Mining and development – how much will it cost us to clothe the naked emperor?

Since the mid-2000s the global mining industry, led by the International Council on Mining and Metals (ICMM) in London, has been engaged in a re-branding exercise: marketing itself to the world as a vehicle for development, against overwhelming evidence to the contrary.

The current Canadian government has been more than accommodating, readily adopting and promoting this new label for the industry at home and abroad. And the government has gone well beyond rhetoric, placing official development assistance at the industry’s disposal as a subsidy for corporate social responsibility (CSR) projects at mine sites.

This commitment of Canadian tax dollars to subsidize corporate social responsibility projects – which mining companies used to pay for themselves – is a first in Canada. Furthermore, the government is actively promoting partnerships between mining companies and Canadian development organizations, such as World Vision, Plan Canada, and WUSC. These Canadian development organizations have proven to be eager to accept both the agenda and funding of the industry and the government by partnering in mining-related pilot projects in, respectively, Peru, Burkina Faso, and Ghana. Canadian taxpayers picked up the lion’s share of the costs, $6.7 million of the total $9.5 million budget for these projects.

Funding these CSR projects in 2011 was just the beginning; the Canadian government has also committed $20 million in development aid to something called the Andean Regional Initiative for Promoting Effective Corporate Social Responsibility (Andean Initiative) “through partnership arrangements between extractive sector companies and other stakeholders aimed at socioeconomic development and support to governance.” For some of the Andean projects in Peru, Colombia and Bolivia, NGOs can only apply if they partner with a mining company. And another $25 million from the aid pool has been dedicated to the establishment of the Canadian International Institute for Extractive Industries and Development (CIIEID) housed at the University of British Columbia in partnership with Simon Fraser University and École Polytechnique de Montreal.

These expenditures of official development assistance raise a critical question: if mining truly is a natural engine for development, then why do Canadian tax payers have to foot the bill? It is time for a bit of a history lesson and some critical independent perspective.

In the 1990s, the global mining industry took a reputational ‘hit’ following multiple catastrophic environmental disasters at mine sites (Omai in Guyana, Los Frailes in Spain, and Marinduque in the Philippines, among others).

In response, the global industry launched a branding campaign labeling mining as “sustainable” with a focus on environmental sustainability. The industry set itself a goal of getting language to that effect into the final text of the upcoming Earth Summit in Johannesburg. In an unprecedented collaborative effort, CEOs from nine major companies launched a two year campaign in 2000 known as Mines, Minerals and Sustainable Development.

The key messages spread quickly. At the annual meeting of the Prospectors and Developers Association of Canada in 2000, an industry presenter showcased environmental management at his company to assure minimal impacts from massive waste rock and tailings impoundments stating, “we are really a waste management industry.” Although the physical and chemical threats of ill-contained waste rock and tailings at mines all over the world did not diminish, the industry campaign was successful as the final text of the 2002 Earth Summit maintains that mining is sustainable.

In the 2000s social issues came to the fore. There was growing recognition of human rights abuses related to, among others, forced relocations of thousands of people to make way for mines; violence, rape and killings by mine security guards; loss of livelihoods through loss of access to land and contaminated water sources; high incidences of sexually transmitted diseases around mine sites; and negative economic impacts associated with mining at both the national and local levels in most developing counties. Economists like Joseph Stiglitz set out to explain why poor countries that developed their mineral resources “have done even more poorly than countries without resources.” Deepened poverty, increased inequality, increased corruption and conflict are all national level characteristics of the resource curse, even as local level social, environmental and economic impacts deepen poverty of many community members around mine sites.

Just as the global industry took on the challenge to its reputation from environmental disasters in the 1990s, by declaring itself “sustainable,” the industry has taken on the re-branding of itself as an agent of “development” with equal vigour. And once again, a lot of effort went into getting text to this effect into the final declaration of the Earth Summit in Rio de Janeiro, ten years after the last earth summit in Johannesburg. And once again, the new mantra spread quickly. At a multi-stakeholder meeting in Vancouver this year a mining executive proclaimed “we are really a development industry.”

The naked emperor...

If sheer repetition of slogans and getting key language into global texts could make what the industry is selling true, we would all be better off. But hard facts and reality on the ground the world over seriously get in the way of this nice story. It is time to recognize that the emperor has no clothes. Large-scale mining is still what it has always been, a business with huge returns for a very small elite, and for home countries such as Canada, based on extracting non-renewable and finite wealth from the earth, primarily in poor host countries.

The local environmental, social and economic impacts during and after mining are still devastating with more losers than winners, particularly in developing countries and in remote and vulnerable communities in developed countries. These impacts exacerbate poverty in ways not addressed by typical project-level CSR efforts. Nor do the newer “governance initiatives” associated with the Andean Initiative and the CIIEID address the realities of the resource curse as these efforts appear to be primarily aimed at smoothing the way for Canadian companies to gain conflict-free and cheap access to overseas ore bodies.

If the Canadian government and the extractive industries were to take seriously the task of mitigating negative impacts of the industry to overseas development they would address the massive capital flight out of poor countries associated with transfer mis-pricing arrangements of Canadian mining companies that cause the taxes they should have paid in those countries to end up in tax havens such as the Cayman Islands. And they would insist on realizable financial bonds that would cover the true costs of managing the ongoing toxic threats from mined-out projects for the true length of time these threats prevail - often “in perpetuity.” In Canada alone there are thousands of legacy sites that taxpayers now have to pay to clean up and manage: a bill that runs in the billions of dollars – and counting. This is a financial burden developing countries cannot bear.

Those who are not fooled by vigorous branding exercises, misleading texts in international documents and the strategic partnering of some Canadian development NGOs, are the growing number of communities who oppose mining the world over, often at great costs to themselves, and those who are fighting to realize protective provisions such as Free Prior and Informed Consent (“FPIC”).

Also waking up are a growing number of overseas governments that are taking a harder look at the investor-state contracts they sign, insisting on better returns from mining, withholding or withdrawing permits from environmentally dangerous projects, and even declaring moratoriums or banning certain kinds of mining altogether. Some of these governments, such as that of El Salvador and Papua New Guinea – even the United States – have found themselves sued by Canadian mining companies, others, such as Costa Rica and Romania are facing similar threats.

If the Canadian government and Canadian mining companies were serious about supporting good governance and promoting development in the countries that host Canadian mines, then it would focus on actively addressing the many ways in which mining creates development deficits.