HISTORY 376 - COMPARATIVE PROFILE OF DEPENDENCY AND ECONOMIC DEVELOPMENT IN PERU, COLOMBIA, AND THE BAHAMAS

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Government Relations with Business

Peru: .Region in question - Cerro de Pasco / Main resource - silver

-Failed to support Pasco Miners Association effort to construct Rumillana adit in 1857.

-Agreed in 1861 to help arrange loan to miners and to auction development rights; sent special loan commission to Europe.

-Confiscated Mineral Railroad from Weyman and Harrison; auctioned it off to the Public Works and Development Co.

-President Jose Prado develops plan with U.S. engineer/contractor Henry Meiggs to diversify Cerro de Pasco's export production.

-In 1877, J.R. de Izcue, Director of Public Works, negotiates contract with Meiggs giving him the right to construct railway and adit. Includes various forms of government financing.

-War of the Pacific (1879-1883) hurts mining region.

-During 1883-1895, awards rights to finish Rumillana adit construction to the Cerro de Pasco Tunnel Company, and sanctions a mix of foreign and domestic financing

-Railway construction begins in 1901 by the Cerro de Pasco Mining Co., which received generous assistance from the government in the form of no production taxes being levied for 25 years. This is the beginning of the dominance of the company in the region.

Colombia: -Region in question - El Cerrejon / Main resource - coal.

-In 1920, government enters into concession contract with Gulf and Exxon to extract petroleum; lasts until 1951.

-Ecopetrol created in 1951 to continue production in returned areas of Gulf and Exxon.

-In same year, IFI set up by Ministry of Economic Development to study El Cerrejon area

-Divides El Cerrejon area into three zones: northern, central, and southern.

-In 1969 allocates central zone control to IFI, which creates Cerrejon Carboneras, Ltd. (CC, Ltd.), to develop central zone.

-CC, Ltd. enters into agreement with Peabody Coal for exploration purposes in 1971.

-1974, President Lopez Michelson issues decree making concession contracts illegal.

-In 1975, Ecopetrol awarded northern and southern zones; Carbocol (another government agency) then established in 1976 and given control of northern zone; enters into a contract with Intercor two months later for development of zone - association contract (North Cerrejon contract)

-Royalty agreement with Intercor states that 15% of their 50% stake of coal production goes to government. Income tax agreement states that they are required to pay them and pay extra if profits are over 35%.

-Neither the northern nor the central zone contract deals with technology transfer or social costs.

Bahamas: .Region in question - Freeport on Grand Bahama Island

-Main resource - tourism.

-Receives independence from Great Britain in 1973.

-In 1955, British colonial government enters into an agreement with Wallace Groves, called the Hawksbill Creek Agreement, that lays the basis for the emergence of Freeport. Groves is given land at bargain prices plus other concessions.

-Bahamian government influenced by the "Bay Street Boys", powerful British businessmen in the area (specifically Bay Street), who receive over $2 million in consultation fees from Groves

-As part of the agreement, the government sells 50,000 acres of land near Hawksbill Creek to develop port and industrial complex

-After other provisions, Port Authority's holdings total 139,000 acres and are known as Freeport; the PA is exempt from customs duties on all construction-related equipment/material. For 30 years, no personal property taxes or levies on capital gains are to be imposed on the port area. The government also agrees not to collect taxes on the earnings of the PA, or any of its licensees. In return the PA is to provide certain educational/medical services.

-Immigration Act of 1963 empowers the PA to employ any qualified/skilled foreigner if it is deemed necessary.

-General elections of 1967 bring to power a largely black government whose first priority is education.

-Immigration Act of 1968 considerably tightens the conditions pertaining to the employment of foreign labor; government gains more control; wants more local labor (Bahamianization).

Localized Factors and Effects

Peru: -Local mining industry is cyclical, beset with drainage problems that need high capital inflows in order to correct.

-Pasco Miners Association attempts in 1857 to gain government support to construct Rumillana adit; effort fails.

-In 1865, association negotiates contract with Weyman and Harrison Co. of England to provide three large pumps.

-Weyman and Harrison fails to provide adequate services; association angry.

-Local banks and commercial houses forced to recall outstanding loans and debts during collapse of guano market of 1875; local miners finding it very difficult to arrange financing.

-Important local equipment given to Meiggs in his government deal; government gives up on trying to find local financing when foreign financing so readily available.

-Meiggs obtains support from around 100 hard-pressed mine owners and refinery owners; Miners Association still opposed to outside control.

-War of the Pacific in the region from 1879 to 1883; hurts industry.

-By 1883, many miners have been reduced to a low level of operation or have sold/abandoned their claims; soon are totally displaced by foreign capital.

-End of 19th century, Cerro de Pasco is a wasteland; out of it emerges a diversified mineral industry anchored by the Cerro de Pasco Mining Co.; labor contractors recruit many locals to fill out cheap work force (10,000 people).

Colombia: -96% of the total labor force in area was Colombian; however, very few ,if any, were in top managerial or technological positions.

-locals were skill dependent; received no training for the use of new equipment and/or technology.

-Main Intercor office placed outside of local region of La Guajira; deprives locals some of the immediate direct and indirect economic benefits.

-Thought agreements would bring crackdown of illegal drug trade, plus stimulate tourism and commerce.

-Hoped that revenues from project would go to establish industries in the areas of gasification and liquefication of coal.

Bahamas: -Gains independence from Great Britain in 1973.

-Local labor inadequately prepared for high-tech industrialization because of selective British educational system.

-The PA argues that it must hire foreign workers since local labor is not "qualified."

-Port Authority sidesteps its responsibility of providing local community with educational and medical services.

-Immigration Act of 1963 makes it easier to not hire local labor.

- Local labor revolution results from the Imm. Act of 1963.

-Election of black leadership in 1967 has education of locals as top priority.

-In 1967 key amendment of Imm. Act of 1963 passed to provide more opportunity for local labor; around this time, in no l occupational group did Bahamian people make up at least 50% of the labor.

-Immigration Act of 1968 makes it even hardier for the PA to hire foreign workers over local labor, thus beginning an effort in Bahamianization to localize the labor force.

Dependency Aspects (mostly based on dos Santos's historical dependency)

Peru: -Major MNC player - Cerro de Pasco Mining Company.

-colonial stage - Spanish Empire rules Peru region from 1570s until 1821; organized mining industry as source of revenue for Empire.

-financial/industrial stage - Begins in 1812 with dependence on the Steam Machine Company in providing capital for steam engine purchases. Continues with the reliance on Weyman and Harrison of England (and other such capital) for pump construction.

-technological/industrial stage - Stage begins with the Meiggs agreement with the government and is solidified with the emergence of the Cerro de Pasco Mining Company (1904) which based its operations in Peru.

-investment dependency was a major factor - outside financing was determined to be essential to development and drainage.

Colombia: -Major MNC player - Intercor, subsidiary of Exxon.

-colonial stage - early dependency on contraband and illegal drug trade with Venezuela.

-financial/industrial stage - This dependency begins with the concession contract in 1920 with Gulf and Exxon and stage agreement with Peabody Coal in 1971.

-technological/industrial stage - Begins with the December 1976 agreement with Intercor to explore, install, and extract the coal mines. Its entire operation is based inside the country.

-skill dependency was a major factor - locals received no training in order to run new machines and technology

Bahamas: -Major MNC player - Grand Bahama Port Authority.

-colonial stage - Great Britain dictated policy in the Bahamas until 1973; had in mind to promote industrial incentive programs in the region; wanted to stimulate local industry; tourism grew after W.W.II because of the treasure found on a Spanish galleon valued at over $1 million.

-financial/industrial stage - Begins in 1946 with the purchase of a pulpwood lumber operation on Grand Bahama by Wallace Grove; continues because of the incentive program promoted by the British government.

-technological/industrial stage - Begins with the Hawksbill Creek Agreement of 1955, with Wallace Grove, who establishes Freeport as his base of operation.

-skill dependency was a major factor - locals were not trained about new technology nor about the aspects of high management.