Milei’s ‘twin extractivism’ reforms threaten Argentina and the planet

Argentina’s debt will grow as Big Tech extracts data and knowledge, forcing state to abuse nature to pay it off

By Cecilia Rikap. Published 6-28-2024 by openDemocracy

Javier Milei, President of Argentina speaking at the World Economic Forum Annual Meeting in January 2024. Photo: World Economic Forum/flickr/CC

Argentina’s far-right president Javier Milei secured early this morning his first major win in office, with the country’s lower chamber passing the first of his landmark regressive reforms. Congress’s approval of the so-called Ley Bases, or the Bases Law, came weeks after the bill prompted a 13-hour debate in the upper chamber and a peaceful demonstration outside Parliament that was met with fierce police repression.

The legislation – which is a key part of Milei’s anarcho-liberal government plan – promotes investment in extractive industries, such as forestry, construction, mining, energy and technology. It includes a Large Investment Incentive Scheme (RIGI, by its Spanish acronym) that will grant extractive investment projects worth at least $200m lower income tax, authorise them to import fixed capital and tax only their exports in the first three years.

As it stands, the RIGI is unlikely to bring Argentina the dollars needed to pay for its already exorbitant – and probably expanding – foreign debt, and will likely lead to the further destruction of the environment, worsening the ecological crisis.

The traditional rationale behind legislation such as Bases Law is that fomenting foreign direct investments will generate internal industrial spillovers – often, a requirement to do so is set out in a firm’s agreement with a state. For example, a foreign car manufacturer receiving a tax break for opening a factory in a country might be required to buy parts from local suppliers.

But RIGI contains only a limited obligation to use at least 20% of local suppliers and simultaneously states the inapplicability of any rule that mandates companies to purchase locally if local prices are higher than market prices. Besides the fact that these two statements could lead to contradicting situations, the share is so low that it can easily be achieved with local suppliers for non-tradables. And it is so low that it prevents any possible dynamic development of indigenous industrial capabilities by local companies. With minimal nuances, this regime resembles the indiscriminate imports during the 1990s’ currency board in Argentina.

Back then, it resulted in company bankruptcies and rising unemployment. Today, the risk is further expanding precarious work, particularly in the gig economy. .

This means the proposals will at best lead to a short-term influx of foreign currency and growth, with perverse effects on Argentina’s development in the medium- and long-term, as dollars are drained via the import of machines and dividends paid abroad, and what is left of Argentina’s industry is further hijacked.

Milei hopes RIGI will lead to a wave of technology investments in Argentina. Around the time the Bases Law was being debated, he flew to the US to meet the CEOs of Microsoft, Google and OpenAI and try to convince them to expand their businesses in the country. But any such investments would also have a detrimental effect on the planet, as Bases Law is rooted in a model that will deepen ‘twin extractivism’, in which the extractivism of intangibles (knowledge and data) reinforces nature extractivism.

In periphery economies – those that have low levels of economic development, usually in Africa, Asia and Central and Latin America – private companies tend to be (very) late adopters of new technologies. This is the case in Argentina, where universities and other public research institutions are usually at the global research frontier of their fields – meaning they are targeted by foreign companies like Big Tech for knowledge extractivism.

One example of this type of extractivism is Amazon giving researchers in Argentina, Peru and Brazil academic grants that are actually credits that can be spent only on Amazon’s Web Services (AWS) – Amazon’s cloud. Such credits represent an extremely low additional cost for cloud hegemons because computing services are often just the same lines of code sold millions of times. And for a company of Amazon’s size, there are very low costs involved in small projects consuming a tiny space of their colossal storage and power infrastructure.

On the contrary, these initiatives can deliver major gains for tech giants – offering them a chance for the early identification of successful projects, which they could then purchase or copy. But even if the research teams awarded the AWS credits do not sell their resulting software or models to Amazon, they become dependent on its cloud services to keep their results alive once the credit runs out.

Scholars cannot be blamed for applying for these private grants to conduct their work, considering the structural underfunding of public research in the peripheries – which is particularly acute in Argentina. But this extractivism reinforces underdevelopment because projects become targeted towards maximising the chances of getting such a cloud credit, thus fulfilling AWS priorities. It is hard to see how a giant foreign company’s business priority would be aligned with addressing local social and ecological problems.

Big Tech companies also carry out data extractivism in the peripheries, harvesting data from individuals and organisations, which is then centralised and processed with their AI algorithms. This is at the core of their valorisation strategies. The data we all create every time we search for something on Google or watch a show on Netflix, for example, is used to improve these companies’ underpinning AI algorithms, which results in more businesses and profits.

Several Global South countries disproportionately produce such data. Last year’s Digital 2023 Global Overview Report, produced by online media monitoring company Meltwater and creative agency We Are Social, found that 87% of Argentinians use the internet. This is less than the 99% of people in Ireland, Norway, Saudi Arabia and the UAE but still far above the global average of 64.4%. Internet users in Argentina also have the fourth highest daily time spent online – after South Africa, Brazil and The Philippines, all peripheral countries – during which time they will be creating data for Big Tech and other large tech companies.

As these companies amass more data and knowledge from the peripheries, nature extractivism seems all the more inevitable. More foreign debt is amassed as more services are purchased in dollars from foreign companies, such as advertising from Google or subscriptions from Netflix. In a country like Argentina that is already drowning in historical foreign debt, the government is then often forced into the further abuse of nature, accepting further investments in industries such as mining and fracking and being more permissive with companies operating in these sectors – as a means to pay for debt.

This is what underpins Milei’s RIGI proposal. From mining to fracking, fostering nature extractivism fuels the world’s ecological breakdown. The effects are dire not only in terms of the reproduction of economic dependence, but also the global environmental consequences for human health and biodiversity of an indiscriminate appropriation of nature.

This equation is a ticking bomb for Argentina, with critical ecological spillovers globally. The country needs a state that embraces the colossal job of democratically planning development and dismantling twin extractivism. Instead, Milei and his coalition in Congress add fuel to the fire by giving away what should be critical common goods to major extractive industry giants and Big Tech.

This article is published under a Creative Commons Attribution-NonCommercial 4.0 International licence.

Share Button

Leave a Reply

Your email address will not be published. Required fields are marked *

Time limit is exhausted. Please reload CAPTCHA.

Protected with IP Blacklist CloudIP Blacklist Cloud