Correlation of Socioeconomic and Environmental Factors with Municipal oil Royalties and CFEM

ABSTRACT

This study aimed to determine the correlation between environmental, economic and social variables with royalties collected in the main oil and mineral producing municipalities. The data used, disaggregated by city, between 2004 and 2010, were the municipalities’ total revenue, investments in sanitation and environmental management, the number of inhabitants per municipality and Index FIRJAM municipal development. The relationship between the variables was evaluated by the Principal Component Analysis. The results showed that the largest collection of royalties, whether oil or mining, does not directly affect greater social or environmental development. Results can be explained by the lack of a legal framework that conditions the application of funds raised to the concerned areas. Thus, we conclude that the possible environmental and social impacts of exploitation of these non-renewable resources are not being rewarded for royalties.

Keywords:
oil royalties; CFEM; externalities; social development; environmental quality