MAC: Mines and Communities

Canadian companies are ignoring human rights issues overseas

Published by MAC on 2011-03-28
Source: Globe and Mail

"Canadian investors have always cared more about political stability than political freedom".

That's according to Geoffrey York, a correspondent reporting last week for Canada's largest daily, the Toronto Globe and Mail.

Judging by statements made at the recent "mining indaba" in South Africa, it seems a number of Canada's mining companies also think the same.

Take just one example: Cliff Davis of Nevsun Resources, a gold miner operating under the despotic regime in Ethiopia, who says:

"We shouldn't be imposing some form of political environment that we're familiar with. It's self-determination".

And, if you're wondering what "poltical environment" and what kind of "self-determination" Mr Davis is referring to, Geoffrey York explains:

"[Davis] prefers to talk about Eritrea's lack of corruption, its political stability and the integrity of its leaders. 'It's not a wealthy elite class - they're very highly principled,' he says.

"And he talks about the jobs and other benefits that the gold mine provides to the community. 'When you have consensus and grassroots involvement by the communities, it can be just as important as a voting process'."

Except of course that, under the present government of Ethiopia, such "involvement " is illusory.

(Just last year, Human Rights Watch  accused local Ethiopian officials of "routinely" denying government support to the opposition and civil society activists, as well as rural residents in desperate need of food aid).

When Human Rights are only on paper

In another recent article from the Globe and Mail, correspondent Marcus Gee uncritically reports recent remarks by David Deisley of Goldcorp, seeking to play up the company's "Human Rights Assessment" of its operations in Guatemala.

According to MAC Editor, Jen Moore (a staff person for MiningWatch Canada):

"It's precisely the fact that this initiative did not have the support of local communities that it was a Human Rights Assessment in the end, not a Human Rights Impact Assessment -  as the very authors of the report acknowledged.

"Goldcorp has been selectively implementing the report's recommendations so far, having shown no interest, in particular, to responding to the recommendation to 'Halt all land acquisition, exploration activities, mine expansion projects, or conversion of exploration to exploitation licenses, pending effective State involvement in consultation with local communities, and agreements put in place with communities to structure future land acquisitions'.

Jen Moore concludes: "It is additionally problematic that Gee suggests this approach has been working in Guatemala when we know the conflict continues to be rife, communities divided, and lots of issues remain very much unresolved".

See also: Violence Near Goldcorp Mine Underscores Need for Suspension

Canadian companies urged to look at the cost of doing business with despots

By Geoffrey York

Globe and Mail

21 March 2011

JOHANNESBURG - While the streets of North Africa were filled with revolution, dozens of Canadian mining companies were enjoying a placid convention at the southern tip of Africa, in the sleepy city of Cape Town.

Around the halls of Africa's biggest mining summit last month, there was little talk of democracy. And why would there be? Canadian investors have always cared more about political stability than political freedom. With commodity prices booming, many were confident that authoritarian regimes will continue to prove as profitable as any democracy.

But the dramatic rebellions in Egypt and Tunisia - and, a few days after the convention, in Libya - have shown the risks of relying on autocracy. Two of Canada's biggest companies, SNC-Lavalin Group Inc. and Suncor Energy Inc., suddenly found their reputations tarnished and their massive Libyan investments in jeopardy as the country collapsed into violence.

Is it time for a reassessment of doing business with despots? Around the world, Canadian companies have invested billions of dollars in dozens of undemocratic regimes, from Congo and China to Russia and Zimbabwe. Now they are facing awkward questions - and perhaps a new assessment of what "political risk" really means.

Tye Burt, chief executive officer of Toronto-based Kinross Gold Corp., one of the world's six biggest gold companies, says he wrestles with these questions all the time. He says he wouldn't have invested in Chile under the military junta of Augusto Pinochet, no matter how attractive its mining sector. And his company sold its assets in Zimbabwe in 2006, partly because of the political turmoil under the autocratic president Robert Mugabe.

In any decision on mining investments around the world, he says, Kinross must ask itself: "Can we live with the environment, politically and economically?"

The company tries to do its homework before investing. "A stable dictatorship would not be a good investment," he says. "Ultimately those regimes will face the political changes that we're seeing now [in North Africa]."

Yet while rejecting some countries, Kinross has chosen to invest billions of dollars in Russia and Mauritania - two countries that are considered "not free" in the latest reports by Freedom House, the respected U.S.-based institute that conducts an annual global survey of democratic freedoms and civil liberties.

Both countries have held elections in recent years, but there were serious doubts about their legitimacy. In both countries, opposition activists are harassed, and human-rights abuses are common. It's not something that Canadian investors like to discuss.

"We're not sitting in judgment of the political process," Mr. Burt says. "We're dealing with the administrators. At some point you have to act in the best interests of your shareholders and your employees."

Mauritania suffered a military coup in 2008 and last year's election was won by the former army commander who led the coup. But the country is "moving in the right direction," Mr. Burt insists. He notes that his company is providing thousands of jobs in Mauritania, along with $10-million for a mining school to train geologists and technicians.

On Russia, he is more cautious in what he says. "We have to be pretty circumspect on the political front," he says. "But we've found it to be stable and improving."

Canadian business leaders are generally uncomfortable with questions about the lack of democracy in the countries where they invest. Like Mr. Burt, they prefer to talk about the benefits they provide to the local population, the jobs they create, and their consultations with the local communities.

Consider the case of Eritrea - one of the most repressive countries in the world and one of the few that has never held a national election in its entire history. Human Rights Watch says the small African country is becoming "a giant prison" of torture, arbitrary arrest, forced labour and lengthy military conscription. One of the biggest investors in Eritrea is a Vancouver-based company, Nevsun Resources Ltd., which is developing a $260-million gold mine there.

Asked about the human-rights abuses and the lack of democracy, Nevsun president Cliff Davis is reluctant to discuss it. "I don't see any of that affecting us," he says. "It's a tough one for me to judge. There are always tradeoffs in where you're working. As a mining company, we shouldn't be imposing some form of political environment that we're familiar with. It's self-determination."

He prefers to talk about Eritrea's lack of corruption, its political stability and the integrity of its leaders. "It's not a wealthy elite class - they're very highly principled," he says. And he talks about the jobs and other benefits that the gold mine provides to the community. "When you have consensus and grassroots involvement by the communities, it can be just as important as a voting process."

Canadian investors are rarely in the spotlight for their business dealings in obscure countries like Mauritania and Eritrea, but they would be foolish to assume that the public will never notice. Canadian companies such as Talisman Energy Inc. and Ivanhoe Mines Ltd. sparked a furor when they invested in the autocratic regimes of Sudan and Myanmar, where they were accused of involvement in human-rights abuses.

Talisman came under such heavy criticism for its oil holdings in Sudan that the company eventually pulled out of the country in 2003. Activists accused the company of being complicit in genocide by allowing its oil revenue to help pay for Khartoum's military machinery. This campaign led to divestment by some U.S. shareholders, depressing the company's stock price until it sold its holdings.

In Myanmar, a country under the heel of a repressive military regime, Ivanhoe faced strong criticism for its major copper mine. Ivanhoe transferred its 50-per-cent stake in the mine to a third-party trust fund in 2007, but continued to receive revenue from the trust fund. Activists continue to dog the company.

In China, several Canadian companies - including Bombardier Inc., Power Corp., Nortel Networks Corp. and Continental Minerals Corp. - were subjected to pressure campaigns by Tibetan activists because of their investments in Tibet-related projects. China's human-rights abuses in Tibet have brought negative publicity to all of these companies.

Jamie Kneen, spokesman for the independent Ottawa-based group MiningWatch Canada, says there are good reasons for Canadian businesses to avoid investing in authoritarian regimes. Intentionally or not, their investments can end up supporting a regime that commits human-rights abuses, he says.

"If the company is asked, can it show that none of its payments went to support those abuses and that none of its infrastructure was used for the benefit of the military in repressive regimes?" he asks.

"There is a pragmatic reason too. Undemocratic regimes may suffer revolutions, while in democratic countries there is a process that is followed."

Yet democracy is rarely a top-of-mind issue for Canadian businesses overseas. The Fraser Institute does an annual survey of thousands of mining companies around the world, asking about the attractiveness of foreign-investment destinations. It asks about "political stability" - and many other factors - but does not ask about democracy or political freedom.

Its latest survey, released this year, found that China was ranked as more "politically stable" than California or Colorado. (In other words, investors said they were less deterred by China's political climate than by that of California or Colorado.) The authoritarian country of Vietnam is ranked as more stable than the democracies of Mexico or Peru, while the undemocratic nations of Russia and Kazakhstan are seen as more stable than the democracies of Guatemala or Bolivia.

Fred McMahon, co-author of the Fraser Institute survey, argues that these are rankings are exceptions to the trend. "The favourably ranked destinations do tend to be democratic," he says. "For the most part, stability and certainty are greater in liberal democracies. Mining companies do prefer to work in stable democratic countries."

In recent years, Canadian mining companies have become more conscious of their responsibility to the local communities where they operate. Most have invested substantial sums in social benefits - schools, clinics, training programs - and some have joined in transparency initiatives to disclose publicly their royalty payments, helping ensure that their revenue is not stolen by the wealthy political elites in authoritarian regimes.

But much more could be done. Consider the massive Canadian investment in the Democratic Republic of the Congo, the impoverished war-torn nation in central Africa. Despite holding elections in 2006, Congo is far from democratic. Opposition leaders and journalists have been assaulted, arrested, jailed or even killed.

Yet Canadian companies have scrambled into the country, competing for its mineral wealth. Today a dozen Canadian miners hold $3.3-billion in assets in Congo - one of the biggest Canadian investments in the developing world.

Denis Tougas, a Congo analyst at a church group in Montreal, says the Canadian investors could be doing more to push for transparency, fairness and public disclosure of its payments in the country. Instead they are often content to accept "the rules of the game," he says. "Stability is the key for investment, not democracy. Who can secure your investment? The people in power."

This might be finally changing. A new breed of Canadian investors in Congo is forthright in saying that they want to help build democracy in the country.

"Social and economic reform is something that forms an integral part of our core strategy," says Simon Village, executive chairman of Banro Corp. of Toronto, which is developing a $377-million gold mine in eastern Congo.

The company's strategy, he says, is "to ensure that the benefits of the mineral development are spread widely in the region and country."

Another Toronto-based miner, CuCo Resources Ltd., has raised $75-million to develop copper mines in Congo. The company's chief executive officer, Malik Talib, says there are risks to dealing with autocrats. "It has to factor into your equation," he says.

"A successful democracy would create more stability. Being transparent and fair with the authorities is important. What we're seeing in central Africa is a real push toward greater transparency."

For Canadian companies overseas, a corporate heart of darkness

By Marcus Gee

Globe and Mail

23 March 2011

When told that The Globe is doing a piece on the laws governing misbehaviour by Canadian companies in foreign countries, John McKay laughs. "That'll be a short article," he says. "There aren't any."

The Liberal MP was behind a private member's bill that would have brought in tough new rules on companies operating abroad. It went down to defeat in Parliament last fall, losing by just six votes when the Conservatives opposed it.

The government of Prime Minister Stephen Harper prefers a loose network of voluntary controls and guidelines to keep Canadian companies in check. But can we trust Canadian companies to police themselves when they do business with dictatorships and other dodgy regimes?

Mr. McKay says that is like expecting drivers to obey the speed limit if they knew police would never stop and fine them. Though he concedes most Canadian companies are "good corporate citizens," some may not be, and laws are needed to ensure they don't commit abuses in far-flung places. "You don't create laws for people who obey the law," he says.

The MP from the Toronto riding of Scarborough-Guildwood says Canada is far behind other countries in regulating the behaviour of its companies overseas.

In the United States, lawmakers passed the Foreign Corrupt Practices Act in 1977 to ban the payment of bribes by U.S. companies doing business abroad. The law was enacted after securities regulators discovered that more than 400 U.S. firms had made dubious or unlawful payments to foreign officials. U.S. justice officials have stepped up prosecutions under the law in recent years, investigating dozens of major companies and levying billions of dollars in fines. By contrast, a similar Canadian statute, the Corruption of Foreign Public Officials Act of 1998, is little known and seldom used.

U.S. rules on corporate behaviour are about to become even tougher under the Dodd-Frank bill, introduced in response to the global financial crisis. It requires companies to report the money they pay to foreign governments, pulling back the veil on deals between U.S. firms and their overseas partners. A sub-bill requires them to reveal if they are using specialized minerals that come from the conflict zone around the troubled African country of Congo.

In Norway and Britain, meanwhile, officials are enforcing guidelines laid down by the Organization for Economic Co-operation and Development for the conduct of their multinationals. Officials with Norway's National Contact Point, which monitors the OECD guidelines, recently hired investigators to look into a complaint about a proposed nickel mine in the Philippines.

The Canadian approach is much less aggressive. In a policy statement by then-trade minister Stockwell Day on March 26, 2009, the government said it will focus on "promoting internationally recognized, voluntary guidelines for corporate social responsibility performance and reporting."

Ottawa also set up the elaborately named Office of the Extractive Sector Corporate Social Responsibility Counsellor, under scholar Marketa Evans, to monitor the behaviour of Canadian mining and oil and gas companies abroad. But the office acts only on complaints - there have been none so far - and cannot intervene without the consent of the companies involved. Human rights groups call it toothless.

They lobbied unsuccessfully for the more powerful post of ombudsman, with the right to investigate companies and make reports to government. Karyn Keenan, a program officer with the Halifax Initiative, a watchdog group, calls Canadian policy "a wholesale failure."

"We haven't taken the issue seriously. There is no regulatory oversight."

With Canadian resource companies doing business in so many poor and undemocratic countries, that is bound to be a problem, the government's critics say. In the latest instance of trouble, Human Rights Watch reported allegations of beatings and gang rapes at the waste dump of a mine in Papua New Guinea run by Toronto-based Barrick Gold. The company said it had investigated the "disturbing" allegations and was taking action.

Company leaders insist they don't need a gun to their head to act responsibly. They argue that it's much better when they take it on themselves to respect workers, human rights and the environment.

In Guatemala, the Vancouver-based mining giant Goldcorp agreed to perform a human rights impact assessment of its Marlin mine on the recommendation of an ethical-investment group. Over 18 months, consultants interviewed scores of residents, officials and local interest groups. The company says it is now working on implementing the consultants' 67 recommendations, including adoption of a corporate responsibility policy.

David Deisley, a Goldcorp vice-president, has met with 40 traditional mayors near the mine to present the results. The result, he says, has been a partnership that not only helps protect the company against disruptive protests but also helps Guatemalan authorities develop standards.

"Rather than try to prosecute companies in Canada for what they do in other countries, it would be much more productive if all three parties - the company, civil society and government - work together to build governing capacity in countries like Guatemala," Mr. Deisley says.

Ethical-fund manager Bob Walker calls the human-rights impact approach "a new way to get on top of the issues and be more proactive and not to play defence all the time."

While human-rights groups acknowledge initiatives such as Goldcorp's, they say the approach won't work in places such as Tibet or Burma, where local people are so afraid of authorities that they can't be expected to complain openly to a company about the effects a mine or factory might have on the environment or labour rights.

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