Development & Aid, Economy & Trade, Europe, Global, Global Geopolitics, Headlines

DEVELOPMENT: Licensed to Plunder

Aileen Kwa

GENEVA, May 30 2008 (IPS) - Metals and mineral mining have been notorious for the "resource curse" they have inflicted on the communities who live where they are mined. Today, as prices are high, the appetites of these mining companies are on the increase.

There are new investments in oil in Angola and Uganda, and in metals in Madagascar and Ghana. These come from both China and the traditional corporations in the "new scramble for Africa".

More and more, companies' interests are protected by investment and trade agreements, allowing companies the ability to sue states if government action or legislation is seen as impinging upon their profits.

"Even more than agriculture, for metals, it has always been big business," Thomas Lines, whose forthcoming book 'Making Poverty: A History' will be published in July, told IPS. "Mines are a big thing. You need a lot of capital behind you. So it tends to be done by big corporations.

"The mining industry is well known for its 'enclave' projects. The mining company is given the right to exploit the mine. It puts in the infrastructure, gets the stuff out, and negotiates with the government on the terms of payment. What all too easily happens is that the mining company makes a lot of money out of it and a very few in government get paid off. Locally, it provides some employment, but it is often quite vulnerable employment in pretty harsh conditions."

Lines shows in his forthcoming book that mining has been a significant creator of poverty. By the late 1990s, least developed countries (LDCs) specialising in mineral exports showed the highest levels of poverty – up to 82 percent of their people were living on less than a dollar a day.

"There is also the issue of land being taken up, not just by the mine itself, but by the transport infrastructure, roads and railways," Lines said. "Now, a lot more mines are open cast or open pit. Rather than drilling down below, they just have the whole top of the hill removed. This is far more environmentally damaging.

"And there can be other environmental consequences such as pollution. It depends on the nature of the commodity. When gold is being removed from ore, they can use cyanide, and if they are not careful, it could get washed into the rivers, causing contamination."

Citing an example of the 'enclave' nature of the industry, Lines said "bauxite for aluminium has been the main export industry of Guinea. But there are few benefits for the people. It is an enclave industry. It takes place in a corner of the country. Bauxite is shipped out. The money comes in and doesn't get shared."

Clearly, a lot more government regulation is needed, yet the ability to regulate has been progressively stripped away from governments.

Researcher Salimah Valiani has been tracking Canadian mining activities in Canada and in the developing world. She shared her views with IPS.

"In the era of structural adjustment and the free market starting from the 1980s, governments were told that they had to open up mining to private interests. Social controls around mines were stripped away.

"In Papua New Guinea, a few cents from every dollar of nickel used to go to the community livelihood fund. Governments were advised to remove these things as a way to 'attract' investments."

New tools to protect corporate interests are constantly being evolved. These tools are becoming increasingly sophisticated. Nathalie Bernasconi, an attorney at the Washington-based Centre for International Environmental Law (CIEL) drew attention to the 2,500 bilateral investment treaties (BITS) that governments around the world have signed to protect the interests of companies.

"These treaties are based on principles such as non-discrimination (companies from any country must be treated similarly) and national treatment (foreign companies must be given the same treatment as local companies)," Bernasconi told IPS. "But there are also other rules, which can be very problematic, such as on expropriation. A domestic regulation that limits the profitability of an enterprise can sometimes be seen as amounting to expropriation, so that the government has to pay compensation."

She noted that it is not just the substantive rules that are tilted in the interest of the companies, but that agreements also give investors procedural rights: investment treaties often allow investors to sue host governments directly under international arbitration, but not vice-versa. There are now many such investor-State cases, a new development which Bernasconi said started to pick up with the North American Free Trade Agreement (NAFTA).

In South Africa, she said, the government enacted two legislative acts in 2004 to stimulate economic growth and address a major obstacle to realising the country's full economic potential – inequality. That is one of the legacies of decades of apartheid, and governments have pursued laws to include all South Africans in economic growth.

Two laws, the Black Economic Empowerment Act and the Mineral and Petroleum Resources Development Act, are now being challenged by Italian investors before an international investment tribunal.

Italian investors control about 80 percent of South Africa's natural stone exports, she said. "Now the mining companies from Italy are attacking the South African Black Economic Empowerment Act, a legislation for affirmative action. The mining companies say it violates the investment treaty between South Africa and Italy. The investors want to be compensated because South Africa is trying to redress the problems from apartheid."

Bernasconi said that CIEL has also been involved with the San Mateo community in Peru. "We brought the Peruvian government to the Inter-American Commission on Human Rights (IACHR). You have a Canadian gold mining company that had polluted the ground water, air and land, and had not dealt with the waste related to gold mining. There were enormous health implications for the villages located near the mining project, especially for children. We worked with the local communities there and won that case. The Commission requested that Peru ensure that the Canadian company clean up and remove the toxic waste."

But the kinds of actions the government has to take to protect human rights could potentially be attacked under investment treaties, she said. "And then the government has a conflict between adhering to its human rights obligations to protect the population, and protecting the gold mining company and its profits. If there is a BIT, the company could actually challenge the government.

"Investors may not always win, but they can bring these cases, and a government has to put a lot of resources into defending the legislation. It could also have a chilling effect on a government's ability to put in place good legislation. The government can be told, 'If you adopt this legislation, we are going to sue you'."

Another tool used to protect corporation interests is "host government agreements" (agreements between a government and a company) that are usually not made public, Bernasconi said. A recent study by the International Finance Corporation (IFC) and the UN Special Representative to the Secretary General for Business and Human Rights (SRSG), John Ruggie, shed light on such agreements in various sectors.

"Many of these agreements contain so-called 'stablisation clauses'," Bernasconi said. "The laws of the state are 'frozen' or 'stabilised' so that if the government changes the law, the company won't be subjected to it, or will have to be compensated for any losses occurred. Parliament can adopt a new legislation and an investor is immune for 20 years! The worst stablisation clauses are in the extractive industries sector. There is one where the freezing clause is 100 years!"

"We need to come up with a production model which is sustainable, both socially and ecologically," says Valiani. "A lot of mineral development is not sustainable. Given all the social and environmental consequences, we need to question our reliance on these extractive resources."

Republish | | Print |

Related Tags