A BRIEF CONTEXTUAL ANALYSIS OF THE LEGAL SUIT OF PACIFIC RIM MINING COMPANY AGAINST THE GOVERNMENT OF EL SALVADOR

Andrés McKinley, Oxfam America

06/09

Metallic mining in Central America:

In the past several years in Central America, mineral extraction, especially of gold, silver and nickel, has increased dramatically in the face of rising commodity prices on the world market and neoliberal reforms designed to attract foreign investment. Mining has existed in the region since pre-hispanic times, but more than 90% of existing concessions have been granted since the year 2000.  Reliable data on mining in the region is difficult to access, but it is generally agreed that more than 30% of the region´s territory is now under concession to transnational corporations, in the majority Canadian, for the exploration and/or exportation of minerals.  In spite of these numbers, the mining industry contributes little to national economies, paying royalties of between 1% and 2%, contributing less than 1% of GNP and generating less than .2% of employment. 

Important deposits of gold and other minerals have been discovered throughout Central America in concentrations that have become economically viable to mine (between 1 and 10 grams per ton), given the dramatic rise in the price of these commodities.  The relatively low concentration of minerals, however, requires the application of technologies that are highly damaging to the environment and generate high social and cultural costs.  Processing of a single ounce of gold (the size of a finger ring) can require the removal of up to twenty tons of rock.  In the process, forestlands, mountains (sacred to Mayan peoples) and landscapes are destroyed.

 The mining of metals requires exorbitant quantities of water, a commodity that mining companies rarely pay for.  It is calculated that the Marlin Mine in the department of San Marcos in Guatemala uses 250 thousand liters of water per hour and indigenous communities around the mine have reported that in the two years since this mine began operating, over 40 community wells have dried up.  The Fenix Project, a nickel mine on the shores of Lake Izabal in Guatemala, is scheduled to utilize 16 million liters of water per day,  the equivalent of the entire volume of this lake (the largest in Guatemala) every 19 days.  In the Siria Valley of Honduras, a cattle-raising area and producer of basic grains, 8 years of gold mining have dried up 19 of the valley´s original 23 rivers.

 Apart from the exorbitant use of water, independent studies have demonstrated that metallic mining  in Central America has contaminated surface and ground waters with cyanide and heavy metals in Guatemala (Tzala River in San Marcos), El Salvador (San Sebastian River in La Union), Honduras (Valle de Siria, Valle de Angeles, Valle de San Andrés) and Nicaragua (Bambara River on the Atlantic Coast).

Metallic mining in Central America is destroying traditional livelihoods based on small scale agriculture, fishing and cattle- raising.  It also threatens important sectors of national economies, such as tourism and agro-exportation. In the face of this reality, key sectors of society, including environmental groups, NGOs, affected communities, the Catholic Church and important members of the business community, are demanding legislative reform in an effort to prohibit open pit mining, the use of cyanide and other toxic chemicals and to assure the rights of affected communities to free, prior, informed consent (FPIC).  In some countries, like El Salvador and Costa Rica, bills have been introduced prohibiting all forms of metallic mining.

A variety of civil society actors in all of the countries of the region are building broad based alliances to advance these policy agendas in the pursuit of sustainable development models for the region and the respect of basic rights.                                                                                                                                                                                                                                                                                                                                                                                                                                              

The case of El Salvador:

The rapid and aggressive incursion of foreign mining companies in El Salvador is particularly worrisome.  This small country, with a geographical area of only 21,000 square kilometers and the highest population density in the western hemisphere (approximately 300 people per km2) has no sparsely populated or remote areas in the country appropriate for mining.   The country also suffers from the worst levels of environmental degradation in the Americas, after Haiti.  Over 95% of original forests have been destroyed by over population, logging and intensive agriculture.  Over 90% of surface water is already contaminated with industrial waste and heavy metals and, according to a recent report by the Salvadoran Foundation for Development (FUSADES), the water table has diminished by 20% in the past 23 years and continues to drop at an alarming rate.   A World Bank study released in 2007 concluded that environmental degradation and pollution were costing the country approximately $500 million per year.

Pacific Rim:

 According to its web site: Pacific Rim Mining Corp. is a gold exploration company in the process of advancing its high grade El Dorado gold project in El Salvador. The Company focuses its exploration efforts on epithermal gold deposits in the Americas because of their typically high gold and silver grades, low environmental risk and propensity to occur in veins that can be mined underground. Environmental stewardship and social responsibility are core values of the Company…

The El Dorado gold project in El Salvador is Pacific Rim's flagship exploration asset and has received the bulk of the Company's exploration efforts over the past 7 years. El Dorado is an advanced-stage gold project with high-grade gold and silver resources. Pacific Rim's other exploration projects include the Santa Rita and Zamora-Cerro Colorado gold projects in El Salvador and a number of very early stage grassroots properties elsewhere in Central America. Pacific Rim maintains a generative program focusing on gold projects in the Americas that have the potential to enhance the Company's growth profile…  

Pacific Rim Mining Corp has offices in Vancouver, Canada, Reno, Nevada and Sensuntepeque, El Salvador. The Company's shares trade on both the Toronto (TSX) and NYSE Amex exchanges under the symbol PMU.” ( see web site: www Pacific Rim.com).

 Pacific Rim´s flagship project, El Dorado, in the municipality of San Isidro, department of Cabañas, has been the site of gold mining since colonial times.  In more recent history, it was owned and mined by the New York based El Salvador Mining Company, subsidiary of Rosario Mining (1948-1953).  Between 1993 and 2002, the project was under exploration by the Mirage mining company.  Dayton Mining Corporation acquired the project in 2002, investing $13 million in its development.  During that same year, Pacific Rim and Dayton Mining fused and ownership of El Dorado passed to Pacific Rim.

In the year 2004, Pacific Rim presented its Environmental Impact Assessment (EIA) to the Ministry of Natural Resources of El Salvador and in December of that year the company formally applied for a license to exploit gold and silver.  In 2005, the Ministry of Natural Resources presented a series of observations on the EIS to Pacific Rim, and Pacific Rim responded in an effort to resolve the concerns put forth by the ministry.  The company had suffered a series of multi-million dollar losses for several years running (see Pacific Rim web site) and the El Dorado project became essential to its survival.  In the face of rising opposition from civil society organizations and growing concerns on the part of the Salvadoran government, however, the latter decided to postpone the approval of all further mining concessions in the country until a Strategic Environmental Study could be carried out at the national level.  In response to the continued delays in the approval of its application for a license to exploit, Pacific Rim announced in 2008 its intent to sue the Salvadoran government for “indirect expropriation” in the context of Chapter 10 of CAFTA.  On April 30^th of 2009, Pacific Rim took its case to the International Center for the Settlement of Investment disputes (ICSID) of the World Bank.

 The Environmental Impact Study of Pacific Rim:

 The Environmental Impact Assessment on the El Dorado mining project, presented by Pacific Rim to the government of El Salvador in 2004, is central to the government´s decision to postpone and later deny a permit to exploit gold and silver in San Isidro.  It was a document of over a thousand pages.  Some portions were in English.  The affected populations of Cabañas were not allowed to photocopy or remove the document from the Ministry of Natural Resources and they had only 10 days to present their objections to the project. 

 In a “Technical Revision” of the EIA prepared in October of 2005 by hidrogeologist and geochemist, Robert E. Moran, Ph.D, an expert in mining with over 30 years of experience with US government regulatory bodies, with mining companies and as an independent consultant on mining and the environment, the following weaknesses were documented:

• The Environmental Impact Assessment of the El Dorado project was found lacking in adequate studies to determine base line data related to water quantity and quality.  It was found especially weak in areas related to water tables.  The study simply states that there will be no significant impact on water resources without presenting any factual basis for this claim.
• The process of consultation with affected communities was clearly lacking in terms of levels of participation and transparency. 
• The basic data of the EIA was poorly organized and poorly summarized for general consumption.
• Independent sources of information and analysis were lacking.
• The EIA ignored a series of threats to the environment common to many other similar mining projects around the world.
• The real cost of water as a commodity was ignored.

In conclusion, Doctor Moran stated that the EIA of Pacific Rim would not be acceptable for regulatory bodies in the majority of developed nations, including the US and Canada (see Revisión Téncia del Proyecto Minero El Dorado Estudio de Impacto Ambiental (EIA), El Salvador, 19 de Octubre, 2005).

Mining and the threat of violence in El Salvador:

Seventeen years after the end of the bloody civil war in El Salvador, the country remains highly polarized.  Communities struggling with this reality and attempting to reconstruct their lives in harmony find themselves again threatened by confrontation and violence from the moment that a mining project inserts itself into community life.  Individual family members are pitted against each other, as they often were during the war. Entire communities enter into conflict with neighboring communities and the citizenry in general finds itself in growing confrontation with local and national authorities.

An opinion poll on metallic mining in El Salvador was conducted in 24 municipalities affected by mining in the northern portion of the country in 2007.  The study was carried out by the highly accredited Instituto Universitario de Opnión Pública  (IUDOP) of the Central American University.  Among the key findings of the study:

• 80% of those polled considered that mining in El Salvador would have a grave impact on water;
• 85% of those polled felt that mining would be harmful to the environment;
• 67% of those polled expressed the view that mining would contribute little or nothing to  development in their municipality;
• 85% of those polled expressed “no interest” in working for a mining project;
• 70% of those polled were opposed to initiating a mining project in their municipality;
• 70% of those polled felt that mining would have a detrimental impact on the lives of their children and grandchildren;
• 62.5% of those polled expressed the view that El Salvador is not an appropriate country for mining.  (See:” Encusta Sobre Conocimientos y Percepciones Hacia la Minería en Zonas Afectadas  por la Incursión Minera en El Salvador”, IUDOP, Octubre, 2007.

It is important to note that this poll was conducted in the midst of a highly aggressive propaganda campaign by Pacific Rim which filled the airwaves of El Salvador for more than six months in an attempt to win hearts and minds with the promise of “Green Mining”.

Resistance to metallic mining in El Salvador also came from other key sectors, including: 

• the Episcopal Conference of El Salvador (see: “CUIDEMOS LA CASA DE TODOS Pronunciamiento de la Conferencia Episcopal de El Salvador sobre la explotación de minas de oro y plata”)
• the Salvadoran Association of Religious;
• the presidential National Commission on Development;
• three national universities;
• the ex-minister of Natural Resources;
• the ex-Minister of Education;
• over 80 communities  organized in the National Network of Communities Affected by Mining;
• civil society organizations of the National Roundtable on Metallic Mining in El Salvador;
• the president of the Association of Industry;
• the Confederation of Religions for Peace;
• the Human Rights Ombudsman;
• the outgoing president of the republic;
• the newly-elected president of the republic.

With the current correlation, any effort to award money or mining rights to a foreign corporation in the context of a highly controversial free trade agreement will inevitably generate dangerous levels of confrontation and violence in El Salvador and will violate the fundamental right of the Salvadoran people to be adequately informed about the impacts of mining in their country and to say “yes” or “no” to this industry.