Tobias Franz (SOAS) and Angus McNelly (University of Greenwich)
A New Commodity “Supercycle”
As the world moves out of the long shadow cast by the COVID-19 pandemic, murmurings of a new commodity “supercycle” swirl around the corridors of power and the pages of the financial press. After an initial slump in commodity prices at the early stages of the pandemic, increased demand for natural resources in the recovery of the pandemic has catapulted prices of raw material to all-time highs. Two of the main drivers of this are the fast recovery of China and the rollout of massive stimulus packages by central banks globally, including the European Central Bank and the US Federal Reserve. Additionally, government responses to the pandemic such as local lockdowns as well as other factors such as the Ever Given blockage of the Suez Canal led to temporary disruptions to the supply chain which further contributed to rising commodity prices.
‘A low-carbon future will be very mineral intensive’, states the World Bank, ‘because clean energy technologies need more materials than fossil-fuel-based electricity generation technologies’. The green transition is underpinned by lithium batteries and copper, cobalt and rare earth metals needed in wind turbines, solar panels, electric vehicles and other technologies at the heart of “going green”. “Going green” will move energy production away from fossil fuels and towards solar photovoltaic (PV), wind, and geothermal energy production technologies. Hence, the transition to green technology will merely reorganise global commodity markets. It does not challenge extractivism as a pathway to growth for natural resource rich countries and ignores negative environment, social, and economic consequences of extractive developmental models. As many of the metals and minerals needed for the green transition are found in Latin America, it begs the question: what does a new commodity supercycle mean for the region?
New Extractive Frontiers in Latin America
The COVID-19 pandemic severely hit Latin America, leading to the region’s worse economic crisis on record. The export-orientated, natural resource dependent character of many Latin American economies left them with high exposure to exogenous shocks in the global economy. Decades of austerity and underinvestment in public services and infrastructure resulted in healthcare systems being ill-prepared to tackle a public health crisis on the scale of COVID-19. High levels of informality undermined government-imposed social distancing measures, with the virus ripping through Latin American cities. The number of people living in extreme poverty in the region grew by 8 million in 2020.
In this context, international actors such as the World Bank view the new commodity supercycle as an opportunity, arguing that ‘mineral-rich developing countries… stand to benefit from the rise in demand for minerals but also need to manage the material and climate footprints associated with increased mining activities’. Given the mixed experiences of Latin American countries during the last commodities boom, many remain sceptical. While the so-called “commodity consensus” resulted in above-average growth rates for most Latin American countries between 2002 and 2013, it also left Latin American countries increasingly exposed to the vicissitudes of global markets. It increased socio-environmental conflicts between progressive governments and communities along extractive frontiers, many of whom are indigenous in places like Bolivia, Brazil or Ecuador, and intensified the environmental and ecological damage wrought by extractive processes.
Why would this supercycle be any different? If the drivers of renewed extractivism are transnational capital and states in the Global North and China, communities that find themselves on new extractive frontiers are likely to suffer the same processes of displacement and dispossession as previously. If this supercycle is going to be more diverse in terms of the mineral and metals that are mined, the length and extent of extractive frontiers are going to greatly increase. Moreover, given many Latin American countries (Bolivia, Brazil, Colombia, Ecuador, Mexico, Peru, Venezuela, the list goes on) are currently dependent on hydrocarbons exports for economic dynamism, there are large sections of these economies that will be marked by divestment and abandonment. The green transition will not be a linear process, but the latest phase in the uneven development of capitalism. The green transition will create losers as well as winners, many of whom will also be found in Latin America.
In short, the political economic reconfiguration currently gathering pace as capital and states home to the centres of capital accumulation (namely China and the North Atlantic) turn their attention to tackling climate change is going to have contradictory effects on Latin America. What this means for the region remains unclear, and close attention needs to be paid to how the green energy transition plays out at the different scales that comprise global energy production. For better or worse, Latin America remains a labyrinth to interrogate what the latest transformation to global capitalism means for the diverse populations who live across the world’s complex energy landscapes.
This blog is going to host reflections on this new commodities supercycle in Latin America, zooming into some examples of how this is already playing out across the region. Future blog posts will explore the different ways in which the green transition and its attendant geographies of extraction are transforming the politics and political economy of spaces and scale in ways that are already being keenly felt by marginalised communities. They will add detail to this rough sketch of the changes underway in Latin America and shed light on some of the different dimensions of tackling climate change through green capitalism.