Canada -- Beware! Look What's Happened to Peru
Publisher: GATT-Fly, Toronto, Canada
GATT-Flyer No. 3
Year Published: 1976
Pages: 6pp Price: $0.10
Resource Type: Article
Cx Number: CX237
Parallels are drawn between the Canadian and Peruvian Oil Industries.
Abstract: This flyer draws parallels between the economic situations in Peru and Canada. Our "pipeline" controversy is paralleled by Peru's Trans-Andean Development. The effects of corporate-dependent modes of development, particularly with respect to the oil industry, become apparent.
In 1972 wildcat discoveries of oil in Peru's trans-Andean territories raised hopes that Peru could quickly become an oil-exporting country. However, before the full extent of these discoveries could be confirmed, Peru, acting on the advice and information provided by transnational oil companies and consultants launched headlong into an ambitious development project. Financed by foreign loans it contracted with foreign construction companies to build a 350-mile pipeline across the Andes at a cost of $400 million. Unfortunately for the Peruvians, they have now been told that less oil has been discovered than was originally predicted and that no surplus for export is expected. Simultaneously, the cost of the pipelines has risen from $400 million to $1 billion and the government is now being forced to buy oil back at more expensive prices. Peru's costly pipeline investment was an important cause of its national financial crisis in 1976. In July of 1976 a group of U.S. banks foreclosed on Peru, making themselves virtual dictators of the country's economic policy. For Peruvians this has resulted in currency devaluation, wage controls, cutbacks in social services and health care. The corporations have become eligible for tax breaks and other incentives. Important lessons can be drawn for Canada from the Peruvian experience. Fist of all, the National Energy Board, the regulatory agency which will advise the Canadian government about the northerdn pipelines, relies heavily upon the huge oil companies for its sources of information. Second, it is not a well known fact that in order to build costly pipelines in this country it is necessary to import vast amounts of capital from abroad. Third, Canada, like Peru, also faces a growing burden of international debt and has run a steadily increasing current account payments deficit in recent years. In order to cover this deficit Canada has sought huge sums of capital abroad and this has resulted in a substantial increase in foreign ownerships of productive assets in Canada. The trend is increasing and is particularly alarming because, in reality, we may be forced to endure the same fate as the Peruvians. The flyer concludes by listing addresses of Canadian groups who are joining together to define more just, more democratic and more truly popular alternatives to corporate-dependent forms of development.