World Bank rules against government of El Salvador in dispute with Canadian mining multinational Pacific Rim

August 11, 2010 by freedomofinformation

A World Bank arbitration panel has ruled in favour of Canadian mining company Pacific Rim in determining that a controversial lawsuit, which the corporation filed against the government of El Salvador after the latter indefinitely suspended the exploitation of a gold mine close to the nation’s capital, may proceed. Preliminary Objections to Pacific Rim’s case had been filed by the Salvadorian government in January, alleging that the lawsuit was erroneous and without legal foundation.

El Salvador’s president, Mauricio Funes, had halted exploration at the El Dorado mine site, located around 40 miles from San Salvador, citing the potential for environmental and social damage. In June, Funes had affirmed that, “El Salvador and my government are not going to support, nor authorise, any mining exploration or exploitation which puts the country’s health at risk and which further deteriorates our environment”, however the panel’s ruling puts this position in serious jeopardy.

The case, brought by Pacific Rim subsidy Pac Rim Cayman, has been shrouded in controversy since it was filed in April of 2009, with the government of El Salvador maintaining from the outset that there is no legal basis for arbitration on behalf of the International Centre for Settlement of Investment Disputes (ICSID), the World Bank’s dispute resolution panel. Upon filing the case, Pacific Rim announced that it would be seeking, “award of damages in the hundreds of millions of dollars from the government for its multiple breaches of international and Salvadoran law”, and the figure currently being demanded by the Canadian company is $77 million. An estimated 30% of El Salvador’s 6 million people live below the poverty line, and the country’s illiteracy rate currently stands at around 20%.

Pacific Rim has pursued its claim under the terms of the 2005 Central American Free Trade Agreement (CAFTA), to which the United States, the Dominican Republic and five Central American nations, including El Salvador, are signatories. The company’s Pac Rim Cayman subsidiary had been registered in the Cayman Islands, but relocated to the U.S. state of Nevada in 2007 – some three years after a rift had begun to emerge between Pacific Rim and the government of El Salvador.  CAFTA has no jurisdiction in either Canada, where Pacific Rim is registered, or in the Cayman Islands, but Pac Rim Cayman’s registration in Nevada has allowed it to use the terms of the free trade agreement to bring legal proceedings against El Salvador.

The Salvadorian government presented ICSID with a six-page document outlining what it describes as flagrant violations of World Bank policy last week, after the panel had determined that the case would be allowed to proceed in spite of vociferous objections. The government also charges that Pacific Rim is acting in violation of the 1996 El Salvador Mines Law, which stipulates certain prerequisites for the granting of mining concessions in the country.

Pacific Rim’s President and CEO, Tom Shrake, said that the company was “very pleased” with ICSID’s decision to allow the case to proceed. “This is a positive and crucial step in the CAFTA process for Pac Rim. We are, however, reticent to celebrate as we believe a more productive outcome is possible for both the Salvadoran people and foreign investors. With this phase of the arbitration now completed, we hope to resume a mutually beneficial dialogue with the Government of El Salvador to resolve the impasse on the El Dorado project”, he added.

The Salvadorian National Committee against Mining (Mesa Nacional frente a la Minería), however, decried the ICSID ruling, saying that it sets a “terrible precedent” in terms of national sovereignty and the right of a country “to reject projects that are environmentally or socially unfeasible”. The committee has called on Funes’ government to join forces with groups opposed to the World Bank’s ruling, with activist Manuel Fuentes saying that such by allying with such organisations the government can “strengthen its defensive strategy”.

Furthermore, there have been calls from activists in El Salvador for the government to pass legislation prohibiting outright the mining of metals in the country, to withdraw from the Central American Free Trade Agreement with immediate effect, and to rule out the possibility of signing bilateral trade accords with Canada.

Neoliberal ‘free trade’ agreements such as CAFTA and its counterpart NAFTA – the North American Free Trade Agreement, which encompasses Canada, Mexico and the United States – have come under intensifying scrutiny in recent years, as many have pointed out that they actively erode national sovereignty and pit member states’ economies against one another in what has been dubbed the “race to the bottom” by some economists.

Republican Congressman Ron Paul remarked of CAFTA in 2005 that, “It is absurd to believe that CAFTA and other trade agreements do not diminish American sovereignty.  When we grant quasi-governmental international bodies the power to make decisions about American trade rules, we lose sovereignty plain and simple… Like the UN, NAFTA, and the WTO, it represents another stone in the foundation of a global government system.  Most Americans already understand they are governed by largely unaccountable forces in Washington, yet now they face having their domestic laws influenced by bureaucrats in Brussels, Zurich, or Mexico City.”

Former World Bank Chief Economist Joseph Stiglitz has also voiced opposition to NAFTA and CAFTA, observing that these agreements have had a detrimental effect on domestic agriculture in signatory states, whose markets have been flooded with cheap produce imported from the United States. In many cases, heavy subsidies offered to U.S. farmers by the federal government mean that U.S.-grown crops are able to undercut domestic produce with disastrous results for those who depend on farming to make a living. The result has been increasing rural poverty in countries such as Mexico, simultaneously fuelling migration from the countryside to the city and immigration from Latin America into the United States.

Speaking about the effects of the NAFTA agreement on Mexico, Stiglitz observes that, “NAFTA, ten years later, did not, I think, produce the benefits that Mexico had hoped for. A fairer agreement could have, but that’s not what they got. One of the key aspects of this was agriculture. The price of corn fell by half. The poorest people in Mexico are corn farmers. So you increased the poverty among the poorest groups in the country. It helps their urban workers, who buy food, but it hurts the some of the poorest. So you have seen this change in the pattern of inequality within Mexico.”

In 1993, then-Vice President-elect Al Gore took part in a televised debate with independent presidential candidate Ross Perot, a passionate opponent of NAFTA, on a special edition of Larry King Live on CNN. It was during this debate that Gore uttered the now infamous line, “this is a good deal for our country”.

A 2003 report into the effect of NAFTA on the U.S. economy, however, contradicts Mr. Gore in the strongest possible terms. Robert E. Scott’s report,The high price of ‘free’ trade, notes that in the first ten years following the 1993 inception of NAFTA, over 870,000 jobs were lost from the United States, mostly “high-wage positions in manufacturing industries”. In addition, NAFTA “contributed to rising income inequality, suppressed real wages for production workers, weakened workers’ collective bargaining powers and ability to organize unions, and reduced fringe benefits”.

Scott’s damning report observes that, “no protections were contained in the core of the agreement to maintain labor or environmental standards”, and that NAFTA, “tilted the economic playing field in favor of investors, and against workers and the environment, resulting in a hemispheric “race to the bottom” in wages and environmental quality”.

The report goes on to state that advocates of NAFTA, such as Al Gore and former President George W. Bush, “misrepresent the real effects of trade on the U.S. economy: trade both creates and destroys jobs. Increases in U.S. exports tend to create jobs in this country, but increases in imports tend to reduce jobs because the imports displace goods that otherwise would have been made in the United States by domestic workers.”

The result of nearly two decades of unchecked neoliberal economic policy has been a sharp decline in real wages and living standards in the United States, spurred on by the near-total obliteration of the country’s manufacturing sector as companies seek to maximise profit margins by moving their factories south of the border where land and labour are considerably cheaper. With support for such policies unsurprisingly strong among Washington D.C.’s political elite, this trend shows no sign of relenting in the foreseeable future.

http://embassymag.ca/page/view/mining-08-11-2010

US mining legislation will affect Canada
By Avinash Gavai
Published August 11, 2010

Last month, the Obama administration declared it would press other nations to implement regulatory standards that would force oil and other extraction companies to disclose payments that they make to foreign governments.

The Wall Street reform bill that was signed into law by the US president will make it mandatory for mining companies to divulge information to the Securities and Exchange Commission information on payments made to governments for "extracting resources such as oil and gas, mining materials, gold, and diamonds." The amendment is seen as a pivotal move in providing transparency on the relationship between corporations and governments in countries where large-scale mining operations are taking or will take place, especially in Africa and Latin America.

"Importantly, this provision sets a new standard for corporate transparency. The challenge for us now is to make this a global standard. The United States is committed to working with other countries to ensure the implementation of similar disclosure requirements in other financial markets and will make this a priority in the year ahead, " said Robert Gibbs, the White House press secretary.

This had important implications for Canada, with many wondering how it would affect the country.

Canada is home to 60 per cent of the world's mining companies. It is an industry that is expanding at an almost exponential rate, particularly in developing countries.

Canadian investments in the mining sector have skyrocketed from $30 billion in 2002 to $110 billion in 2008, with $57 billion in Latin America and $20 billion in Africa.

Canadian companies say they accept the notion that they must operate responsibly, and help rather then hurt the communities in which they are working. However, there has been an organized resistance against mandatory requirements. The contentious battle with Bill C-300 is a prime example.

The bill would in essence hold extraction and mining resources operating abroad accountable through federal oversight and penalize violators by denying them public support.

In the last few months, experts and commentators have held the view that legislative action taken in the US would help shift the paradigm in Canada--and now that the White House has made this emphatic statement, critics say tangible effects seem likely to be forthcoming.

"Often with mining companies, in particular when you look at Canada's involvement, you have the highest level of investment of mining abroad - it would make sense that we would adopt this kind of proposal," said NDP Foreign Affairs critic Paul Dewar.

"The reason for this kind of disclosure is so that people can understand the relationship between (Canadian) mining companies and government...I think a minimum standard would be to have disclosed and the question for those who say no to it, it would be 'why not?'"

Mr. Dewar is planning a bill that will be tabled in the House in the fall that looks to tracking minerals and extraction industries in conflict areas. He says that it will be modeled on legislation being passed in the United States.

His Liberal Party colleague, John McKay, who sponsored Bill C-300 is cautiously optimistic that the Canadian government would follow suit and embrace the spirit of legislative action being taken south of the border.

"I would hope so, I have no anticipation that this government will be anything other than the dinosaurs they have proved to be, and I would hope that the Liberal party which aspires to be government, would embrace CSR with more enthusiasm than they have thus far," he said.

Mr. McKay, who is currently working on bringing one of the main movers of the Wall Street Bill, Senator Richard Luger, to speak at the Foreign Affairs committee, believes that while such disclosure is hugely beneficial it will face stiff resistance from the Canadian mining industry.

"Anytime a corporation is compelled to equally disclose their activities - not just profit, loss and expenses - but also their activities, I think its good, and there's little or no downside to the whole thing, but I don't see any progressive thinking from the MAC (Mining Association of Canada) on this," he said.

International Trade Minister Peter Van Loan wrote in an email that Canada and the United States "work closely together" on developing and implementing a number of international corporate social responsibility standards and guidelines, "including the Organization for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises, the Voluntary Principles on Security and Human Rights, and the ISO 26000."

But Canadian civil society organizations are clear about the domino effects created by actions such as the Wall Street Reform Bill.

"Securities and regulators always look south of the border to see what new developments are. We are one jurisdiction where prodding may not even be necessary because we adopt a 'follow the leader' approach," said Ian Thomson, program coordinator at KAIROS, an organization heavily involved in the mining debate.

"In this case its interesting, because both countries are part of an initiative called EITI (Extractive Industries Transparency Initiative) - and what the US has now done is walking the talk on EITI. It is now requiring the sorts of disclosure that the EITI program was set up to promote. Canada joined the same program last year, and it hasn't brought into effect any new regulations to require this reporting...I think the pressure is going to mount on Ottawa to make a move towards it," he said.

The MAC, the Canadian mining industry's premier lobbying group, did not respond to a request for an interview.

The Border: Misery & Hope
Mitch St.Pierre

I’ve been following the ongoing conflict in Burma for several years, but it wasn’t until I heard the stories at former Secretary of State David Kilgour’s house that I decided it was time to check out the situation on my own. Mr Kilgour had a reception at his Ottawa home for several Burma advocates including Dr. Cynthia Maung - everyone simply calls her Dr. Cynthia. She had come to Ottawa from the Thai-Burma border to urge the Canadian government to continue its federal funding of relief projects there. Dr Cynthia is an inspiring Burmese woman who has won a slew of international human rights awards; she also runs a medical clinic for refugees on the border of Thailand and Burma, where hundreds of thousands have received treatment since the conflict began.

It wasn’t long after that I threw my bag on the back of my wheelchair and embarked on a journey to witness some of the impacts caused by a brutal military regime. I landed in Bangkok Thailand where I would begin my journey to Mae Sot. It's a town that shares a border with Burma where Burmese refugees outnumber Thais by more than two to one. As a main over-land gateway between the two countries, it has gained a notorious reputation for gem trading, human trafficking and drugs. It is also home to hundreds of thousands of Burmese refugees and economic migrants. Refugees come mostly from Burma's war torn ethnic Karen State, a region engulfed by intense conflict between the 400,000 government soldiers and a small rebel force of 12,000 fighters. The rebels are determined to achieve an autonomous Karen State and to protect the Karen people from abuses by the government.

Over the years, thousands of ailing refugees make their journey to Dr. Cynthia’s Mae Tao Clinic. Many of them arrive on foot, some barely making it. The clinic was established by Dr. Cynthia during the 1988 Burmese pro democracy movement. The military seized power, many activists disappeared, and others fled the country. Traveling through the jungle at night, Dr Cynthia and fourteen of her colleagues carrying limited supplies made their way to Thailand. Along their 7 day journey through the jungle, they passed through remote villages, treating local people suffering from disease and injury. To the generals of Burma, she is an opium-smuggling terrorist and an insurgent causing unrest. To the thousands she treats and trains, she is a saint.

The clinic provides free health care for those who are escaping the military rulers. People of all ethnicities and religions are welcome at the clinic. The success of the Mae Tao Clinic depends upon collaboration with other local and international organizations and the ongoing support from the international community.

My stay in Mae Sot was heartbreaking but hopeful. From education projects, health clinics, to orphanages, people from all around the world come to Mae Sot to assist in any way they can. Derek Koch is one of these people, a fellow Canadian who works with an NGO called Imagine Thailand.

For years, large numbers of children have been fleeing the region towards the relative safety of Thailand. This has led countless children into over crowded orphanages in Mae Sot. Imagine Thailand works in poor and marginalized communities empowering youth, businesses and communities with the tools needed to bring about beneficial change. Derek brought us to a few of the many orphanage/boarding schools where in some cases only 2 bathrooms were available for 400 students, 140 of them who live there on a permanent basis. One of the projects his NGO is involved with; is the 'Clean Water Project'.

Globally, diarrhea is the leading cause of illness and death and 88% of diarrhoeal related deaths are due to a lack of access to sanitation facilities. The Clean Water Project helps by providing each migrant school in Mae Sot with a source of clean, reliable drinking water. The reverse osmosis water filtration system removes bacteria and toxins and cleans the water to nearly 100 percent purity.

For the most part, the border town does not lack water; it lacks water that is safe and clean. For many, drinking water without toxins and bacteria is not an option. Bottled water is expensive, especially for those with an extremely limited budget. Improving access to clean water and sanitation is vital for children to develop physically, and mentally. It is also one of the UN Millennium Goal targets.
 
After leaving Mae Sot, I left for Burma. I flew into the capital, Rangoon. The city was old, run-down. Its infrastructures were crumbling and inadequate. At the same time, it had beautiful sites such as the Shwedagon Pagoda, a 2500 year old sacred Buddhist pagoda with relics of the past four Buddha’s. The people of Burma too are warm, welcoming and very friendly. This was surprising given the oppressive conditions they live in. Government control is pervasive. Internet access is highly censored. There is no independent judiciary or democratic institutions. Burma is the textbook example of a police state. The average Burmese person is afraid to speak to tourists except in superficial ways, fearful of being hauled in for questioning or worse. Every attempt I made to travel to the Karen region proved impossible. No driver would take us there.
 
My journey to the border was something I will never forget. The images of misery are enduring as is the hope for a brighter tomorrow thanks to the many local Burmese, Thais and foreigners who dedicate themselves to helping the refugees. Despite the continued suffering inflicted by the Burmese military government, around the world there is support. Grass roots organizations and NGOs are mobilizing, advocating, and putting pressure on governments to urge Burma to change its course.

For more information please visit:

www.maetaoclinic.org
www.imaginethailand.org
www.filmsforhumanrights.org