Tapping the Veins of the World

McGill Daily
Thursday, October 4th, 2007 | Volume 97, Number 10

By Arthur Phillips and Dave Schecter

In a recent speech at McGill University, former Canadian Prime Minister Joe Clark proclaimed that the world needs more Canada. Which version of Canada was he talking about - the romantic view of Canada as a benevolent force in international affairs, or the overseas extractive industry?

Overseas mining is a huge industry, and integral to the Canadian economy. Unbeknownst to most Canadians, the extractive industry is Canada's most prominent face overseas. This intimate relation between the two has transformed the mining question into a Canadian question. Mostly justified by rosy development mantras, the actual effects of the mining industry in the global South are fickle, teetering between resource exploitation and genuine sustainable development.

In recent years, non-governmental organizations (NGOs) and community opposition to the disastrous consequences of some Canadian mines has challenged the government to consider overseas regulation. The government's response will decide which side of the two-faced beast
of development continues to be spread.

Is the mining industry entirely rotten? Or, with the right regulation, could the Canadian mining industry begin to respect human rights, the environment, and contribute to sustainable development?

Mining, mining, everywhere
Canada is undoubtedly the biggest player in the global mining industry, and mining itself is one of the largest industries within the Canadian economy. Sixty per cent of the 7,300 mineral properties worldwide are listed on the Canadian stock exchanges, totalling $167-billion in trade activity in 2005. If the mining industry were a country of its own, it would have the 37th-largest GDP worldwide.

Easy access to immense sources of capital, expertise in mining, a wide variety of investment banks, and relaxed regulation and securities law combine to make the Cold White North the perfect
economy to cultivate this massive industry. But the Canadian mining sector is no longer contained within this country's borders.

When it comes to mining, countries tend to fall into two categories: resource-rich and poor, or rich and resource-poor. Canada, resource-rich as well as a rich country, is an exception. It is this
domestic foundation for mining that became the launch-pad for its leap to the international scene.

Since 1992, Canadian mining has transitioned from a domestic industry to one based mostly overseas. The growth is mainly due to the liberalization of trade, the elimination of impediments to direct foreign investments, and greater security for mining companies. In this age of neo-liberal globalization, transnational corporations are no longer restricted by territorial boundaries, guided only by trade agreements and local laws.

In 1992, 43 per cent of all Canadian mining capital was directed overseas, while by 1995 this value increased to 68 per cent. This overseas mining has mostly expanded into Latin America. Canada's
special relationship with the region has allowed its companies to occupy up to one-third of investment in this emerging mining market.

A few rotten apples

The Canadian mining industry often portrays itself as a responsible corporate citizen. When people get wind of mining companies engaged in questionable activity overseas, the industry's typical response is to dismiss them as a "few bad apples."

But the social and environmental problems associated with Canadian mining projects are far more widespread than the extractive industry would have us believe. It is an industry-wide problem, and issues crop up just about wherever Canadian companies decide to invest or mine.

In the view of mining companies, developed countries come with developed laws - making it increasingly expensive for companies to extract resources. This is the primary reason for the move to the global South.

Much of the mining in the developing world has been in the name of development. The argument for development has been taken to its extreme with Prime Minister Stephen Harper's recent trip to Colombia. The Canadian government offered to begin free trade negotiations with Colombia, despite its horrific human rights record. As Harper put it, "We're not going to say, 'Fix all your social, political and human rights problems, and only then will we engage in trade relations with
you.'"

Hopes for the kind of mutual exchange envisioned by Harper - the developed world and its companies extract resources, and developing countries receive some prosperity in exchange - have been left unrealized. The reality is somewhat bleaker: the opening of modern mines usually translate into a few low-level jobs for local inhabitants and little sustainable economic development of the region.

The mining process is also an inherently destructive act, tearing the ground up to extract the desired resources. Mining innovations have meant more for efficiency; one such innovation is open-pit mining. Instead of the traditional method of vein mining, open-pit mines clear vast tracks of land, facilitating the extraction of lower-grade ore by mining a greater area, sometimes leaving craters the size of six football fields in its wake.

The impacts on local communities are just as acute as they are on the environment. Indigenous land claims are often ignored, communities are sometimes violently evicted from their lands, and poisoning and chronic health ailments are common legacies of mines. And all too often, mining companies become entangled with political struggles in foreign countries. In 2005, Canadian extractive company Skye Resources was granted mining exploitation licenses for a nickel
project in Guatemala. In 2007, government officers and soldiers forcibly evicted various indigenous communities in the region.

Breaking new ground?
Legislation is weak in the global South, and government enforcement is weaker still. Many of these countries have radically changed their domestic laws, opening their countries to attract mining companies. As part of North American Free Trade Agreement negotiations in the early 1990s, Mexico changed its constitution and passed the Mining Law of 1992 in order to attract companies. Mining companies have been given the keys to the world's subsoil, without any obligation to
protect the people and environments of the areas where mining occurs.

Many mining companies operating overseas operate within the law, but many have also been accused of violating laws in countries in which they doubt they'll be prosecuted. Increasingly, companies have faced harsh criticism from civil society groups and members of local communities.

Canadian mining companies have not sat on their hands as reports of mining disasters have accumulated - starting off where governments have stopped, they have begun to develop corporate social responsibility (CSR) policies and practices.

These voluntary-measures projects have usually taken charitable form: providing roads and electricity, schools, and hospitals. Such projects don't always satisfy locals or civil society, many of whom feel charity doesn't counterbalance the damages. But in some cases, projects on the ground have improved from one-time initiatives to more long-term efforts that may last beyond the life of the mine.

McGill Management Professor Louis Chauvin is concerned that such measures may not be for the sustained benefit of the community, but the company's public image.

"We recognize that in a lot of instances most of CSR is PR. Companies will spend a bit of money to make some change and then spend a lot of money to promote it," he says.

"[Companies] have a way of making sure that it's the good stuff that gets printed out there while the nasty stuff they do gets buried."

Public outrage stemming from mining abuses spilled over into the later nineties in the form of lawsuits, public testimonies, and pressure from international NGOs.

In 2002 the industry-initiated report Breaking New Grounds was published, pointing toward the areas where companies needed to reform their actions. In the same year, a group of large mining companies formed the International Council on Mining and Metals as a way of certifying those companies' voluntarily responsible operating standards.

Karyn Keenan of the NGO Halifax Initiative, which monitors Canada's mining industry, doesn't find these CSR developments entirely encouraging. These initiatives may do more harm than good, she says, hedging against more serious regulation.

"The industry needed to come together and try to come up with some kind of constructive solution to show that they could be more socially responsible . . . in part to preclude being regulated," she
says.

In 2005, in the wake of a Canadian mining scandal in the Philippines, the federal government's Standing Committee on Foreign Affairs and International Trade issued a report on the overseas industry, raising concerns about the lack of legally binding government regulation.

It called on the government to start policy reform and recommended a consultation process in Canada. This consultation was realized in 2006 when the government initiated a national roundtable and invited representatives from all sides of the issue to participate.

Despite this significant step, the sole recommendation was the continued development of voluntary standards. The only government mechanism that industry representatives were willing to agree to was the appointment of an ombudsperson, who would suggest withholding government assistance from the most severely abusive cases.

Keenan, who was personally involved in the roundtables and was impressed by the inclusive consultation process, insists that government regulation is necessary to ensure that all Canadian mining companies are acting responsibly.

"There's a complete policy vacuum in Canada in terms of what the expectation is of corporations when they operate overseas," Keenan says.

The Conservative government has yet to respond to the roundtable report. If or when the government implements the report's recommendations, Canada may be one step closer to the creation of laws ensuring compliance with clearly-defined CSR, human rights, and
environmental standards. Compliance with such regulations should be a precondition for the provision of financial and political assistance to Canadian mining companies from the Canadian government.

The Canadian government's failure to address unregulated mining in the developing world will mean that environmental and human rights abuses continue. The actions of Canadian mining companies overseas have become inextricably linked with the reputation of Canada itself; mandatory legislation may be the only way to redeem this country in the eyes of the world.

- with files from the McGill Research Group Investigating Canadian Mining in Latin America
Arthur Phillips and Dave Schecter are McGill undergraduates and members of the McGill Research Group Investigating Canadian Mining in Latin America.