South America's Mining Wars Heat Up

On May 25, some 2,000 protestors near Espinar, Peru stormed the world's third largest copper mine, attacking officials, taking over facilities and forcing the mine's owner, BHP Billito, to shut down the facility for four weeks.

Though it's unclear what concessions were won, the protesters, who clamored for social investments in neighboring communities, cost the mining company $1 million per day in processed ore.

They also added to a growing trend.

As global metals prices rise, a new Latin American mining rush is underway as are dramatic struggles between mining companies and indigenous groups demanding community paybacks and opposing environmentally destructive methods of extraction such as strip mines and heap leaching.

When European explorers first mined Latin America's lodes in the 1500s, they burrowed underground with tunnels to get the ore. Conservationists say today's technologically sophisticated methods pollute more and create more waste compared to how much ore the methods retrieve. "Heap leaching," for instance, involves piling broken ore onto supposedly impermeable pads and spraying it repeatedly with a cyanide solution to dissolve out the gold content. It is perhaps unsurprising that this method, if not impeccably performed, can leak deadly cyanide into local water supplies.

And mining companies are getting bold: a Canadian company is proposing to "relocate" massive glaciers in the Andean Mountains in order to get to the gold underneath. The problem is that the glaciers are an immensely important source of fresh water for the ecosystem, and removing them would lead to unimaginable disruption of the ecosystem.

Though many Latin American governments are eager to reap the jobs and revenues mining operations bring, grassroots opposition to some mining projects has been impressive.

From Mexico to Peru to Argentina, indigenous opposition groups have chalked up a series of victories against mega-wealthy mining interests. But activists say U.S.-backed trade deals such as the Dominican Republic Central American Free Trade Agreement, known as CAFTA, could offset populist victories by giving transnational corporations the right to sue poor developing nations for lost economic opportunity.

In Argentina, which in 2004 witnessed a trebling of mining investment, 81 percent of residents in the town of Esquel voted to shut down an open-pit gold mine proposed by Canada's Meridian Gold. In Cajamarca, Peru last November, U.S.-based Newmont Mining Company for the first time closed an exploration site after local residents blocked roads in protests. And in the Andes Mountain borderlands between Argentina and Chile, activists have helped stall the proposal by Canada-based Barrick Gold to remove three glaciers that collectively cover 17.6 million ounces of gold and silver lodes.

In Central America some national governments have responded to activist pressures by taking tough stands against mining companies. Citing environmental reasons, a Costa Rican court in December negated a gold-mining concession owned by a subsidiary of Vannessa Ventures Ltd of Canada. Earlier that year, Honduras cancelled a mining concession owned by Silver Crest Mines, Inc. because its strip-mining operations threatened a nearby nature reserve.

The problem? Activists say the North American Free Trade Agreement (NAFTA), CAFTA and other U.S.-backed free trade accords contain a highly controversial provision known as the Chapter 11 investor-state provision, which lets private companies sue governments for lost economic opportunity.

Experts worry the provision could be used to sue governments whenever protestors halt mining operations.

NAFTA's Past, CAFTA's Prologue

Though unfamiliar with CAFTA's investor-state provisions, Alejandro Calvillo of Greenpeace Mexico said in an email interview that CAFTA's cousin, NAFTA, "clearly supports mining companies against community rights." So far, companies have used NAFTA's Chapter 11 provision (which has been embedded and expanded in CAFTA) to file outrageous lawsuits in cases where governments sought to protect the environment.

NAFTA case law offers a preview of what CAFTA will do if ratified by Congress in the coming weeks.

  • Metalclad vs. Mexico
Several years ago, Metalclad, a US-based mining company, tried to build a waste dump near Cuadalcazar, Mexico. When the state governor sided with fierce local resistance and stopped the project, Metalclad used NAFTA's Chapter 11 provision to sue for lost economic opportunity. Result: the Mexican government that had to shell out $16 million in damages.
  • Glamis vs. United States
The state of California issued cleanup requirements for mining operations belonging to Glamis, a Canadian gold mining company. The government acted out of concerns the operations caused environmental harm and destroyed sacred Native American sites. Glamis sued the U.S. under NAFTA's Chapter 11, claiming the regulations would stamp out profits. The pending case seeks a total of $50 million in compensation -- $15 million from actual investment and $35 million for "lost profits" -- from the U.S. government.
  • Methanex vs. California
When in 1999, after a gasoline additive and suspected carcinogenic made its way into the groundwater beneath hundreds of California communities, the state enacted a ban on the chemical, called MTBE. Methanex, a Canadian corporation which made a component of MTBE, used NAFTA's Chapter 11 to bring a still pending $970 million suit against the U.S. for lost profits and business opportunities its suffered.
So far, both Mexico and Canada have already lost cases under NAFTA's Chapter 11 and there are currently one billion dollars worth of Chapter 11 environmental suits pending, according to The Sierra Club. Those statistics surely catch the eyes of Latin American governments caught between foreign mining interests and protesting citizens, governments that might be want to enact hard environmental regulations.

"Certainly there are fears that if a government has to take action to order the suspension of [mining] operations, that in principal the company could claim entitlement of compensation," said Keith Slack, senior policy advisor for Oxfam America.

Fear of NAFTA and CAFTA-style lawsuits has pushed at least one government to crack down hard on indigenous protestors. In January, protestors in the Guatemalan town of Solola rose up against a strip mine owned by California-based Clamis Gold. News reports said police killed one man and wounded 16 others. And according to an Associated Press account, "The government said it had to honor the mining concession, or risk a huge lawsuit by the company."

A spokesperson for the Washington-based National Mining Association, a trade organization that lobbies on behalf of U.S. mining interests, declined an interview request saying the groups represents mining interests in the United States and has limited information about international operations.

CAFTA goes further

Activists are stunned by the fact that CAFTA goes even further in giving multinational corporations the legal power to bring billions of dollars in investor-state suits against poor countries.

What does CAFTA do? The proposed deal expands the international dispute resolution system to cover corporations that have written agreements with a federal government relating to "natural resources or other assets that a national authority controls."

The short of it: mining companies can sidestep domestic courts and take claims directly to international arbitration, which tends to keep public participation and observation at arms length.

Moreover, that expansion gives foreign companies powers they don't currently have under U.S. law, which stipulates that firms holding federal contracts regarding public assets are not allowed to go around domestic U.S. courts.

Observers also say United States Trade Representative (USTR), in crafting CAFTA's expansions, substantively ignored a Congressional mandate requiring them to allow "no greater substantive rights with respect to investment protections than U.S. investors in the United States."

Want a firm example of what CAFTA's excesses might look like? Take a gander at Harken Oil.

Harken Costa Rica Holdings, a corporation linked to Texas-based Harken Energy, inked a deal with the Costa Rican government to drill for oil off its coast. The deal, however, was contingent on an acceptable environmental assessment, which in the end fell against Harken citing potential risks to marine ecosystems. Costa Rica's government denied Harken drilling rights, which prompted the company to bring a suit for $57 billion dollars (it claims to have invested 12 million: the rest was for lost potential profit). A contract provision demanded that Harken take the suit to Costa Rican courts but after legal wrangling the pending case has moved to international arbitration. Costa Rica maintains that it won't pay up.

"But had CAFTA's investor rules been in place," according to a report by the Sierra Club. "Harken could have bypassed the domestic court system and taken the case straight to a NAFTA-style tribunal."

Battles between Latin American locals and the mining industry are sure to continue. But CAFTA's corporate favoritism could make sure megacolossal miners win no matter what the cost.

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