Winner Take All

Title: Winner Take All is

Author: Dambisa Moyo

Publisher: Basic Books 2012

 

I read this a couple of years ago and a recent article in the news about Ecuador selling its rain forests brought this book back to mind. Before getting to the book I will mention two articles the situations of which are exact replicas of a “deal” with another country mentioned in the first paragraph of the introduction. These two incidents lay the groundwork for the report on this book.  The first article is about Ecuador selling one-third of its rainforest to Chinese companies to pay off its debts to China. The article by Tim Fernholz is from August 19, 2013 on the Quartz website titled “Ecuador abandons rain forest protection to pay its China debts”.  First paragraph goes:

“When a poor nation finds a massive oil reserve beneath a rainforest with more species per hectare than in all of North America, it makes for a nettlesome problem. When you add in a huge amount of debt to resource-hungry China, it makes for an environmental catastrophe.”

He then explains how at first President Rafael Correa tried to work a deal with the UN to create a trust fund not to drill but it fell through and he turned to selling it to China.  The third paragraph of the article reads:

“Oil companies, anticipating the decision, have already built roads and drilling infrastructure adjacent to the park, and expect drilling to begin within weeks; Correa says the development will affect about 1% of the park’s land.”

I wonder how they knew it was going to work in their favor?

The link to the article is: http://qz.com/116321/ecuador-terminates-a-3-6-billion-plan-to-protect-the-amazon-from-oil-drilling/

 

Another article in Money Morning June 1, 2015 by Tara Clarke titled “Insatiable China Gold Demand Is Ruining Ecuador’s Tribal Lands”. The first three paragraphs go:

“We can’t be beggars sitting on a sack of gold.”

“This was socialist Ecuadorian President Rafael Correa’s favorite catchphrase during his reelection campaign that ended in a sweeping victory on Feb. 17, 2013.”

“Correa’s “sack of gold” referred to the Cordillera del Condor, a rainforest mountain range laden with precious metals – especially gold and copper, but also silver and platinum.”

The link to the article is: http://moneymorning.com/2015/06/01/insatiable-china-gold-demand-is-ruining-ecuadors-tribal-lands/

 

INTRODUCTION        (to Winner Take All)

“In the summer of 2007 a Chinese company bought a mountain in Peru. More specifically, it bought the mineral rights to mine the resources contained in it. At fifteen thousand feet (forty-six hundred meters), Mount Toromocho is an imposing land mass– more than half of the height of Mount Everest. It contains two billion tons of copper, one of the largest single copper deposits in the world. For a hefty fee of US$3 billion, Mount Toromocho’s title transferred from the Peruvian people to the hands of the Chinese.”

“…………. In just over a decade China has risen from relative insignificance to pole position in underwriting numerous resource-related transactions across the globe. China’s Chinalco, the company that bought the rights to exploit the Peruvian mountain, also spent nearly US$13 billion in 2008 for a state in Australia’s aluminum sector. In June 2009 Sinopec–a leading Chinese petrochemical company – purchased Addax Petroleum, which has sizable assets in Iraq and Nigeria, for US$7.2 billion.  Sinopec also bought a 40 percent stake in the Brazilian arm of Repsol, a Spanish energy company, for US$7 billion in October 2010 and part ownership in a joint-venture oil company with Russia’s Rosneft (a leading oil and gas company) for US$3 and.5 billion in June 2006.”

“……………….. Of all the world’s great powers, only one, China, has focused its economic and political strategy on anticipating the considerable challenges presented by a resource-scarce future.”

“What is at stake? At a minimum, acute resource scarcity will lead the world into a period when the average prices for commodities – arable land, water, minerals, and oil – will skyrocket to permanently higher levels. Food at supermarkets (bread from wheat and grains as well as sugar, meat, milk, etc.), water from taps, mobile phones and cars, gasoline at the pumps, and many of the other daily costs of life will be substantially higher. And higher prices will, inevitably lead to worsening living standards across the world.”

“…… China is now the main trading partner of many of the most influential economies in both the developed and the developing world. ……………… indeed, rich countries and poor alike do not just wait for China to come calling; they actively court and seek out Chinese investments.”

“China now funds foreign governments (providing loans and buying their bonds), underwrites schools and hospitals, and pays for infrastructure projects such as roads and railways (particularly across the poorest parts of the world), catering to the needs of the host nations in making China an altogether more attractive investor than international bodies such as the World Bank, which often ties loans to harsh policy restrictions.”

“……. Meanwhile, heavily indebted industrialized countries that need to raise revenues also capitulate, borrowing significant sums from China. In 2011, for example, China was the largest single holder of US government debt, with 26 percent of all foreign-held U.S. Treasury securities (around 8 percent of total US public debt).”

“Through a centrally planned command-and-control system of the economy, China’s Communist Party sponsors and influences the behavior of mammoth state-owned enterprises such as banks, energy firms, transport and logistics businesses, and resource companies.”

“The government makes its financial muscle felt, so the line between public and private can appear deliberately obfuscated: for example, the Chinese state retains sizable equity stakes in many publicly traded companies (in some cases upward of 70 percent of these companies are government owned) and virtually all of the top 30 Chinese multinational enterprises are state owned.”

“China’s so-called going-out strategy uses state-controlled tools to encourage overseas expansion and acquisitions by even privately held companies. Many Chinese enterprises receive government grants or (low-interest) loans from state owned banks, placing them at a distinct advantage compared with foreign companies that have to source funds with more expensive borrowing from the financial markets.”

The above was only from the “Introduction”. The book is full of charts, graphs, tables and detailed explanations and examples building a skyscraper on the foundation of the introduction. It has also given the source materials for the information it contains. This is a must read for anyone attempting to divine the future. It does not bode well for the democratic and capitalist systems we are now operating under. As one reads it one becomes painfully aware of how corrupt and incompetent we have become. I have added two paragraphs from Chapter 8, “The Geopolitics of It All”. Between the introduction and the two paragraphs they should be enough to spark the truly concerned to read the entire book.

Chapter 8: The Geopolitics of It All

It Takes a Crisis

“The sad truth is that in democracies with regular election cycles, government officials rarely focus on “imminent dangers.” Under the pressures of the ballot box, the urgent usurps the important. A more brutal way to put it is that governments tend not to care for future generations; these supposedly desirable models of government actually encourage political myopia.”

“When it comes to food, water, energy, and minerals, for example, there are clear signals today that these vital resources will not be enough to go around in the near future. As we witness the groundswell of the global population and as wealth and prosperity expand, global supply is struggling to keep up, but investment lags behind and nature’s supply hits its limits. All things being equal, the situation will only get worse over time.”