The Canadian mining industry in Latin America and the Caribbean

January 14, 2009

“If the USA is the world’s policeman, Canada is the world’s miner”
Jon Baird, President of the Prospectors and Developer’s Association of Canada


Introduction
Approximately 80% of all global financing of the mining industry is channeled through the Toronto Stock Exchange (TSX) and over 60% of all mining companies in the world are Canadian. With extractive resource prices incrementing despite the current economic crisis , the world can expect to see even more of Canadian foreign direct investment (FDI) flowing into their countries in the form of explorations, construction and exploitation of natural resources which will continue to be necessary commodities as long as the world’s consumers need it to be so.

Canadian Investment in the Americas
After North America (including Mexico) and Europe, Latin America is the most important destination for Canadian foreign direct investment (FDI) in the world . Currently, Canadian FDI in the Americas is 3 times its investment in Asia and 4 times its investment in the Middle East and Africa. In the last 3 years, Canadian investment grew by 79 percent in the region, to CDN$88 billion, compared to an average of 15 percent in the rest of the world. The extractive industry constitutes the most important sector for Canadian direct investment in the region.

Prime Minister Stephen Harper’s visit to the Americas in 2007 in his campaign to “re-engage” the Americas, followed by Minister of State for the Americas, Peter Kent’s, 2009 visit to Central America (primarily in preparation for free trade agreement talks with the CA4 in February), speak to the increased interest in continued healthy economic relations between Canada and countries of focus in the region – Mexico (North American Free Trade Agreement, NAFTA) Colombia (pending bilateral trade agreement) Guatemala, El Salvador, Nicaragua and Honduras (pending trade agreements with CA4) Chile (bilateral trade agreement), Costa Rica (bilateral trade agreement) and key Caribbean countries (CARICOM trade agreement)– as well as countries which Canada has deemed as prospective possibilities for strengthened relations, such as Haiti, Brazil, and Barbados.

The Canadian government has named its priorities in the region as: enhancing the prosperity and providing greater opportunity for all; strengthening and reinforcing support for democratic governance throughout the Americas; and building a safer hemisphere. Stephen Harper has proposed a “third way” between market liberalism and focus on social policy, although what exactly the “third way” diplomacy is referring to is unclear at this point.

Given that the majority of Canadian direct investment in the region is in the extractive industry it is reasonable to hypothesize that Canada’s renewed interest in the region will complement its economic interests in continued expansion of Canadian FDI in the extractive industry, and any approaches to foreign relations that will support this agenda.

The Canadian government’s stated interests in fomenting increased security and democratic governance, albeit lofty and respectable goals, are also necessary for creating “secure” environments in which Canadian companies can safely invest and, particularly in controversial sectors such as mining, increased “security” has often been accompanied by domestic military force presence providing security for company infrastructure and personnel, and often times has resulted in violent repression of social protest in the various countries in the region where Canadian mining companies have sought or are currently seeking, reception of their megaprojects or further development of their exploration projects. The disconnect between human security and investment security in Canadian foreign policy objectives is a marked point of contention between Canadian civil society, Latin American civil society, and governments.

Growing awareness has developed into numerous working groups on the Canadian extractive industry question. Made up of NGOs, civil society groups, share-holder organizations, educational institutions and local community organizations from the countries where the industry is investing, as well as collective campaigns for engagement and advocacy around the Canadian mining industry, the large network of civil society organizations has brought the issue of the Canadian extractive industry to the attention of the government and Canadian society. The work of the collective initiatives culminated in the “Round Table Talks” on the Canadian Extractive Industry.

Prior advocacy and engagement work done on Extractive Industry in Canada
In 2005, the Standing Committee on Foreign Affairs and International Trade (SCFAIT) issues a ground-breaking study called “Mining in Developing Countries and Corporate Social Responsibility”.

From the Halifax Initiative (a Canadian coalition of NGOs, ThinkTanks and Academic institutions): the report recommended that the Canadian Government move away from its current voluntary approach to Corporate Social Responsibility (CSR). It called for policies that condition public assistance for Canadian companies on compliance with international human rights and environmental standards, including core labour rights. The report also identified the need for legislation that holds companies accountable for their actions overseas.

This report led to the 2006 National Roundtable talks (named “Corporate Social Responsibility and the Canadian Extractive Industry in Developing Countries”), a comprehensive multi-stake holder consultation process, held through public forums, facilitated by the government, to hear the position and concerns of Canadian society regarding the Canadian extractive industry. The process led to the publication of consensus-based final conclusions and policy recommendations for government and business, in 2007. In that same year, the United Nations Committee for the Elimination of all Forms of Racial Discrimination encouraged the Canadian government to take bigger strides in responding to and preventing the negative impacts Canadian mining operations were having on Indigenous communities within Canada and around the globe. With the entrance of the conservative government in Canada, the reports and continued conversations around implementation of policy recommendations were effectively shelved.

Agreements like the “Global Compact”, the “OECD Guidelines for Multinational Enterprises”, the “International Code of Ethics for Canadian Business” are all attempts at creating global, or at least national level, norms and standards for Corporate Social Responsibility and human rights, environmental rights and labour rights, in all global business. The Canadian extractive industry, however, being one of the primary perpetrators of violations of human and environmental rights, has yet to agree to anything that would be beyond voluntarism and legally binding within Canadian courts. The Canadian government has not demonstrated serious interest in establishing any sort of legally binding framework to hold Canadian corporations operating abroad accountable for their activities, nor has it seriously considered implementing a mandatory independent human, environmental and labour rights impact assessment policy that would ensure better and more timely information with regards to the potential effects a mining operation – or any other extractive industry operation – might have on the local population. At this moment, the only guidelines established are the already mentioned initiatives, and a company’s own corporate social responsibility policy none of which are legally binding, or have demonstrated significant improvement to the situation of the local population in terms of poverty reduction, job creation or social services.

At the February 2009 meetings of the Americas Policy Group (a working group of the CCIC), one of the agenda items is “Getting it Right: A step by step guide to assess the impact of foreign investments on human rights” facilitated by Caroline Brodeur of Rights and Democracy – this demonstrates that this is still an important issue for Canadian civil society and NGO coalitions working for justice in the Americas.

So what’s the Big Deal about Canadian Mining?
FAQ:

1. Doesn’t FDI create jobs for the local population?
a. Jobs are being created, but the numbers generated through IFC investments and via MIGA (main financing bodies for the global extractive industry) guarantees are not overwhelming. Many jobs have been created, and then lost through early shutdowns and closures. Also, no data is available on whether large-scale mining jobs are displacing other workers, such as small-scale miners or agriculturalists. While jobs are being created, there is no indication if jobs are benefiting marginalized or poor sectors of the population.

2. Shouldn’t increased FDI alleviate poverty by raising standards of living and access to social services that many MNCs invest in during operations?
a. There is little evidence to indicate that poverty alleviation is achieved through direct investments and guarantees in the extractive industries. Qualitative investigation reveals that the poor do not benefit from the extractive industries. In-depth qualitative research reveals that investments that might look like contributions to poverty alleviation (i.e., electrification of a region, potable water systems) do not benefit the poorest because tariffs are out of reach or distribution systems are not egalitarian.

3. Is mining really that bad for the environment?
a. According to Jamie Kneen of MiningWatch Canada, mining in its two main manifestations (open-pit and underground) are inherently unsustainable. As he states in a response to Pierre Gratton of the Mining Association of Canada: Mining is essentially a waste management industry. Whether a mine is underground or open-pit, most of what is mined is discarded, leaving millions of tons of waste rock and sand-like “tailings” loaded with dangerous heavy metals that had previously been more or less safely bound up in the rock. When uranium is mined, 85% of the radiation is left behind in the tailings. Sulphides exposed to weathering by air and water can generate acid drainage, which, in addition to being deadly to aquatic life on its own, also helps leach heavy metals from tailings and mine workings. Arsenic, cadmium, nickel and so on make their way into ecosystems with deadly results. Canada has been a leader in trying to find solutions to this problem, and while improved management techniques have been developed, mines are still being built that require the sacrifice of natural water bodies to create tailings dumps, and whose effluent will have to be monitored – and often treated – in perpetuity. The industry is fond of saying its harmful practices are all in the past, yet it continues doing basically the same things. In other countries, especially underdeveloped or “third world” countries, governments’ capacity to create, monitor, and enforce environmental regulation is weak or absent, and in the interest of low-cost production, mining companies routinely engage in practices that are illegal in Canada and may well be illegal in the country they are operating in as well – practices such as dumping effluent and sewage directly into streams and rivers, dumping tailings into rivers or oceans, or smelting ore without any effort to scrub acid and toxins from the smokestacks.
b. An open-pit gold mine typically will use 900,000 liters of water in a day, or more. According to an independent study by the Pastoral Commission for peace and Ecology of the San Marcos Dioceses, Guatemala, 250,000 liters of water is used in every hour of operations, which is the amount of water a family will typically use over the course of 20 years. In water scarce parts of the world, such as San Marcos in Guatemala, this is an incredibly irresponsible use of water, especially when taking into account the questions of food security and agriculturalists’ ability to grow and produce their own food for consumption – currently an MCC project in the area of San Marcos.
c. When a mine is closed, it is closed and either abandoned or reclaimed by the mining companies. There will always be environmental scarring of some sort, and sometimes a government will step in to do a closure and clean up, as the Canadian government is doing in the case of the Giant Mine in NWT. In impoverished countries, such as Guatemala, Honduras or Colombia, it is much less probable that the government will be able to spend the average CDN$300 million that a mine clean-up usually costs, leaving the environmental damage un-remedied and the local community with a devastating scar on their lands.


4. Does mining really have such negative impacts on human and labour rights?
a. In Colombia, 65% of all human rights violations occur in areas where there are extractive industry projects operating. These human rights violations include anything from denying workers the constitutional right to organize, to massacres forcing entire communities to flee their homes. Mining companies have been accused of hiring paramilitary groups to threaten and assassinate community leaders who seek to organize unions and people who oppose the mine. In Honduras, a Mennonite Pastor was forced to flee the country with his family for his work in advocacy against a Canadian mining project operated under GoldCorp subsidiary, Glamis Gold in the Siria Valley, in 2008. In the same year, in Guatemala, Monseñor Ramazzini received threats against his life for his work in advocating for an end to mining projects which have been proven to jeopardize the environmental integrity of the area, and the lives of the local community members. At the moment, at least 3 people have been killed during protests against the Marlin mine in San Marcos, and the threats continue.
b. In Colombia, home to the world’s second largest population of internally displaced persons (IDPs) the majority of forced displacement occurs in regions of the country where there is interest in the natural resources the land can offer. As the Conflict Analysis Resource Center on the Colombian conflict states: While defending the interests of the State and the companies operating in these districts, the paramilitaries have committed the majority of the human rights violations reported in the last few years; they are notorious for extreme brutality involving massacres, torture, kidnappings extortion and massive displacements of civilians. These violations have been committed mainly as part of an explicit strategy to separate the guerrillas from their perceived popular support base and gain control over land, natural resources and strategic roads. This largely explains the co-relation between internal displacement and the presence of multinational corporations in Colombia. The regions richest in natural resources are also the ones most prone to internal displacement.
c. 50% of all newly mined gold is taken from Indigenous Lands. The United Nations Declaration on the Rights of Indigenous Peoples (September 2007) provides that Indigenous Peoples (IPs) should be guaranteed the right to free prior and informed consent (FPIC) providing that IPs’ right to determine and develop priorities and strategies for the development or use of their lands, territories and other resources, including FPIC from state in connection with development and utilization of surface and subsurface resources such as (from the Declaration):
(a) Article 10 on forced relocation;
(b) Article 12 on culture and intellectual property;
(c) Article 20 vis-à-vis legislative and administrative measures taken by the States
(d) Article 27 with regards to indigenous peoples’ lands, territories and resources, and
(e) Article 30 with development planning.

Canada opposed the passing of the UN Declaration, and most governments in the Americas do not comply with the norms established by the United Nations and the International Labour Organization.

5. Don’t local communities want mines?
a. According to the Co-Development Report prepared for the Extractive Industries Review by Canadian government in 2003, out of all the mines studied, “community support for mining is apparent in only one case study: the mine in Turkey and at the same time, citizens launch many complaints with this mine.”
b. In 2004, a series of community consultations were realized with the 13 communities of the San Marco department in Guatemala with regards to the mine. The poll showed that 95.5% of the populations were against the mine and the communities issued a public statement saying: We publicly declare at the national and international level, that the granting of the licence for open pit metal mining violates the collective rights of the [I]ndigenous peoples who inhabit our territories. The company and the government of Guatemala, as well as the government of Canada, roundly ignored the positions and interests of the local communities and in response, an Indigenous group 150 kilometres away from the mine site in Sololá began a 42-day blockade of Glamis trucks passing through their community on the way to San Marcos. The blockade ended on January 11, 2005, when more than 1,200 soldiers and 400 police agents began firing at the unarmed protesters. Raúl Castro Bocel, an Indigenous farmer, was killed by the security forces. Twenty others were injured. Following these events, another process of community consultations were realized by the Dioceses and a number of NGOs. These community “consultas” resulted in 98.5% of the local population voting against the mine.
c. Canadian mining company, Pacific Rim, is in the process of suing the El Salvadoran government if it is not permitted to open a controversial mine which the community has organized around to protest. According to the company, which although it is Canadian is making the claim under its US subsidiary, Pacific Rim Cayman LLC, provisions within the Free Trade Agreement between the United States and Central America (CAFTA) allow for the company to sue the government if it changes laws (El Salvador is currently re-working its Mining Code) or allows for any activities that would potentially cause a company from the FTA signature countries to lose profits or not make as much profit as it would have, had the laws not been changed.
d. In Colombia, community consultations have demonstrated repeatedly that local communities are not in favour of mines and other mega projects in the extractive industry, and this has created backlash from companies and paramilitary groups. Union organizers, environmentalists and human rights activists have been threatened and assassinated systematically in their activities to protest foreign mines, including Canadian.

6. How am I involved?
a. 80% of all gold mined is used for ornamental purposes.
b. Canada and the United States demand far greater amounts of petroleum produced products than any where else in the world, particularly for gasoline for vehicles and air travel.
c. Under most Domestic Mining Codes (the Canadian International Development Agency has been involved in various countries’ mining code revisions) and trade agreements, foreign companies are required to pay on average between 1-5% in royalties to the local government. This means that 95% of all earnings stay within the Canadian economy and stock exchange. In the case of the Marlin Mine in Guatemala, GoldCorp is required to pay 1% of all profits back to the Guatemalan government and according to COPAE, MCC partner, the community has seen none of the money.
d. Mining companies receive financing through Export Development Canada (a Crown corporation) and the International Finance Corporation. Companies also receive equity financing (i.e. shares) through the Canada Pension Plan Investment Board. A significant percentage of investments in the CPP are in the extractive industry, including in GoldCorp CPP: $63 mil (Guatemala, Honduras), Pacific Rim CPP: $21 mil (El Salvador), Eldorado Gold CPP: $71 mil (Colombia), Alamos Gold CPP: $1.5 mil, (Mexico), Enbridge CPP: $34 mil (Colombia).



What can we do?

Ask the Canadian government:
a. That the Canadian government implement legally binding framework for Canadian extractive industry corporations operating in foreign countries;
b. That the framework include obligatory independent human rights, environmental and social impact assessments prior to entry by the Canadian corporation;
c. That the Canadian government signs and ratifies the UN Declaration on the Rights of Indigenous Peoples;
d. That Canadian corporations are legally bound to respect the norms of free, prior and informed consent with indigenous communities.