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Lack of Private Ownership of Subsoil Generates Poverty

By: Contributor - Aug 26, 2013, 5:42 pm

2Governments and states in Latin America have taken advantage of the ambiguous principle of the “common good” expressed in the constitutions of their countries. Under this principle they gain legal power to posses, control, use, and exploit natural resources in the subsoil as a “national interest.”

Subsoil in Latin America is the ground beneath the surface that is not in use by the land owner. If a building, for example, has a basement, the subsoil would be under it, not the basement itself. So long as the owner has not given a use to the subsoil, it becomes the legal property of the state by default.

For instance, Guatemalan Constitutional Law expresses in its Article 121 that the state owns (among other things) water running underground, waters not utilized by individuals, the subsoil and the hydrocarbon and mineral deposits, and any other organic or inorganic substances from the subsoil.

The right to privately own subsoil, according to Enrique Ghersi, a Peruvian lawyer and professor, is relevant politically and economically, even if it appears abstract and incomprehensible at first sight. For Ghersi, the reason that the private ownership of subsoil is important lies in a question: what is the big difference between finding oil under a property in Texas and finding it in Peru? Ghersi explains that finding a valuable material underground in Texas makes the owner of the land rich because the material is his, while the one in Peru becomes poor because state officials and their cronies own the material and take it away from him.

The Peruvian man who finds, for example, a gold deposit under his property would have to give up the rights to the surface land above of the findings in exchange of an amount the state decides to pay him. So, after being expropriated, the land can be explored and exploited by a drilling company that negotiates contracts with the state and agrees to pay a certain amount of the total winnings for the materials extracted, not to the previous owner but to the state.

The subsoil case has become more contentious since members of the public have got involved against international companies making money out of “their” land. While the common reasons for subsoil ownership are the same as the broader reason for the right to private ownership of land — natural rights and economic efficiency, in particular — ecological activists also oppose the drilling industry for its contamination to the environment and indigenous groups claim historical or ancestral rights over the land.

The Yasuní National Park in Ecuador provides one recent example of the problems generated by the lack of property rights over the subsoil. Since the park has never been privately owned, the use the state gives to it is a national concern, and everyone is squabbling over it. That means drilling company owners and environmentalists have been lobby against each other, along with various student and indigenous groups. In this case, even Leonardo DiCaprio gave money for the preservation of the park.

Ecuadorian President Rafael Correa barred use of the oil-rich land of the Yasuní against its commercial use and started a pioneering conservation plan in the area that attempted to raise funds from the international community and everyone interested to stop the need to drill it. It did not work, however, and recently Correa’s government approved the exploitation of less than 1 per cent of the park. The taxes on the earnings of the drilling company will go directly to the state.

The challenge of collective land exploitation is inevitably political, which in Latin America means name-calling and personal attacks. Magalí Rey Rosa, a Guatemalan writer and activist for Ecological Action, demonstrated this with her column Gold Fever. Rey Rosa wrote that an investigative reporter (she did not mention whom) has called “everyone who opposes metallic exploitation in the country, a terrorist.” Later in her text she commited the same offense when she called the reporter of the mining investigation someone who “lacks journalistic ethic for publishing interviews made over the phone on her show.”

The violence and resistance of the people living near the mines, and the strong opposition towards the mining sector in general derives from the “uncertainty of the property right or a wrong definition of it,” Ghersi explains. The private property right over subsoil makes people free to sell to international drilling companies their resources at the price they agree, and that suits both parts. Little state power is needed for the transaction: to give legal certainty for the contract made between them.

“In this way, I always propose the solution to the violence problem caused by clashes between rural and mining sectors . . . let’s spread the property, establish a property right that allows harmonious development, reconciling the populations with the mining companies, and making them partners of an agreement freely negotiated and established with landowners, who will go from being the poorest people on Earth to being featured in Forbes.”