Demand for economic growth from oil exportation comes out as the major factor motivating the Brazilian and Ecuadorian governments to consider extracting hydrocarbons in the Basin due to the presence of huge deposits, which can significantly stimulate the countries rate of industrialisation.
Degradation and deforestation of the Amazon Basin are also increased by increased demand for agricultural land and logging. However, this element presents a major challenge in the continued existence of the Basin’s ecosystem and biodiversity as such activities may also increase soil, water, and land pollution. Additionally, the countries’ economic growth and development due to other economic activities such as ecotourism are hindered.
The paper cites a number of alternative economic development models that Brazil and Ecuador can adopt in their quest to achieve economic growth without destroying the natural resources in the Amazon Basin. The main alternatives suggested include investing in ecotourism and carbon trading.
Natural resources play a critical role in the economic growth and development of a country and various categories of natural resources can be utilised to stimulate economic growth. Over the past two centuries, the world has undergone unprecedented economic growth due to consumption of natural resources. The growth is associated with increased exploitation of non-renewable natural resources such as minerals and fossil fuels.
Currently, most economies are under pressure to stimulate their economic growth. Consequently, the exploitation of natural resources occurs without considering the aspect of environmental protection.
Moreover, the finite characteristic of most natural resources presents a challenge with regard to whether the natural resources will sustain the economic growth. The world is currently experiencing a high rate of population growth, hence exerting pressure on natural resources. Consequently, natural resources are increasingly becoming scarce.
The demand to achieve a high rate of economic growth has led to uncontrolled extraction of natural resources. Consequently, most countries that depend on natural resources have reached a point where their ecosystems have become very fragile.
The Amazon River Basin is one of the most important natural resources in South America. It is estimated that the basin covers 44% of the total land area in South America or 6,100,000 km2. The basin extends into “Venezuela, Bolivia, Colombia, Peru, Guyana, Suriname, Ecuador, and Brazil” (Bastida 3).
Currently, the Amazon Basin faces a number of environmental issues. The economic analysis of the Amazon River Basin in this paper focuses on the role of the Amazon Basin in the economic growth and development of Brazil and Ecuador by conducting a cost-benefit analysis of deforestation and degradation of the Basin’s ecosystem. The alternative strategies that Amazon Basin countries can adopt are also evaluated.
The Amazon Basin comprises very delicate ecosystems that have been developed over thousands of years. However, the perception towards the region has changed tremendously over the past few decades. The change has arisen from discovery of the Basin’s potential with regard to hydrocarbons.
The Basin is characterised by substantial deposits of hydrocarbons, which has motivated most countries within which the Basin is located to engage in deforestation in pursuit for the hydrocarbons. This aspect presents a major challenge to the Basins. The extraction of hydrocarbons has increased five times over the past eight years.
It is estimated that oil companies were granted over 52 million hectares of land within the Amazon Basin to explore and extract hydrocarbons by the end of 2007. The allocation of land varies from one country to another.
Seventy percent “(70%) of the allocated land is located in Peru, 10% in Ecuador, and 13% in Brazil” (Bastida 6). Moreover, 5 million additional hectares have also been granted for hydrocarbon extraction in Ecuador, which represents that largest proportion of the Amazon’s ecosystem that is set for exploration.
The aggressive extraction of hydrocarbons in the Basin is motivated by demand for high economic growth. Oil revenue has “been the major source of economic growth for most countries within the Amazon Basin; moreover, countries within the Basin are focused on stimulating their economic growth by increasing their oil exports” (Bastida 5). Peru and Brazil have invested in aggressive exploration of oil within the basin.