El Salvador Fights Aussie Mine Takeover

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Late last month Australia-based mining company OceanaGold acquired Pacific Rim, a mining company currently demanding $315 million from the government of El Salvador over their refusal to grant permits for a controversial project.

The El Dorado gold mine in northern El Salvador has been stalled since 2008, when the government of El Salvador refused to grant a permit to Pacific Rim.

The government’s decision came after many in the local community had protested against the mine, concerned about the effects of acid drainage, heavy metals and the use of cyanide in the mining process, which they fear could contaminate major water catchment areas and impact on public health and the environment.

However, despite local support for the government’s move, Pacific Rim was able to take the case to an international tribunal and demand $315 million in compensation from the developing Central American nation.

This amount reflects the predicted value of Pacific Rim's investment. According to the company, its investments are “significantly higher in value than the to-date investment that has already been made in El Salvador”.

The case is in its final phase of arbitration at the International Centre for Settlement of Investment Disputes (ICSID), as OceanaGold, headquartered in Melbourne, takes control of the project from Pacific Rim. A spokesperson for OceanaGold confirmed to New Matilda that, “OceanaGold will continue to seek a negotiated resolution to the El Dorado permitting impasse.”

In response, Salvadoran anti-mining activist, Vidalina Morales, travelled to Australia recently to speak on behalf of La Mesa, a broad network of local organisations including churches, civil society organisations, and academics who call for an end to metallic mining in El Salvador.

“We want to make it clear that our people, our organisations and our government do not want metallic mining in our country,” she told NM.

OceanaGold CEO Mick Wilkes was quoted recently in Mining Weekly saying, “The project has the potential to be an economic engine for El Salvador”.

However, according to Morales, “The project would employ only a few people, for only a short time”. The impact on the productive activities in the region — like farming, tourism, raising livestock and fishing — would be huge, she says.

Additionally, the economic cost of the international tribunal is enormous. “The amount they are requesting is around half of the national schools budget,” says the Edmund Rice Centre’s Sean Cleary, who assisted Morales with her tour. Even if the company does not win the case, the government will still have to pay expensive legal fees.

Bilateral and multilateral trade and investment treaties increasingly contain mechanisms to solve such "investor-state disputes" in international tribunals in order to protect foreign investors. However, cases like this one are becoming more common, and these clauses have attracted widespread criticism.

Earlier this month, South Africa joined Ecuador and Venezuela in terminating some investment agreements in a decision praised by Nobel Prize winning economist Joseph Stiglitz, who noted recently on Project Syndicate that agreements like this “significantly inhibit the ability of developing countries’ governments to protect their environment from mining”.

According to Dr Patricia Ranald from the Australian Fair Trade and Investment Network (AFTINET), “more consideration is given to whether the investment was harmed than to whether the policy was in the public interest” in these kinds of cases.

In Australia, the Coalition government’s trade policy has been widely criticised by civil society groups, particularly in relation to the inclusion of similar investor-state dispute clauses in the Trans-Pacific Partnership agreement, which is currently being negotiated between, the US, Australia and 10 other Asia Pacific countries.

Among the reasons given by Pacific Rim to pursue this case against El Salvador is because the government failed to respect their “legal right to develop mining activities in El Salvador”. But what about the right of the people of El Salvador to effectively protest against unwanted mining?

Morales questions the democracy of these international tribunals. “They do nothing to help us,” she says. “The tribunals are not interested in the environment or the people.”

New Matilda

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