Reflections On Ecuador's Mining Mandate

Written by Carlos Zorrilla
From UpsideDownWorld, Monday, 05 May 2008

It's easy to see why Canada's mining companies have spent so much money on publicity to try to lessen the public relations nightmare caused by the Constitutional Assembly's 95-1 passing of Ecuador's Mining Mandate: The mandate annulled 88 percent of the country's mining concessions- including all of the larger concessions held by the Canadian companies. And it comes as no surprise that Canada's Ambassador to Ecuador, accompanied by a squad of Canadian mining company officials, met with Ecuador's president in a high profile meeting last week. When there's so much at stake, anything goes.

What's at Stake

When the assembly passed the Mining Mandate on April 15 , 4,474 mining concessions were abolished, while only approximately 600 concessions were spared, most being small mines and medium non-metallic projects (for cement and building materials). The anti-mining population cheered the approval of the mandate last month, though not too loudly. Many expected the mandate to completely abolish large-scale metallic mining. However, it was seen as a very important victory by most of the anti-mining factions. If the mandate is implemented as it was meant to be by the Assembly, not a single large-scale metallic mine project should be left standing

The main parameters for the abolition of concession rights include:
* Concessions owners may only own three concessions (totalling 15,000 hectares).
* It forbids mining in protected areas and their buffer zones, and projects that threaten water resources. What metallic mining project doesn't?
* It abolishes concessions rights if the concessions were given to government functionaries, or their relatives. There are rumblings that this could hit the Ecuacorrientes project, among others.
* It puts a freeze on all mining activities: the only exceptions are the 600 small projects not affected by the mandate. It prohibits the approval of new mining concessions.
* Any concessions owner not up to date on their payment of patents to operate lose their concessions.
* The mandate also calls for the creation of a state-owned mining company--which has a lot of mining company owners very worried.

The mandate does allows mining to go ahead if the companies have invested in exploration and related activities, but not if it falls under the other categories. In other words, none of the large project will remain viable.

These measures are effect until a new mining law is drafted, which is expected to be finished within six months. The new law must be approved by the same Constitutional Assembly that approved the current mandate. If the law isn't drafted in six months time, the companies must negotiate with the government for the re-issuance of new concessions. The new law, undoubtedly will take its lead from the Mandate's directives.

The parameters, if applied objectively, will stop all of IMC, IAMGOLD, Aurelian, Dynasty's, All Metals, Corriente Resources (Ecuacorrientes project), and Lowell's - as well as most other metallic mining projects in the country. Ascendant Copper lost their JUNIN concessions in January of this year, but this new legal measure means the loss is permanent (the project poses a great threat to water resources). None of these companies were exploiting minerals. And most, if not all, do not even have their environmental impact studies approved for exploitation or exploration.

What Happened in Montecristi?

The Mining Mandate's overwhelming approval took pro-mining circles here by surprise. This was in part because many thought Assembly members would go a bit easier on the mandate, given President Correa's seeming support for mining. But there is a very strong anti large-scale mining faction inside the assembly, led by the very popular ex-Minister of Energy and Mines, Economist Alberto Acosta, and Monica Chuji, a Sarayaku indigenous Ecuadorian and president of the Assembly's natural resource working group. Both belong to Correa's Alianza Pais political party. Acosta has had no problem stating his anti-large scale and open pit metallic mining stance. Acosta is an economist and knows very well what mining means to developing countries, while Chuji is part of a indigenous community who has successfully resisted oil exploitation on their territories for years.

This issue, more than any other to date, has caused a deep divide within the Alianza Pais, who won 60 percent of the Assembly's seats in last year's election.

Counter Attack

Mining companies are applying tremendous pressure on the government, not to have the mandate vetoed (which is impossible), but to soften it's impact as much as possible. They've also enlisted Canada's Ambassador, Ecuador's Chamber of Mining and the unwavering support of most media outlets. The companies and their public relations firms are using scare tactics, suggesting the mandate and new mining law will cause thousands lost jobs, the country will go bankrupt, and investors will flee. Furthermore they've issued threats of international lawsuits unless their demands are met. And, a lot of money is being spent on trying to convince Ecuadorians that mining will really lift them out of poverty and will solve all of the country's problems- and that it won't contaminate!!

President Correa has recently shown signs of weakness by making pro-mining statements and by rabidly attacking mining opponents every chance he gets- though he has been vague enough to possibly let it be interpreted that he is not against State-owned mining. The President also means to renegotiate mining deals if private mining is permitted, in order for Ecuador to actually make money from mining (a radical idea indeed). In spite of all the evidence proving that mining actually impoverishes developing countries like Ecuador, Correa believes mining rents could replace those now generated by petroleum, which provides a sizable chunk of the nation's budget. The measures being discussed to supposedly make this happen include high royalties (perhaps as high as 20 percent), and a 70-80 percent Windfall Profit Tax (which has been discussed by Ministry of Energy and Mines official this year). No one in government is seriously looking at the social, cultural, environmental and economic impacts of large-scale mining development.

The upshot of all this is that there are many mining company owners and investors that are worried sick; and not just about losing a few hundred million dollars here in Ecuador, but more so about the potential of Ecuador's Mining Mandate influencing to other developing countries. They may not be too worried about whole-scale nationalization of mines (though I would be if I was them), but talk of steep rises in royalties and windfall profit taxes must keep them up at night. Either way you cut it, the days of free, or nearly free, access to mineral resources in developing countries may soon be over for the transnationals.

Everyone knows that natural resources of these countries have been "stolen" by transnationals for centuries, in the process ruining economies and landscapes, and leaving the people impoverished and facing long-lasting social and environmental havoc. All Ecuadorians have to do is look over the Andes at the horror left behind by 30 years of petroleum exploitation in the Amazon to know this isn't just talk ($16 billion is the latest estimate set by a court-appointed assessor in the case against Chevron-Texaco for damages to the people and ecosystems in the Amazon as a result of environmental impacts left behind by the company).

So, the rush is on by the transnationals and their in-house plenipotentiary representatives to kill this initiative before it spreads like wildfire. And there's a lot of money apparently set aside for this. A mayor from an anti-mining local government has publicly said there are three hundred million dollars earmarked by mining companies to win the hearts and votes of Assembly members.

On the other hand, the resistance to large-scale metallic mining has never been stronger in Ecuador. Unlike in the past, the resistance now includes all of the powerful indigenous organizations, who this year joined with the human-rights, local community and environmental groups. Given that the vote was so overwhelmingly pro-communities and anti- mining last month, there's every chance that no matter how much the companies spend, the Assemblistas are not going to sell their vote to betray the prospect of an Ecuador free of large-scale metallic mining, and an end to all natural resource pillaging.

Suturing Latin America's Open Veins

What really is at stake is an opportunity to stop the hemorrhaging of the region´s natural resources and the opportunity for Ecuador to start down a path of community-based, democratic and sustainable development which excludes the dependence on natural resource extractive industries (much to the chagrin of transnation capital and international financial institutions such as the World Bank). If the Assemblistas belonging to the president's party stand firm and justly represent the people whom elected them, there's a good chance of establishing a precedent to suture the open veins of Latin America, which have been hemorrhaging natural resources for five centuries. If Correa gets his way, the hemorrhaging and destruction on the ground will continue unabated, with the difference being that the pillage may have a tint of nationalism and a few superficial social, environmental and economic regulations to make it seem more just and "sustainable".

The mining companies, especially Canadian ones, are using all of their political and economic muscle to make sure these regulations don't seriously affect their outrageous privileges, nor of those of their fellow transnationals working in other impoverished, but natural-resource-rich nations. In the meantime, civil society is focused on the 130-member Constitutional Assembly bunkered down in the small coastal town of Montecristi to see if their representatives can withstand the pressures of foreign capital and set a precedent for the rest of the world.

Carlos Zorrilla is executive director of Defensa y Conservación Ecológica de Intag (DECOIN).