MAC: Mines and Communities

Nationalisation - Threat Or Promise?

Published by MAC on 2006-05-14

Nationalisation - threat or promise?

14th May 2006

"This is just the start ...tomorrow or the day after it will be MINING, then the forestry sector, and eventually all of the natural resources for which our ancestors fought."

That was the ringing 2006 May Day declaration, made by president Evo Morales to the Bolivian people and encompassed in a Decree. on nationalisation. As the only indigenous head of state in Latin America - and one acutely conscious of his obligations to those who brought him to power - his words have provoked a flurry of contradictory speculation.

Yes, he had sent troops into the oil fields to "repossess them" and, shortly before, had expelled a businessman trying to set up charcoal blast furnaces in Santa Cruz, seat of Bolivia's richest extractive operators. But would he really implement his threat to nationalise? And would Venezuela's Hugo Chavez and Peru's president elect, Ollanta Humala, follow suit?

After all, recent experience in Venezuela shows that the mining indstry, far from being eased out, is actually being offered more concessions. The president of one US mining company operating in the country on May 3 declared that "Venezuelan officials aren't going to do anything too terribly radical" and may actually provide opportunities to develop additional properties in the country. Phil Baker, President and CEO of Idaho's Hecla Mining, commented that "nothing has really changed politically for mining during the first quarter of this year; Hecla had increased gold production in Venezuela by 16,000 ounces during that time, although having to sell a modest 15% of production to the local market as required by Venezuelan law (Mineweb May 4 2006) .

As for the contention that this new breed of Latin American leaders would follow Fidel Castro's anti-American lead, in fact the Cuban autocrat, desperate for foreign investment, granted US company Sherritt International a 49% equity in the island's nickel and coablt resource, as long ago as 1990.

Doubt has also been expressed by some observers that Morales is really proposing the type of nationalisation characteristic of the 1950's and sixties, especially in Africa and Latin America. The relicts of state-owned Comibol still have a commanding share in some of Bolivia's major mines, without this appearing to faze foreign investors too much. Another U.S. mining company, Denver-based Apex Silver, in early May asserted that "the company is not aware of any plan by the government of Bolivia to follow a [nationalisation] policy in mining...Apex Silver was particularly encouraged by recent statements made by the Bolivian Minister of Mines and Metallurgy in which he emphasized that the mining policy does not contemplate nationalization and even less incorporation of private companies such as San Cristobal."

When state-owned companies ruled the roost, many failed in terms of their obligations to the health and safety of workforces, environmental oversight, and returning income to the people at large. Nonetheless, some clearly provided well for workers (like Brazil's CVRD) while others - as at India's Neyveli lignite mine - cultivated townships with consistent, if not vibrant, community particpation. These may be enclaves, but they are
enclaves with a civil purpose, and far removed from today's many dissolute, upstart, ventures which rely on cheapened, sub-contracted labour. Vedanta's bauxite mines in the Indian state of Chhattisgarh provide graphic evidence of the deleterious consequences of privatisation.

Where there is unbroken state ownership, with social services and employment benefits built in from the start, there may still be much to commend it. But, where national companies have been forced to privatise under the World Bank's "structural adjustment programmes". we have sometimes seen the worst of both worlds. In Zambia during the late nineties, the privatisation of Zambia Copper Consolidated Copper Mines (ZCCM) stripped workers of various rights (including the right to sue for compensation) and exempted the new owners from environmental regulations. Worse still, Anglo American pulled out of ZCCM only a couple of years after taking it over, claiming it couldn't make the enterprise profitable. In 2004, Vedanta took over ZCCM's key mine at Konkola at a price that opposition politicians have claimed was derisory.

Would a new wave of nationalisation recoup the social advantages of the past, without replicating the undoubted environmental damage? As the large state-owned enterprises have been broken up, so their management expertise has been dissipated. Many thousands of workers skilled in operating underground mines have been laid off, or moved to other occupations (such as those who dug Britain's deep coal pits until Thacherism eviserated the industry in the mid-eighties). Every time a national leader promises to turn back the clock, mining companies say they will sue for breach of contract, or withdraw from the country. Considering the many other countries which are ready to welcome them with open arms, these are not idle threats.

But, perhaps most important, these purportedly "radical" heads of state rule domains which have been irrevocably locked, not just into mineral dependency, but reliance on international markets they cannot control. The commodity trading pacts of thirty years ago have inexorably given way to the rules of the WTO. With the likely accession to those regulations of NAMA (Non Agriculture Marketing Access) and GATS (General Agreement on Trade in Services), calls for nationalisation look to be merely symbolic gestures. Meanwhile, the power of communities, to claim sovereignty over what lies beneath the land, remains as chimerical as ever.

Ironically, reactions to Mugabe's threats to nationalise mines in Zimbabwe have met with somewhat more industry alarm than those recent announcements from Latin America. No doubt there's apprehension that the renegade leader is capable of anything - even driving the country's nation (literally) into the ground. The irony lies in the fact that it was Mugabe who, on coming to power in 1980, declared that foreign mining companies would be ejected from the country, but soon pleaded with them to stay. Now, if they were to leave, there's hardly a hope in hell that the industry could survive.

Or, as a recent Zimbabwean commentator pointed out, there's a likelihood that South African companies - which have themselves seen the ANC government retreat on its "black empowerment" minerals ownership strategy - would move in swiftly to pick up and exploit the pieces. [Comment by Nostromo Research, May 14 2006].

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