Latin American history is littered with failed attempts at integrations. From Gran Colombia – Simon Bolivar’s ill-fated super state – to Unasur – the failing left-wing block created two centuries later by Bolivar’s compatriot Hugo Chavez – attempts to unify the region often fall flat. Yet if one thing should unite Latin America it is climate change.
Combating global warming will be the dominant investment theme of the 21st century – in the same way the industrial revolution was for the 19th. And Latin America has a unique role in this story. Without the region’s incredible endowment of natural resources, it will be impossible for the world to slow climate change. From Argentina’s lithium in the south of the region to Mexico’s solar potential in the north, nearly all of Latin America’s countries are globally relevant in the fight against climate change.
There is no silver bullet to fighting climate change and we will probably need to use a mixture of all the low-carbon technologies. But one thing we do know is that, whichever solution we use, we will rely heavily on Latin America. Electrification will need Chile and Peru’s copper. Biofuels will need feedstock from Argentina to Central America. Green hydrogen will be produced by the region’s electricity grids, which already have the highest renewable content in the world. And biodiversity, which is recognised as recognised as a vital element in fighting climate change, can best be preserved in the mega-biodiverse Amazon Rainforest.
Clean commodity boom
Fighting climate change will require funnelling immense amounts of international capital to Latin American clean commodity projects. The region is no stranger to commodity booms of course. Modern Latin America was forged by waves of silver, cacao, coffee, rubber, gold, iron, oil (you can insert almost any commodity here) booms and busts. But the clean commodity boom will be wider-reaching and spread over a longer period.
Another difference is that the firms investing in this boom will pay more attention to the social impact their projects have. That’s partly because of the growth of ESG investing, which will be the source of much of this new capital. But also, because regulations in Latin American countries have become stricter. As we heard from various government ministers in this report, commodity projects in the region will have to mitigate their local environmental impact and ensure long-lasting social benefits. Indeed, so far this century we have seen that when corrupt governments and short-sighted companies try to develop natural resources without a social license they are soon beset by protests. That’s because Latin America has changed and marginal groups in the remote corners where commodity resources are often found now have more tools to fight projects.
Fighting climate change
Yet environmental groups – both local and international – operating in Latin America, will also have to change. They need to accept that a clean energy future is impossible without more mines, biofuel feedstock plantations and power plants in the region. That also means more cement, steel, roads, trains and transmission lines. Some protestors in the region display a rigid anti-development attitude that makes it impossible for the region to save the planet. Sometimes this is an honest stance, logically-based on the negative impacts of previous projects. However, there are also commercial vested interests disguised as environmental concern.
If the G20 nations are serious about fighting climate change, they need to create mechanisms that funnel international capital towards clean commodity projects in Latin America. Those projects have to then be developed by firms that closely adhere to ESG principles. Not because it is the morally right thing to do, but because it will reduce the number of protests. But Latin America must also play its part. From rural communities surrounding projects, to policymakers and business elites, the region must grasp its unique role in the climate crisis. The inflow of capital will create plenty of economic opportunity, but also much disruption. If Latin America is to do better from clean commodities than it has from previous booms then it needs to ensure that the rewards of fighting climate change are evenly spread.