Battle over CAFTA Rages in El Salvador
by Michael Busch
As El Salvador transitions from decades of conser– vative rule to the administration of leftist President Mauricio Funes, the country faces an international showdown triggered by a restrictive free-trade agree– ment between the United States and Central Ameri– ca. Canada’s Pacific Rim Mining Corporation is suing the government for its refusal to allow it to mine gold in El Salvador’s rural north. If Pacific Rim succeeds in securing the $100 million settlement it seeks, a trou– bling precedent would be set. At stake is a question that affects all nations: Can private interests trump national sovereignty under international law?
Pacific Rim initiated arbitration proceedings against El Salvador with the World Bank’s International Cen– ter for Settlement of Investment Disputes (ICSID) on April 30, 2009. The corporation argues that El Salva– dor violated investment rules in the US-Dominican Republic Central America Free Trade Agreement (DR-CAFTA) which is confusing on its face, seeing as Canada is not a party to the accord. (Pac Rim fun– neled the lawsuit through a US subsidiary.)
Company officials charge that the government has violated their “investor rights” by refusing to approve an Environmental Impact Assessment (EIA) submit– ted by the company. Without this approval, Pacific Rim cannot obtain a mining permit.
The company insists that its operations pose no threat whatsoever to El Salvador’s ecological stabil– ity and public health, but a wide array of community leaders, activists, and environmental experts disagree. They contend that Pacific Rim’s assessment offers little evidence supporting the company’s “green min– ing” claims, and serves as a smokescreen to obscure the adverse socioeconomic impacts gold mining is likely to produce in the small, densely populated na– tion. These social movements contend that it’s Pacific Rim that should be sued. Says Rodolfo Calles of the anti-mining activist group Mesa Frente a la Minería Metálica: Pacific Rim and other “extractive compa– nies in question have violated national laws, caused environmental damage, provoked economic losses, generated conflicts among communities, corrupted government officials, and offended religious leaders.”
Thus far, El Salvador’s movement against precious– metal mining in El Salvador has succeeded in com– pelling the government to fight Pacific Rim’s strong–
arming. But questions remain concerning Funes’s resolve to stand defiant in the face of international pressure. These concerns have grown in recent weeks following a spate of murder and violence directed at anti-mining activists.
This wave of intimidation began with the murder of Marcelo Rivera, a teacher, community leader, and political activist involved in the anti-mining fight. Ri– vera, who went missing on June 18, was discovered weeks later in a remote section of Cabanas depart– ment. An autopsy revealed that he had been tortured extensively before his windpipe was crushed, and his body dumped in an unused well. Activists continue to challenge Salvadorian authorities, who claim that this was an ordinary crime committed by members of a Salvadoran gang, to investigate what they say was a politically motivated assassination.
Since then, local media have been targets of sab– otage and threats for their coverage of the Pac Rim lawsuit. Information Radio Victoria discovered its transmitter stolen shortly after reporting on the min– ing case, and at least four journalists covering the is– sue have received death threats. Bay Area IndyMedia reports that the journalists were “threatened to be the ‘next on the list’” and would fall victim to those who “‘also spoke in San Isidro,’ making a clear reference to the link between these events and the disappearance and murder of…Marcelo Rivera.’”
Violence has also been directed at the Catholic Church, which has stood as a staunch ally of anti– mining activists throughout the dispute. A colleague of Rivera’s, Father Luis Quintanilla — himself a fre– quent target recently of threats against his life — was stopped by four hooded men on a road in Cabanas and forced from his vehicle. The priest threw himself down a gully to avoid what many believe would have been his murder. Quintanilla later released a copy of the text message he received shortly before the inci– dent. It reads, “Extermination…you motherfuckers better stop stirring people up if you don’t want to end up like Marcelo. We’ve got eyes on you.”
background
Pacific Rim began exploring the country’s potential for gold exploitation nearly seven years ago, chart– ing a vein system that covers considerable portions of El Salvador’s northern reaches. It commenced op–
erations at what it claims was the invitation of the government’s Ministries of the Economy and the Environment, which issued exploration permits in 2002 under the neoliberal administration of Fran– cisco Flores. Since then, the corporation has identi– fied some twenty-five sites for gold extraction across seven national departments, and invested upwards of $80 million.
While global corporations haven’t historically seen El Salvador as promising territory for mining, Pacific Rim significantly extended its base of operations as gold prices exploded on the international market. With the value of gold nearly tripling since 2001, the company assured shareholders that it was discovering “bonanza gold grades” and making “exciting gold dis– coveries” that would expand opportunities for future investment and high returns.
Meanwhile, Salvadorian environmentalists, civil society organizations, and others in the country grew increasingly alarmed about the potentially adverse ef– fects of gold mining. Critics point to the threat of wa– ter and soil contamination from chemical residue in the wake of mining operations (miners use cyanide– laced water to extract gold from subterranean rock, which, experts contend, makes its way back to local reserves tapped for drinking). That all of Pacific Rim’s sites are located along the country’s longest river, the Rio Lempa, has environmentalists especially wor– ried. The river’s basin extends nearly halfway across the country, supplying much of the nation’s drinking water. Moreover, the Lempa runs through Guate– mala and Honduras as well, increasing the likelihood that contaminated water could spread throughout the region.
Pacific Rim denies that these concerns are real. The corporation claims that it would detoxify any water used for mining, leaving local water sources cleaner than they were previously. “You could basically stick a cup in the water and drink it,” Pacific Rim’s Barbara Henderson recently boasted to the Miami Herald. “We’ve met all conditions under the law. So there’s no basis for the government of El Salvador to fail to make a decision [about issuing mining permits].”
Not so, say experts. Robert Moran, an independent, nonpartisan hydrogeologist, undertook a technical review of Pacific Rim’s environmental assessment in 2005, concluding that “it would not be acceptable
to regulatory agencies in most developed countries.” In his final report, Moran notes that “The public EIA review process is clearly lacking in openness and transparency… only one printed copy of the EIA is available…within all of El Salvador. The public must review and submit written comments on this 1,400 page document within a period of ten working days. No photocopies or photos of any part of this docu– ment may be made.” More– over, Moran points out that the EIA completely ignores “many of the environmen– tal impacts encountered at similar gold mining sites,” and voiced concerns about the fact that “the signifi– cant uncertainty of [its] seismic risk calculations” and a number of other is– sues were presented in the document in English only.
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Local activists Fight back
These concerns were met with popular unrest. La Mesa Nacional Frente a la Minería Metálica in El Salvador (the National Working Group against Mining in El Salva– dor), an umbrella organization for coordinating nationwide action, has led the charge. Beginning with local organizing and small-scale protests, La Mesa and its partner organiza– tions have managed to make min– ing a central issue in Salvadoran politics. Activists scored an early victory when Pacific Rim agreed to freeze its operations at the compa– ny’s Santa Rita mining site in 2006, while negotiating a resolution to its clash with local anti-mining organi– zations. Though the meeting failed to reach a mutually acceptable com– promise, local organizers success– fully used the gathering to attract the attention of the media and the government, and garner broad national and interna– tional support.
Momentum behind the movement increased fur– ther when the Conference of Bishops of the Roman Catholic Church issued a statement of opposition to mining operations in El Salvador. In addition to enumerating the adverse consequences of mining to El Salvador’s people and environment, the bishops castigated Pacific Rim’s economic justification for gold mining operations. “No material advantage,” the bishops warned, “can be compared with the value of human life.”
The combined effect of local resistance and reli– gious backing had a decisive impact on government decision-making. With public opinion polls showing a clear majority in opposition to gold mining, and despite its initial enthusiasm for Pacific Rim’s min– ing proposals, officials from the ruling conservative ARENA party refused to issue the company permits to begin extracting gold from underground deposits. In essence, the government ceased to acknowledge Pacific Rim’s existence. Repeated complaints and ap– plications for permits were filed by the company with government ministries, and promptly ignored.
Since then, La Mesa has continued to push the en– velope. Not trusting that government silence on the permits issue equaled support for their cause, the organization presented a bill for congressional con– sideration in 2006 that would ban all precious met– al mining in El Salvador. While the bill was almost immediately withdrawn from deliberation, it wasn’t forgotten. Shortly after Funes took power, the Frente Fabarundo Martí para la Liberación Nacional (a left– wing opposition party, better known as the FMLN) resurrected the proposed legislation and presented it to El Salvador’s National Assembly for a vote. Accord– ing to the Latin American Herald Tribune, the pro– posed law would grant Pacific Rim and other foreign companies six months to discontinue operations be– fore being ordered to leave the country.
Legal action
With its prospects for obtaining permits grinding to a standstill within the government bureaucracy, and opposition forces gaining the advantage locally, Pacific Rim filed a notice of intent in December 2008 to bring El Salvador before an international arbitra– tion tribunal to resolve the dispute. Specifically, the company claimed that El Salvador violated the spirit of nondiscrimination enshrined in Chapter 10 of the DR– CAFTA agreement, by allowing domestic com– panies to pollute while denying the same privilege to Pacific Rim.
The agreement, which El Salvador signed in 2006, allows multinational corporations to sue governments covered by it for cash compensation when their po– tential for profit has been undermined by measures that are tantamount to expropriation. But because Canada isn’t a signatory to DR-CAFTA, Pacific Rim
isn’t technically entitled to Chapter 10 protections as it claims. Nevertheless, the corporation routed the lawsuit through the backdoor of its US-based subsid– iary Pac Rim Cayman LLC, and relied on the services of an American lobbying firm to ensure support from Capitol Hill.
Under DR-CAFTA’s Chapter 10 proceedings, par– ties to a dispute are mandated to respect a 90-day consultation period before filing their claims in court. Pacific Rim’s December filing ensured that their threatened lawsuit would coincide with El Salvador’s national election three months later. According to Burke Stansbury, an activist with the Committee in Solidarity with the People of El Salvador (CISPES), the claim was timed to affect the electoral outcome. They “either us[ed] the threat of a lawsuit as leverage or [as] a strategy to help ARENA win the election,” Stansbury told the Pacific Free Press in February.
If this was true, Pacific Rim miscalculated. Out– going president Antonio Saca remained firm in his rejection of the corporation’s demands, rendering the case a non-issue during the election. Yet Saca’s refusal to give in to corporate pressure — whether politically motivated or based on genuine concern for his country — had the effect of kicking the Pa– cific Rim can down the road for the incoming Funes administration.
On April 30, Pacific Rim filed for arbitration with the ICSID, demanding a $100 million payout for damages. “The company’s claims under CAFTA,” the company announced in a press release, “are based on the government’s breaches of international and Salvadoran law arising out of the government’s im– proper failure to finalize the permitting process as it is required to do and to respect the company’s…legal rights to develop mining activities in El Salvador.”
La Mesa’s Rodolfo Calles sees things differently. “Operating permits are not automatic; that is, the current mining law does not oblige the government to provide [permits] after having allowed exploration. Pacific Rim submitted an Environmental Impact As– sessment that did not meet environmental require– ments, and was not able to demonstrate that its min– ing projects would not pollute the environment…In our view, it is Pacific Rim that should be sued, not the Salvadoran state; It is the company that should com– pensate the country and not vice versa.”
Early indications, however, suggest that Funes will pursue a compromise solution instead of risk– ing a costly settlement. “We’re not in a position to be losing litigation. That money should be allocated to social programs,” El Salvador’s Secretary of Technol– ogy recently noted. Indeed, if the arbitration tribunal rules in Pacific Rim’s favor, El Salvador would be pro– foundly crippled by the $100 million payout. Perhaps more troubling still, the verdict would send a signal to other multinationals in Central America that the law sides with corporate interests over the protection of local populations.
Nevertheless, a negotiated settle– ment offers equally disturbing pos– sibilities. The most likely would be an amendment to existing environ– mental and mining laws, allowing foreign corporations easier access to El Salvador’s natural resource deposits. In all likelihood, the Mesa Nacional/FMLN-sponsored anti-mining legislation would be shelved indefinitely, and oppor– tunities for peaceful resolution of local concerns increasingly fore– closed.
On top of Pacific Rim’s case, on March 16, another international mining firm added to the pressure by threatening an additional DR– CAFTA lawsuit. A joint venture of American companies, Commerce Group Corp. and San Sebastian Gold Mines, Inc. (Commerce/San– seb), filed a notice of intent to claim compensation for additional $100
million for the government’s alleged failure to renew a permit to mine gold and silver at the San Sebastian Goldmine near Santa Rosa de Lima, in the depart– ment of La Unión in El Salvador.
The prospect of mounting lawsuits has led to calls from activists demanding that El Salvador revisit the terms of its international trade agreements. “The de– mand of Pacific Rim against El Salvador recalls the need to review international treaties signed by previ– ous governments, especially CAFTA, and reverse — or at least modify — those aspects that are most harmful and violate our sovereignty.”
Hopeful signs from Washington?
The mining companies’ lawsuits — along with the vi– olent repression of recent protests in Peru — represent the latest example of failure by US trade agreements to bring prosperity and progress to the region. US policymakers, including Barack Obama, seem to ac– knowledge as much: bilateral trade agreements with Panama and Colombia continue to stall, and pressure to amend the North America Free Trade Agreement (NAFTA) continues to build.
Yet hopes that the social movement against min– ing in El Salvador would find an ally in Obama have been unrealized. Obama, who voted against the pas– sage of DR-CAFTA as a senator, spoke out passion– ately on the campaign trail against free trade agree– ments (FTAs) that privileged economic gain over the welfare of local populations under threat. And “with regards to provisions in several FTAs that give foreign investors the right to sue governments directly in for– eign tribunals,” Obama promised, “I will ensure that this right is strictly limited and will fully exempt any law or regulation written to protect public safety or promote the public interest.” As president, however, Obama has so far failed to meaningfully act on an issue he himself acknowledges desperately demands attention and change.
The president reportedly will outline a new vision of equitable trade in a major speech at the Group of 20 meeting in Pittsburgh at the end of this month. There, Obama will hopefully forge plans for a new approach to trade that would meet his goal of preventing foreign corporations from gaining “an economic advantage by destroying the environment” and amend NAFTA and possibly other FTAs to “make clear that fair laws and regulations written to protect citizens…cannot be overridden at the request of foreign investors.”
In some respects, unfortunately, it’s already too late for Salvadorans affected by Pacific Rim’s activi– ties. The failure of Funes and other likeminded “part– ners” throughout the region, like Obama, to stand up for these communities under threat, sets a regret– table precedent — that concern for corporate profit overrides that for human beings and their environ– ment — a precedent that would invest even Obama’s most eloquent rhetoric with the hollow timbre of false promises.
