KGOU

Looking For Solutions To Latin America’s Resource Curse

Jun 19, 2015

For nearly two centuries, the city of Potosí in the highlands of what is now Bolivia was the crown jewel of the Spanish Empire. From the mid 14th until the early 16th century, the Spain used the silver mined from Potosí’s Cerro Rico – or Rich Hill – to fund its empire

Since that time, the mining industry has been the center of Potosí’s economy, but the city is no longer the booming metropolis that it was during colonialism. The wealth from mining the Cerro Rico has not stayed in Potosí. Today the population is among the poorest in Bolivia, and the mountain is collapsing in on itself, having been hollowed out from centuries of mining.

The case of Potosí highlights many of the common problems with resource extraction in Latin America, which often causes environmental and social harms for communities near extraction sites.

“A lot of the mines that are run by these mining cooperatives are done with minimal or no environmental safeguards,” says geographer Tom Perreault. “This creates a huge problem for environments and for people that live downstream.”

While some communities try to fight against extraction projects that might affect them, they are often also among the most marginalized, said NOVAGOLD Executive Vice President, David Deisley.

But Perreault says stopping extraction activities completely is not realistic because local economies depend on extraction, but governments and industry need to work to make sure extraction happens in a way that fosters meaningful and sustainable development.

Deisley agrees that extraction should promote development.

“The [mining] industry has a great opportunity to be an effective force for remedying many of the legacy issues that have plagued the industry as well as to be an effective catalyst for development,” Deisley said.

Perreault says there is no single solution to the problems associated with extraction, but Deisley says the industry is taking measures to address environmental and social issues and finding ways to promote development is what motivates him in doing his job on a daily basis.

Deisley says that in his work, he takes a ground-up approach to development.

“I think that most communities would like to economic development in their community, but they want to have control over the way it’s done and how the benefits of that are distributed,” Deisley said.

Deisley says this type of development is not just about economics, but also empowering people.

“Part of the transformative and sustainable development that can come out of investment,” Deisley said. “To readjust that power imbalance that has been historic.”

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Interview Highlights

On The Historical Legacy Of Mining In Latin America

One of the things that I think is very important to understand about mining in Latin America is the deep historical roots that it has, particularly in certain areas – more so in some parts of the region than in others, of course. But the Spanish came looking for gold; that was one of the main things that the Spanish were looking for and, of course, the civilizations that were Latin America prior to the arrival had lots of gold. So the Spanish arrived in Mexico, they arrived in Peru, and found these very wealthy cultures with lots of gold and other metals that they were working. And so one of the things that they did very quickly was look for mineral deposits and begin mining, and they did so in really brutal ways. And one of the main sources of revenue for the Spanish empire for about a century and a half – during the late 1500s up through the 1600s and early 1700s – were the mines at Potosí in what is now Bolivia. So at that time it was called Upper Peru, and it provided a source of gold, a source of wealth, for the Spanish Empire. It really funded the Spanish Empire and all of their various wars during that period. The famous pieces of eight from the Pirates of the Caribbean were the coins minted in the Americas, and one of those mints that minted those coins was in Potosí. It was fabulously wealthy at the time, and you can still see the remains of that colonial city – it still is there at about 14,000 feet, a very high elevation – and now it's one of the poorest areas in all of Bolivia. So there's a long, deep history of mining not just there, but in Mexico, in Peru, in Chile, in Colombia… So there's a long historical legacy of mining in many places.

On The Question Of Extraction’s Potential To Create Development

I think the potential is there for extractive industries to foster development. Certainly. And countries around Latin America, throughout the region, left, right, and center – and I mean that literally in the political sense: countries on the left like Venezuela, Bolivia, Ecuador; countries in the center like Chile, Brazil; and countries that, at least recently, have been more on the right, now kind of more center-right, like Colombia and Peru – have all thrown themselves 100% into extraction. So it's not a political issue in terms of right or left and you're either for extraction or against it. There are some differences in terms of how it's done, but the differences are relatively minor for the most part. There are some exceptions, and Venezuela is a big one. But for the most part, it's not a political issue. And so yes, extraction is happening. That's the reality. So then you can say, "Should it happen? How will it happen?" And then I think you get into sort of the big question: how does extraction happen in such a way that actually fosters meaningful and sustainable development – development that's going to last and kind of build on itself as opposed to creating wealth for a small set of people or political cronies or political elites that are already there? There's no question whatsoever that extractive industries – so not just mining but oil and gas and timber harvesting and a range of others – create tremendous wealth. Whether they create development and what kind of development depends a lot on the institutional framework that's in place. And this varies tremendously from country to country and within countries. And so I think this is where David, I'm sure, would agree with me and argue that this is where the industry is working hard to create an institutional framework that will foster that. The other side of that, of course, is the state themselves and what kind of institutional framework exists within the central government and then to a certain extent within subnational governments as well and when rents are distributed to, say, departments or provinces or municipalities, what happens to those funds. And this varies quite a lot.

On Creating Sustainable Development

If you view these issues in the context of human rights, what you realize is that sustainability is not purely an economic issue. And what I mean by that is that a lot of the indigenous communities and frontier communities that are affected by extractive industries and development at the frontier have been marginalized from society historically – in terms of economic authority, political power, access to the things that people who live in the more urban areas take for granted whether it's education, medical care, access to infrastructure whether its telecommunications, roads, power. And part of the transformative and sustainable development that can come out of investment, in my view, is to readjust that power imbalance that has been historic. And when I have worked, we've gone about this with the idea from the ground-up. And so you begin to work with the local communities – not tell them what you're going to do for them, not throw a bunch of money into a school and say "good luck with that," but help the local communities develop the capacity to make intelligent decisions about what they see their future being. One of the topics that's important that has been in great debate in the industry over the past five or six years is the concept of free, prior, and informed consent. And it’s been characterized, in my view, all too often as "yes or no on this project," when, in my view, if you engage in meaningful consultation, I think that most communities would like to see economic development in their community, but they want to have control over the way it's done and how the benefits of that are distributed. And I don't think that is anathema to the industry at all. In fact, I think it creates the best value out of converting, as you said, these resources in the ground that have no value, into products that are salable in the international market. And, as Tom pointed out, the question is how does that conversion process result in meaningful development for the people who live and reside in the areas where the extraction takes place.

FULL TRANSCRIPT

SUZETTE GRILLOT, HOST: David Deisley and Tom Perreault, welcome to World Views.

DAVID DEISLEY: Thank you. Pleasure to be here.

TOM PERREAULT: Thank you.

GRILLOT: Well we're here to talk about the relationship between mining and extraction of resources and environmental circumstances or conditions or outcomes of that. And, Tom, I'd like to begin with you to maybe give us a little historical perspective about the history of mining and some of the problems we've seen historically, and how that perhaps has changed throughout time. The work that you've done in Bolivia, for example, in the past and some of the criticisms that have emerged, and then kind of where we are today.

PERREAULT One of the things that I think is very important to understand about mining in Latin America is the deep historical roots that it has, particularly in certain areas – more so in some parts of the region than in others, of course. But the Spanish came looking for gold; that was one of the main things that the Spanish were looking for and, of course, the civilizations that were Latin America prior to the arrival had lots of gold. So the Spanish arrived in Mexico, they arrived in Peru, and found these very wealthy cultures with lots of gold and other metals that they were working. And so one of the things that they did very quickly was look for mineral deposits and begin mining, and they did so in really brutal ways. And one of the main sources of revenue for the Spanish empire for about a century and a half – during the late 1500s up through the 1600s and early 1700s – were the mines at Potosí in what is now Bolivia. So at that time it was called Upper Peru, and it provided a source of gold, a source of wealth, for the Spanish Empire. It really funded the Spanish Empire and all of their various wars during that period. The famous pieces of eight from the Pirates of the Caribbean were the coins minted in the Americas, and one of those mints that minted those coins was in Potosí. It was fabulously wealthy at the time, and you can still see the remains of that colonial city – it still is there at about 14,000 feet, a very high elevation – and now it's one of the poorest areas in all of Bolivia. So there's a long, deep history of mining not just there, but in Mexico, in Peru, in Chile, in Colombia. And one of the issues around this is that it has left a big environmental legacy of that because a lot of the historical mines are leaching what's called acidic mine drainage from tailings or mineral that has been worked in the past. As water flows through that as precipitation, it oxidizes, and then what flows out from the bottom of that is acidic. And so even tailings that are very, very old can produce acidic runoff that can affect waterways and what not. So there's a long historical legacy of mining in many places. In the area where I work in Bolivia, the mining isn't as old as that, but it does go back about 100 years. And so this is one of the major problems and the Bolivian state hasn't had, I would say, the political will or much technical capacity to really deal with that. And so a lot of the state-run mines – well there's one state-run mine now – a lot of the mines that are run by these mining cooperatives are done with minimal or no environmental safeguards. And so, not just acid mine drainage, but a lot of the chemicals that are used in processing mines, a lot of heavy metals that are used in processing mines – like mercury, cadmium, the list goes on – are sometimes discharged directly into waterways. And so this creates a huge problem for environments and for people that live downstream. So it's important to understand that there isn't a single mining industry or a single type of mining in Latin America. There's lots. From sort of very large-scale, highly capitalized, very modern mines to these very small-scale artisanal mines, some state-run mines. And so there's a whole range of things, and so there isn't going to be a one-size-fits-all solution to dealing with some of the problems.

GRILLOT: Clearly there's that potential negative relationship between the mining and the environmental consequences. So David, I want to turn to you, because you're working in this industry, in the gold mining industry, also in Latin America. So tell us about what your industry is doing to help mitigate some of these potential consequences, these potential negative consequences.
DEISLEY: There are a variety of things that the mining industry is doing around the world. There are organizations that are based at the national level, like the Mining Association of Canada. There's also a larger organization called the ICMM – the International Council of Mining and Minerals – which is not just gold mining, but a variety of leading mining companies in the world. And these industry organizations have developed standards that apply to a lot of the legacy issues that Tom mentioned, and they deal with environmental issues, labor issues, interactions with communities. In addition, the United Nations from 2006 to 2011 asked Harvard professor John Ruggie to develop a system for providing guidance to businesses generally – not just the mining industry but all businesses that work on an international level. The result of which, in June 2011, was the adoption of the United Nations Guiding Principles on Business and Human Rights. And those provide guidance for businesses when they do work internationally as to how they can honor their obligation to respect human rights while recognizing that the duty to protect human rights is a duty of the state, the nation-state. Both states and business have an obligation to provide effective remedy when human rights are infringed. And I think, from my perspective, it is what creates great opportunity for mining industries or extractive industries in that, as an industry, we are dependent on where the minerals, where the resources are. So we can't decide to open a factory in one country or another. We have to go where they are. And as we do, I think the industry has a great opportunity to be an effective force for remedying many of the legacy issues that have plagued the industry as well as to be an effective catalyst for development.

GRILLOT: So on that note, Tom, in terms of these activities obviously being a catalyst for development, it seems to me in your work in Latin America, you might suggest that even though we can definitely criticize this industry, we can definitely see the negative consequences, but that it isn’t realistic to think that they wouldn't extract these resources. As David said, they're there, and they're there to be extracted, and they're valuable, and they lead to development. Is that the case? And are they leading to development? And is it something we just should expect them to do and so therefore we should be working with them to make sure that they do it in the most sustainable and environmentally friendly way as possible?

PERREAULT: Well I think you have to qualify those statements. I don't think it's a simple either-or, black or white situation. I think there are a couple issues. I think the potential is there for extractive industries to foster development. Certainly. And countries around Latin America, throughout the region, left, right, and center – and I mean that literally in the political sense: countries on the left like Venezuela, Bolivia, Ecuador; countries in the center like Chile, Brazil; and countries that, at least recently, have been more on the right, now kind of more center-right, like Colombia and Peru – have all thrown themselves 100% into extraction. So it's not a political issue in terms of right or left and you're either for extraction or against it. There are some differences in terms of how it's done, but the differences are relatively minor for the most part. There are some exceptions, and Venezuela is a big one. But for the most part, it's not a political issue. And so yes, extraction is happening. That's the reality. So then you can say, "Should it happen? How will it happen?" And then I think you get into sort of the big question: how does extraction happen in such a way that actually fosters meaningful and sustainable development – development that's going to last and kind of build on itself as opposed to creating wealth for a small set of people or political cronies or political elites that are already there? There's no question whatsoever that extractive industries – so not just mining but oil and gas and timber harvesting and a range of others – create tremendous wealth. Whether they create development and what kind of development depends a lot on the institutional framework that's in place. And this varies tremendously from country to country and within countries. And so I think this is where David, I'm sure, would agree with me and argue that this is where the industry is working hard to create an institutional framework that will foster that. The other side of that, of course, is the state themselves and what kind of institutional framework exists within the central government and then to a certain extent within subnational governments as well and when rents are distributed to, say, departments or provinces or municipalities, what happens to those funds. And this varies quite a lot.

GRILLOT: Well I think that throws us back to you, David. And as we were talking earlier about the standards and the framework and the principles that have emerged to guide industry in this way, we were talking about in the context of the environment. You mentioned, though, that the focus is on human rights, the principles have to do with human rights. And I presume that this gets to this larger issue of ensuring that local populations are involved in some of these decisions, and that they aren't the losers in this relationship, and that they actually benefit from the resources that they're providing. Is this something that is actually happening? These international organizations and norms and efforts, frameworks, that are emerging are actually doing what Tom is suggesting and trying to move us more down that path? Because some would say that the perception is, anyway, that multination corporations go in and they take and don't give back. Is that not your experience in your work with this industry in gold mining?

DEISLEY: That is certainly my experience, and it's certainly what motivates me in doing my job on a daily basis. I think that one of the things that Tom mentioned early on was this part of the legacy issues. The Spanish came, they took from the mines, and took it back to Spain where it had value. And you see that as well in many communities where the royalties and the rents go to the central government and they are not reinvested. And I think if you view these issues in the context of human rights, what you realize is that sustainability is not purely an economic issue. And what I mean by that is that a lot of the indigenous communities and frontier communities that are affected by extractive industries and development at the frontier have been marginalized from society historically – in terms of economic authority, political power, access to the things that people who live in the more urban areas take for granted whether it's education, medical care, access to infrastructure whether its telecommunications, roads, power. And part of the transformative and sustainable development that can come out of investment, in my view, is to readjust that power imbalance that has been historic. And when I have worked, we've gone about this with the idea from the ground-up. And so you begin to work with the local communities – not tell them what you're going to do for them, not throw a bunch of money into a school and say "good luck with that," but help the local communities develop the capacity to make intelligent decisions about what they see their future being. One of the topics that's important that has been in great debate in the industry over the past five or six years is the concept of free, prior, and informed consent. And it’s been characterized, in my view, all too often as "yes or no on this project," when, in my view, if you engage in meaningful consultation, I think that most communities would like to see economic development in their community, but they want to have control over the way it's done and how the benefits of that are distributed. And I don't think that is anathema to the industry at all. In fact, I think it creates the best value out of converting, as you said, these resources in the ground that have no value, into products that are salable in the international market. And, as Tom pointed out, the question is how does that conversion process result in meaningful development for the people who live and reside in the areas where the extraction takes place.

GRILLOT: Well, clearly, the importance of these resource issues is significant today and will continue to be so well into the future. So thank you both, David, Tom, for being here today and helping us understand a little bit better what the issues are that we're facing. Thank you.

DEISLEY: A pleasure.

PERREAULT: You're welcome. Thank you.

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