How Will ‘America First’ Policies Impact Water Security on the Colorado River?

Water security on the Colorado River faces an ambiguous future, with the Minute 319 agreement set to expire.

By:  Meghan Curran, Lynx Global Intelligence

 

Tensions between the United States and its southern neighbor have risen steadily over the last few months. In January, a diplomatic standoff ensued as President Donald Trump announced his decision to move ahead with the construction of a border wall preceding Mexican President Pena Nieto’s White House visit, which was thereafter canceled.  The implications of President Donald Trump’s proposal to fund the building of a wall along the U.S-Mexico border by applying a 20% tax on Mexican imports disproportionately effects certain U.S. states. Colorado is one of these states.

Mexico is Colorado’s second largest market for export goods, besides Canada. In 2015, Colorado exported $1.08 billion in goods to Mexico, an 83% rise from 2010 levels, according to Commerce Department data (Denver Business Journal, 2017). Additionally, Colorado imported $1.72 billion in goods from Mexico in 2015 (a 164 % increase from 2010 levels). While there are numerous negative implications regarding trade between Colorado and Mexico under ‘America First’ policies, there are also human security concerns relevant to the increasing tension between the United States and Mexico.

One potential human security concern is water security, and the future of agreements between the U.S. and Mexico regarding the Colorado River. In 2012 the U.S. signed an agreement with Mexico establishing rules for managing water from the river, which runs from the Colorado Rockies to the Gulf of California. The river passes through seven states, and provided water for 33 million in the United States and Mexico. Under the 2012 arrangement, called Minute 319, the United States and Mexico agreed to share surpluses and shortages from the river.

In times of drought in the United States, Mexico agreed to accept less water in exchange for being able to store water in the United States during times of surplus, reducing the potential for harmful flooding. Prior to the 2012 agreement, the United States had sent the same amount of water to Mexico every year, despite the river’s waning levels and increasing concerns over drought in the U.S. southwest. Mexico, which has limited capacity for water storage, in return could store surplus water in Lake Mead, of great benefit to the U.S. since the lake is crucial to supplying water to the Las Vegas area. The United States also agreed as part of the arrangement, to support improvements to Mexico’s water infrastructure. Additionally, both the United States and Mexico agreed to provision a specific amount of water annually to the Colorado River delta area, which has become desert-like in recent years, endangering native plant, fish, and animal species. (New York Times, 2012)

Water security on the Colorado River faces an ambiguous future today, with the Minute 319 agreement set to expire at the end of 2017. With tenuous relations between the United States and Mexico persisting, and a water shortage on the river projected to be declared as early as 2018, the future of Colorado River, a lifeline for tens of millions of people on both sides of the border, is uncertain. It is still unclear how President Trump’s ‘America First’ policies might impact resolutions regarding future management of the river, but the delivery of water to 3 million Mexican households could potentially be at stake. Additionally, in 2016 Lake Mead recorded its lowest water levels since the construction of the Hoover Dam in the 1930s. Mexico’s willingness to continue to store water in Lake Mead in accordance with Minute 319 has the potential to significantly impact over 1 million people in the Las Vegas Valley, as well as the area’s massive tourism industry. (San Diego Union Tribune, 2016)

With water levels expected to continue to drop in the coming years, a renewed emphasis on binational cooperation between the United States and Mexico on the issue of water security is essential. Colorado, as both the source of this crucial waterway, and a key trading partner for Mexico, will no doubt have an essential role to play in helping to broker this future cooperation.

 

 

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Mexico is Colorado’s second-largest market for export goods, after Canada. Colorado exported $1.08 billion in goods to Mexico in 2015, up 83 percent from 2010 levels, according to Commerce Department data.

Manufactured food products represented about 25 percent of Colorado’s exports to Mexico in 2015, valued at $269.6 million. That was followed by chemicals (18 percent, $192.9 million), non-electrical machinery (10 percent, $112.1 million), and fabricated metal products (9 percent, $100.2 million).

And Colorado imported $1.72 billion in goods from Mexico in 2015, up 164 percent from 2010. Roughly half of those Mexico-to-Colorado imports were classified as computer and electronics products, valued at $856.3 million.

No. 2 was plastics and rubber products (9 percent, $150.8 million), followed by non-electrical machinery (8 percent, $135.6 million) and electrical equipment, appliances and components (5.5 percent, $95.3 million).

Russia’s Northern Sea Route: The Superior Course for Maritime Trade in the Arctic

Lynx Global (AI)ssisted-Data-Science™ Dashboard facilitates public and private risk strategy

ABy:  Anthony J. Riddle,  Lynx Global Intelligence

 

The Chinese government intends to redraw the lines of power in maritime trade. In a Chinese-language only report distributed by the Chinese Communist Party (CCP), they signaled their intent to encourage Chinese shipping companies to utilize trade routes in the arctic circle. This will catalyze a paradigm shift in global maritime trade because China is the first major power committed to utilizing the Arctic Circle; setting a new precedent in naval history. Specifically, the CCP prioritizes the increasingly navigable Northwest Passage which crosses through Canadian and American territorial claims. Shortening transit times for maritime shipments is the primary motivation for using emerging Arctic sea routes to link China to European markets. The Chinese Maritime Silk Road ends at the Port of Piraeus, Greece, and leads through the Indian Ocean and Suez Canal. The current route cuts 10 days off the journey to Central or Eastern Europe when compared to routes which lead around the Horn of Africa. [1] Because of this accelerated transit speed “most of China’s $1 billion in daily exports to Europe [now] traverse the Gulf of Aden and the Suez Canal.” [2] The CCP now looks to the Arctic to further expedite shipments to European consumers at a time when China’s “online revenue [is] projected to double to $1.1 trillion by 2020.” [3]

China currently controls fourteen of the top twenty high volume sea ports and has launched the One Belt, One Road Initiative with the intent of establishing new trade routes to bolster its economy and expand its international influence. The maritime component of this initiative initially used a shipping route that ran through the Indian Ocean, the Straits of Malacca, and the Suez Canal. [4] This route, however, forces shipping vessels to transit through three high risk piracy zones which increases shipping costs resulting from the combination of higher insurance premiums and augmented security measures. Costs to shipping companies are increased by $726.1 million a year when transiting just the East African piracy zone because of the additional security merchant vessels require to do so safely. [5] By shifting priority to the increasingly navigable arctic, Chinese shipping companies can effectively bypass these costly and dangerous areas when shipping goods to European markets. China’s Maritime Safety Administration spokesman Liu Pengfei was quoted as saying “Once this [arctic] route is commonly used, it will directly change global maritime transport and have a profound influence on international trade, the world economy, capital flow and resource exploitation.” [6]

The Russian controlled Northern Sea Route will become navigable far sooner than the Northwest Passage according to climate change models; additionally it will have the largest ice free area comparatively to other routes. [7] The Northern Sea Route is also approximately 40% shorter than using the Suez Canal trade route [8] and shortens voyages from Shanghai to Hamburg by 2,800 nautical miles. [9] Such a significant input cost reduction for delivering goods to European markets will be irresistible for shipping companies participating in Chinese trade. An example of how arctic transits create significant savings is “the Nordic Orion, a Danish bulk carrier, [which] saved $200,000 and four days’ transit time by shipping 15,000 metric tons of coal from Vancouver to Finland via the Northwest Passage in 2013.” The Arctic Ocean therefore represents an approximate savings of $50,000 a day in transit costs while simultaneously removing the necessity for Maritime Security teams that are required to safely transit piracy zones. This will drive Arctic and non-Arctic states to compete for access to these lucrative routes that are partly claimed by the United States, Russia, Canada, Denmark and Norway. [10]

122333The Russian government has heavily invested in making the Northern Sea Route navigable for trade to compete with the Northwest Passage. China stated in their 2015 military white paper that they place great importance on “managing the seas and oceans and protecting maritime rights and interests” [11] and, as a result, they made history in 2014 by having the first unescorted commercial vessel transit the Northwest passage which delivered a shipment of nickel ore. [12] This same year China and Russia signed a 30 year and $400 billion dollar deal for GAZPROM to supply China with Russian oil in an attempt to further link Russian and Chinese economies. This deal ultimately was crippled by plunging price of oil from the $100/barrel at the time of the deal and the global supply of Liquid Natural Gas (LNG) which has become more attractive because of the Paris Agreement on climate change. [13] Russia intends to manage their Northern Passage to circumvent western sanctions by taking advantage of Chinese economic growth to repair their own economy and improve Sino-Russo relations. The Chinese decision on which arctic route to rely on will rebalance global relations between the three superpowers.

To successfully attract Chinese shipments, Russia maintains forty icebreakers and has another eleven icebreakers on order to improve the viability of this emerging shipping lane. Additional signs of Russian commitment to controlling arctic trade are found in their four active Arctic combat battalions, recently established dedicated Arctic command, and creation of sixteen ports in the arctic circle. [14] Russia’s State Commission on Development of the Arctic Regions also founded a single company to boost the development of these new shipping routes and will oversee all logistical operations in the area. [15] The Northern Passage has already experienced a 30% increase in commercial traffic from 2008 to 2010. [16] Companies interested in participating in a region that is quickly becoming viable for trade, a first in recorded history, require both familiarity with the agreements between states in the region and to establish a dialogue with new partners already established there.

We are experiencing a paradigm shift in global trade. One that can be capitalized on if effectively managed through careful analysis of real-time competitive intelligence. Companies wishing to take advantage of this development require a dedicated team of subject matter experts who are familiar with the political forces affecting global supply chains. They will also require a network of professional partners who are firmly established in these expanding markets. Without a carefully constructed strategy to mitigate potential risks created by the geopolitical pressures between states, the subsequent volatility could cause irreparable damage to a company’s supply chain.

By introducing an Artificial Intelligence (AI) driven analytical dashboard to assist a diverse team of experts, Lynx Global Intelligence is uniquely positioned to provide the services necessary to successfully emerge from this transition ahead of the competition.

 

 

[1] http://unctad.org/en/PublicationsLibrary/rmt2016_en.pdf

[2] http://www.huffingtonpost.com/joseph-braude/why-china-and-saudi-arabi_b_12194702.html

[3] http://unctad.org/en/PublicationsLibrary/rmt2016_en.pdf

[4] http://unctad.org/en/PublicationsLibrary/rmt2016_en.pdf xi, 21

[5] http://oceansbeyondpiracy.org/reports/sop/summary

[6] http://af.reuters.com/article/commoditiesNews/idAFL3N17N1JK

[7] Scott Stephenson, University of Connecticut, https://www.newsdeeply.com/arctic/community/2016/02/10/scott-stephenson-the-future-of-arctic-shipping

[8] http://www.gallois.be/ggmagazine_2013/gg_02_03_2013_90.pdf

[9] http://www.scmp.com/news/china/society/article/1937327/china-wants-its-shipping-use-faster-arctic-route-europe-opened

[10] http://www.maritime-executive.com/article/rival-claims-to-the-changing-arctic

[11] http://thediplomat.com/2016/04/going-blue-the-transformation-of-chinas-navy/

[12] http://www.latimes.com/world/asia/la-fg-china-ships-alaska-20150902-story.html

[13] http://www.reuters.com/article/us-russia-china-gas-exclusive-idUSKCN0UT1LG

[14] SEN PERDUE (R-GA): Senate Armed Services Committee Holds Hearing on U.S. Southern Command and U.S. Northern Command Witnesses: Gen Lori Robinson (CDR USNORTHCOM) PG 25

[15] http://e360.yale.edu/features/cargo_shipping_in_the_arctic_declining_sea_ice

[16] https://www.afsc.noaa.gov/publications/misc_pdf/iamreport.pdf PG 16-17

Latin America is Leading the Charge in Renewable Energy

While the U.S. leaves the Paris Climate Agreement, Latin America is leading the charge in renewables

By:  Tyson Guajardo, Lynx Global Intelligence

 

Following President Donald Trump’s withdrawal from the Paris climate agreement, many citizens of the world were left furious and in a state of uncertainty about our planet’s future.  Despite the universal outrage which surfaced from a large magnitude of individuals and organizations alike within the United States, this largely symbolic retreat does not at all indicate the end of the green future narrative.  In fact, it is possible Mr. Trump’s withdrawal has actually incentivized climate activists more than ever before to push businesses towards committing to renewables and clean energy.  The alliance of mayors from 292 cities across the United States (1), as well as the partnership of 10 states including New York, Washington and California are a beacon of hope for many who are at odds with POTUS.  Hundreds of businesses in America led by giants such as Google, Apple and Facebook (2), are also dedicated to tackling the threat of climate change, with or without the federal government’s blessing.  Opportunities for American firms to invest in renewables can be found all over the world, with most other nations willing to lend a helping a hand in some capacity.

For example, Latin America, where there is a combined population of more than 600 million, has great potential for investors looking for the current hot spot in alternative energy.  The region as a whole has one of the highest rates of renewable energy consumption in the world (3).  In 2016, both Costa Rica and Uruguay ran almost entirely on renewables for several months, while in 2014 Latin America collectively generated 53% of its electricity from renewable sources (in comparison to a world average of 22%) (4).  In Brazil and Paraguay, most electricity is hydro powered (5) and Chile has recently become a leader in solar energy.   In Latin America, mergers and acquisitions in the sector have doubled over the last 12 months (5).  There is no other area on the planet that can claim to be as successful in this regard.  Moreover, an intergovernmental organization known as the International Renewable Energy Agency has stated that close to every Latin American nation has created goals supporting a greener future (5).  These nations are willing to collaborate with private investors for the benefit of their economies, which will become more dependent on renewables in the future as most of the world shifts its focus in this direction.

Lynx Global Intelligence is currently engaged in a solar power project in Peru and can also help your organization lead the charge (pun intended) in the alternative energy revolution while simultaneously generating (oops, there’s another one) more revenues.  We partner with South American businesses to help preserve the future of our planet for our children and grandchildren.  For more information, contact us to see how we can help.     http://www.lynxglobalintelligence.com

 

 

 

 

  1. https://www.curbed.com/2017/6/1/15726376/paris-accord-climate-change-mayors-trump
  2. http://money.cnn.com/2017/06/05/technology/business/businesses-paris-climate-agreement/index.html
  3. http://www.iadb.org/en/topics/energy/se4allamericas/renewable-energy,17688.html
  4. http://www.economist.com/news/americas/21711307-power-andean-sun-latin-america-set-become-leader-alternative-energy
  5. http://knowledge.wharton.upenn.edu/article/bright-outlook-renewable-energy-latin-america/
  6. http://www.renewableenergyworld.com/articles/2015/08/why-renewable-energy-in-latin-america-is-a-winner.html

The Paris Climate Agreement and Future Business Implications

Pursuing the goals of the Paris Climate Agreement will ensure businesses long-term success while allowing them to participate in the reshaping of the economy while saving the environment.

By:  Jenya Sakaeva, Lynx Global Intelligence

 

In light of recent political events, the environmental future of the United States, and consequently the world, may look quite bleak. Fortunately, as the saying goes, every cloud has a silver lining. For the planet’s climate, this silver lining could be businesses big and small leveraging their power for global good. While the Trump Administration has yet to formally withdraw from the 2015 Paris Climate Agreement, the executive orders to date signify the United States’ noncompliance with the goals set forth to prevent global temperatures from rising another 3.6 degrees Fahrenheit. This is a point when scientists have agreed the Earth will be irrevocably locked into “a future of severe droughts, floods, rising sea levels, and food shortages” [1].

Pursuing the goals laid out in the COP21 Paris Agreement will set businesses on a course of action that will lead to sustained success. In Lynx’s previous post, https://tinyurl.com/mnqbq9q, we outlined the ways in which corporate social responsibility and ethical business practices bring long-term prosperity to those who participate in them. Addressing climate change is a part of corporate social responsibility.

Why should businesses uphold the Paris Climate Agreement?

 A changing climate poses many risks to business. First, there is the risk of depleting natural resources that are either raw materials in a company’s product, or necessary to the process of manufacturing or shipping those products. There are tangible, physical risks associated with damage to facilities or manufacturing centers from a more extreme and volatile climate and weather events. Of course, there are financial risks that lack of natural resources or extreme weather will result in. Market risks in the form of shifting consumer preferences, behaviors, and demand are equally prevalent. Additionally, companies face reputational and regulatory risks for poor performance in climate related endeavors.

The Paris Climate Agreement is historic in terms of the goals set and number of countries that have committed to take them seriously. This reflects the global understanding of the multitude of issues stemming from climate related problems. The time to act is now.

In the words of some of our economy’s biggest players, “Implementing the Paris Agreement will enable and encourage businesses and investors to turn the billions of dollars in existing low-carbon investments into the trillions of dollars the world needs to bring clean energy and prosperity to all” [3].

The Paris Climate Agreement creates a global landscape in which business opportunities are plentiful. As the world economy and political powers move towards achieving reduced emissions and capping temperature rise, businesses will see a need to change their practices to support their country’s commitment to the agreement. Evaluating the strategic decisions now can put you ahead of the curve, but failing to adjust just means a more turbulent transition further down the road. Aside from political agendas impacting businesses and the Paris Climate Agreement, there are also economic, social and technological reasons to begin honoring the agreement sooner rather than later.

According to a business briefing on the topic by Cambridge University, “Companies such as GE, Unilever, Nike, IKEA, Toyota and Natura are already reaping the benefits of offering ‘green’ products and services, a market which has grown to over $100 billion” and “Unilever’s purpose-driven brands are growing at twice the rate of the rest of their portfolio and if GE’s Ecomagination was a standalone business, it would be a Fortune 100 company.” [4] Additionally, there are many economic opportunities to invest in renewable energies and new technologies, while oil prices may vary globally and contribute to higher energy prices.

Socially, consumers are increasingly more aware of the sustainability efforts and initiatives of the companies they purchase from and their behaviors are shifting to favor those businesses with more commitment to the environment. Patagonia is a classic example of a company that embodies the ideals of the Paris Agreement within the core functionalities of its strategy, and is rewarded for that by consumers. On the other hand, businesses that ignore these social patterns often witness consumer backlash and reputational damage.

Technology is already a rapidly evolving field in which some businesses have seen immense success. In order to reach the goals set forth in the Paris Agreement, many more technological advances will have to bridge the gaps between where we are now and where we aim to be. This presents businesses with huge potential. New business models, like the circular economy, have begun to emerge as an innovative response to dealing with climate problems. “Smart” technologies are becoming more customary in our daily landscape, from wearable technology to transportation solutions, and even smart cities. Also, the role of big data will only grow as the world tries to understand how to enact technological changes and incorporate them into society.

While the political approach to the Paris Climate Agreement remains uncertain in the United States, the rest of the world remains committed to the deal. As we know, neither climate nor the economy exists independently in one country or another. We live in a global world and a global economy, and businesses that realize the opportunities within the goals of the agreement will be successful in the long-term across many different aspects.

 

 

[1] https://www.nytimes.com/2017/03/28/climate/trump-executive-order-climate-change.html?_r=0

[2] http://www.cisl.cam.ac.uk/publications/publication-pdfs/A-New-Climate-for-Business.pdf

[3] http://www.lowcarbonusa.org/

[4] http://www.cisl.cam.ac.uk/publications/publication-pdfs/A-New-Climate-for-Business.pdf