Argentina boasts some of the largest shale gas and oil formations in the world, and is well positioned to replicate the shale revolution that has transformed U.S. energy production over the past few years. Sensing opportunity, President Mauricio Macri has made attracting foreign investment to the energy sector a key part of his economic agenda since taking office in 2015.
So far, despite high labor costs and lingering doubts about Argentina’s long-term political stability, Macri has largely succeeded. ExxonMobil recently announced a $200 million investment to ramp up production at Vaca Muerta, the Belgium-sized epicenter of Argentina’s oil and gas sector. Its biggest competitor, Chevron, will invest $500 million this year in partnership with Argentina’s state-owned oil company, YPF. The potential reward is huge: The U.S. Department of Energy estimates that Argentina has the second-largest shale gas reserves in the world, and the fourth-largest reserves of tight oil. The Vaca Muerta deposit alone is twice as large as Eagle Ford, the famed South Texas shale play.
However, Argentina’s ambitious energy plans are now being threatened by an unexpected group: Mapuche Indians.
The Mapuche, who span Argentina and Chile, have become increasingly aggressive about reclaiming what they describe as their ancestral lands throughout Patagonia. Their activism has resulted in repeated confrontations with law enforcement. Last August, a clash with Mapuche protestors resulted in the disappearance of activist Santiago Maldonado, captivating the country in advance of the October midterm elections. In November, the police shooting of a young Mapuche protestor, Rafael Nahuel, outside Bariloche, brought renewed attention to the conflict. The Mapuche appear undaunted by their run-ins with police. Following Nahuel’s death, his cousin lamented the “great loss of a warrior,” but warned that the Mapuche would “continue fighting to defend our lands.”
Land conflicts involving the Mapuche are not new in Argentina’s heartland or in Patagonia. For two decades, Italy’s Benetton Group has struggled against squatters on the 2.2 million acres in Patagonia where the company explores for copper and silver, raises sheep for wool clothing and logs pine trees. For their part, the Mapuche have long complained of social exclusion, encroachment on ancestral lands and their government’s failure to honor their constitutional right to “communal ownership of the lands they traditionally occupy.” Frustration among Argentina’s Mapuche is understandable, as the country’s indigenous communities have long suffered isolation and high rates of poverty.
In November, Argentina’s Congress approved another four-year extension of an emergency law that prohibits evicting indigenous peoples from their ancestral lands while the government seeks a broader solution to the issue. Originally passed in 2006, the imminent expiration of the law had prompted indigenous activists to camp out for weeks in Buenos Aires to pressure lawmakers.
Though Argentina’s Mapuche are small in number – approximately 205,000, compared to 1.5 million in neighboring Chile – their growing activism could be enough to imperil Macri’s plans. Out of fears of Mapuche protests, Argentina deployed 1,500 federal and provincial security forces in December for a meeting of G-20 negotiators in Bariloche. Argentina’s energy sector, meanwhile, already had plenty of disadvantages to overcome, including notoriously high labor costs and poor infrastructure in the remote region where its unconventional oil and gas is located.
A lot is at stake, for both Argentina and global energy supplies. Argentina, once a net energy exporter, saw production consistently decline and found itself reliant upon costly energy imports for seven consecutive years. Now, it faces the specter of a prolonged conflict similar to the tensions in Chile, where for decades the Mapuche and government have clashed over land rights, autonomy and the construction of energy infrastructure.
It is unclear whether Argentina’s Mapuche have the will, numbers or resources to sustain a Chile-style protest movement. Already, however, they have successfully pressed for compensation from the government and YPF, which has reportedly paid out tens of millions of dollars over the past three years.
So far, investors seem more perturbed about the high cost of drilling than the land disputes. Argentina attracted $6 billion to Vaca Muerta last year, and $8 billion is expected this year. The government says the region needs $20 billion annually to develop fully its energy resources.
Success in Patagonia is paramount for Macri’s government, which is struggling to accelerate growth and address the high inflation, budget deficit and low foreign currency reserves it inherited from its populist predecessors. Quick and successful development of Vaca Muerta would go a long way toward stabilizing the Argentine economy.
For energy companies like ExxonMobil and Chevron, the fields of Vaca Muerta have potential unmatched anywhere outside the United States. But it now appears that Argentina’s path to energy independence might run through some pretty complicated terrain.
Gedan is a former South America director on the National Security Council and a fellow at the Woodrow Wilson International Center for Scholars
Phalen is a research assistant at the Wilson Center