Home Business Business Columns El Salvador mining ban may cause a rethink in PH

El Salvador mining ban may cause a rethink in PH

Ben D. Kritz

ON March 29, the Legislative Assembly of El Salvador passed what activists are hailing as a “landmark” law that essentially bans all forms metallic mining in the small Central American country.

The ban on mining has been brewing since 2007, when the Catholic Church, which wields formidable political influence in the country, took a stance against mining.

The following year, the right-wing Salvadoran government at the time canceled the exploration permit of the Canadian mining company Pacific Rim (absorbed by OceanaGold in 2013), prompting the mining firm to take the government to the International Center for Settlement of Investment Disputes (ICSID) in Singapore.

Two successive leftist governments in El Salvador maintained the exploration moratorium, and in October 2016, ICSID dealt a blow against OceanaGold (who inherited Pacific Rim’s case), ruling the company must pay the government $8 million in legal costs, which it has so far not done. On March 28, the day before the mining ban was passed—by an overwhelming majority vote of 69 to 15—ICSID hit the mining company again, ordering it to pay interest on the back payments dating back to October. Political analysts have suggested that ICSID’s rulings probably helped to encourage the government to impose the mining ban.

El Salvador is not a treasure trove in terms of potential mineral wealth, but it does have some amount of gold and silver; the northern part of the country lies within a “gold belt” that stretches from Nicaragua to Guatemala. Pacific Rim guessed there might be as much as five million ounces of gold in the tract it was granted a permit to explore in 2002; but by 2008, when the first moratorium was imposed, it had yet to find an area with a high enough concentration of gold to make building a mine worthwhile.

The main focus of the activists’ arguments against mining in El Salvador is water, which is already in short supply; El Salvador is Central America’s most densely populated country, and only has one significant river system. What is somewhat remarkable about the efforts against mining, however, is that they have not been based entirely on environmental or social concerns, but have advanced several potent economic arguments.

The first was that due to the high volatility of metals prices, there was a strong possibility that gold extraction, at the concentrations (measured in grams per ton of ore) that exist in El Salvador, might cost more than the metal was actually worth; throughout Central America, mines have historically gone through repeated closures as metals prices have declined.

The second was that the revenue potential of mining has been consistently overstated; according to a study by Oxfam, the value of all the exportable minerals in El Salvador (gold and silver, plus minor amounts of nickel, copper, and iron) would still be just one-twentieth of what the country collects annually in overseas workers’ remittances.

The third was that the cost-conscious nature of the mining business, along with the comparatively low value of the potential resources themselves, would probably not result in local or national economic gain. While there have been economic success stories—Chile is one example—more often than not, mining communities are noteworthy for their poverty, even in developed countries—some of the poorest areas of the US are mining regions, including Appalachia (coal), the Ozarks (lead), the Four Corners region (coal), the Silver Belt in Idaho, northern Michigan and Minnesota (iron), and the Black Hills (gold). The Oxfam study noted that mining does not necessarily always result in local poverty, but far more often than advocates are willing to acknowledge, it does not necessarily result in local prosperity, either.

A big part of the problem is that because mining companies need to keep costs as low as possible to contend with volatile prices, they build mines that have short working lives, require as little infrastructure as possible, and rely heavily on automation. Oxfam and economists in El Salvador determined that an open pit mine by Pacific Rim would probably create about 800 new jobs—almost none of which would be available to locals because of the technical skills required, and would in any case only last for six to 10 years.

Mining has obviously become a very contentious issue in the Philippines of late, and perhaps El Salvador’s action can provide some guidance for this country. Obviously, the Philippines has different circumstances—it is much more mineral-rich than El Salvador, for one thing—but the same questions about the viability of the mineral resources, the degree to which mining operations can be enmeshed in the national and local economies, and the life cycle of mining activities can all be critically examined, and should be, as the results of those assessments will be far more objective than purely social or environmental concerns.

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Today’s Front Page December 06, 2019

Today’s Front Page December 06, 2019