muerta gas pipeline could boost Fernández’s chances of winning the polls.
For Pera, Fernández’s re-election also affects Lula, as the president knows that saving Brazil’s leading role in the region depends on partnership with Argentina, especially when Mercosur renegotiates the terms of the free trade agreement with the European Union (EU), under resistance from Uruguay.
“It is a very clear message that Lula wants to regain regional leadership, based on the idea that regional integration benefits Brazil, since the country alone does not have the same strength,” says the political risk analyst.
If the center-right regains power in Argentina, the country could make a change in its economic policy. So even if Brazil’s willingness to finance the pipeline doesn’t materialize, Lula’s message is clear: Brazil’s third-largest trading partner has the most to gain from the continuation of the current president at the Casa Rosada, Pera points out.
“The announced plans for the gas pipeline and the creation of a common currency between the two countries are part of the international strategy of power projection [do Brasil]”, completes the analyst.
energy integration
With the Russian invasion of Ukraine a year ago, natural gas has become a valuable resource on the international market.
Argentina sees in Vaca Muerta, which holds the second largest gas reserves and fourth largest shale oil in the world, an opportunity to reverse the $5 billion trade deficit in its “energy budget”, recorded in 2022, and reach a $12 billion surplus in 2025.
For this reason it intends to export gas to both Brazil and Bolivia: the latter, while continuing to supply part of the Brazilian demand, is unable to replenish its fuel reserves due to lack of investments.
Brazil imports gas from Bolivia through the Bolivia-Brazil gas pipeline (Gasbol), the longest in Latin America by length, at 3,150 km. It starts in Santa Cruz de La Sierra and crosses five Brazilian states (Mato Grosso do Sul, São Paulo, Paraná, Santa Catarina and Rio Grande do Sul) until it reaches Canoas (RS).
The Argentine government plans to conclude, in June 2023, the construction of the second section of the Vaca Muerta gas pipeline, which will bring gas from Patagonia to San Jerónimo, in the province of Santa Fe, its main consumption center. The feasibility of the project depends on a “small effort” by Brazil: the construction of a gas pipeline to transport the product from the border city of Uruguay to Porto Alegre. From there, the gas could reach Bolivia via Gasbol.
Poverty and indigenous rights
According to recent data from the Instituto Nacional de Estadística y Censos (Indec), the body that coordinates statistical activities in Argentina, the province of Neuquén leads the way in terms of poverty rate in Patagonia.
“I’ve seen firsthand that the promise of turning Neuquén into ‘Dubai of Argentina’ is far from reality,” says Zugman.
According to the environmentalist, the exploitation of Vaca Muerta has intensified the dispute over the region’s natural resources. In the cities where the gas is mined, thousands of families don’t even have access to the gas itself, he points out. “They depend on firewood to heat their homes,” he says.
Another distributive conflict revolves around water, a resource that the population lacks, but which is used on a large scale to make the fracking technique feasible.
The most intense clash, however, takes place between the Argentine government and the indigenous Mapuche, who oppose the exploitation of Vaca Muerta. After decades of being expelled from different regions of the country, the group settled in the province of Neuquén, an area that had no value until the geological formation of oil and gas was discovered. They are currently pressing for the delimitation of the territory, but the government resists.
On 16 January 2023, the governor of the province of Neuquén, Omar Gutiérrez, signed the decree which guarantees the Mapuche people the right to free, prior and informed consultation of Convention 169 of the International Labor Organization (ILO), which provides for the obligatory governments to recognize and protect the values, social, cultural, religious and spiritual practices of traditional peoples (indigenous and tribal).
“Isn’t it a contradiction that the government announces its intention to finance an overseas project that violates the rights of traditional peoples while leading efforts to save the Yanomami in its own territory?” asks Zugman.
The Promise of Vaca Muerta
According to Fernando Cabrera, coordinator of Observatorio Petrolero Sur (OPSur), an Argentine organization that fights for the democratization of access to energy in a fair and sustainable way, the Vaca Muerta project has not achieved the strategic objectives outlined by the governments of that country.
“A decade after Vaca Muerta exploration began, Argentina continues to import large volumes of gas and liquid fuels, while oil exports have increased and gas exports have started tentatively, causing the trade balance to country’s energy deficit remains”, he explains.
In addition, Cabrera points out that fracking, the extraction method used to extract gas from Vaca Muerta, is extremely harmful to the environment, as it involves the use of excessive volumes of water, chemicals and sand to fracture the rock where the energy resource is located is “trapped”.
“In 2022, a large gas field used 96,000 m³ of water and 13,400 tons of sand. That is the equivalent of 3,865 trucks of water and about 350 trucks of sand,” he says.
As if that weren’t enough, he reports that gas-producing areas in the region have started experiencing earthquakes from fracking. “Since 2018, more than 250 earthquakes have been recorded, of which a dozen have exceeded 4 degrees on the Richter scale”.
Finally, the OPSUR coordinator draws attention to the fact that among the local communities, the Mapuche were the ones who resisted the most, seeing their traditional way of life jeopardized, since the multiplication of wells means more roads and thousands of kilometers of new gas pipelines, generating intense land occupation.
“we believe [a OPSur] that it is a mistake to go ahead with this kind of project. The degradation generated by fracking makes it difficult for communities to continue to support their livelihoods, based on the extensive rearing of small animals. This way one of the cultural pillars of traditional communities is at risk,” he warns.
Source: Terra
Rose James is a Gossipify movie and series reviewer known for her in-depth analysis and unique perspective on the latest releases. With a background in film studies, she provides engaging and informative reviews, and keeps readers up to date with industry trends and emerging talents.
