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Digging Up Canadian Dirt in Colombia

Issue: 41 Section: Accounts Geography: Latin America Colombia Topics: Mining, CIDA

November 27, 2006

Digging Up Canadian Dirt in Colombia

Canadian corporations and aid agencies facing controversy and resistance in Colombia

by Chris Arsenault

Children play in Barrio near the mine. photo: Chris Arsenault
Up a flight of stairs, behind double-enforced bulletproof glass and a large, silent bodyguard, sits the office of Francisco Ramirez, a mining-policy researcher and President of a small Colombian trade union.

Mining policy really isn't sexy stuff and researching it usually isn't a dangerous occupation, but some of Mr. Ramirez's conclusions can mean life or death, literally and figuratively. "Once they tried to kill me right here in this office," said the researcher, who has survived seven assassination attempts.

In Colombia's mineral-rich underworld, often demarcated by the full-scale destruction of towns near mining sites, environmental contamination, paramilitary attacks and assassinations of those who stand up to mining interests, Canadian hands are dirtier than those of a coal miner coming up from the pit.

"We had a five-year, $11-million project in Colombia, which ran from 1997 to 2002," said a senior official with the Canadian International Development Agency (CIDA), who spoke on condition of anonymity. "Basically, it was to help Colombia strengthen its institutional capacity in both the Ministry of Mines and Energy and the Ministry of the Environment and the regulatory agencies these agencies worked with," said the CIDA official in a phone interview.

Many Canadians believe CIDA's role is building schools, providing food aid and doing other touchy-feely 'development' in poor countries. But with a $3.74-billion international assistance budget in 2004-05, CIDA spearheaded some controversial meddling in Colombia's domestic mining legislation. According to Ramirez, this 'development assistance' did not improve the lives of ordinary Colombians, but in fact helped to "further under-develop Colombia, creating more poverty and decreasing tax revenue for public investment."

In 2001 and 2002, CIDA's Colombia branch teamed up with the Canadian Energy Research Institute (CERI), a think tank funded by the mining industry and various government departments, based at the University of Calgary. The two organizations worked together to "streamline the country's mining and petroleum regulations," reported the Calgary Herald.

According to Ramirez, this "streamlining" had some nasty effects on average Colombians. "Environmental regulations were 'flexibilized.' Labour guarantees for workers were diminished and the property of indigenous and Afro-Colombian people was opened to exploitation," said the researcher during an evening interview in Bogota.

One of the most controversial changes to mining regulation concerns the amount of royalties paid to the Colombian government by foreign companies extracting non-renewable resources. After reviewing the new code with a lawyer in Bogotá, Ramirez's allegations of a Canadian royalty robbery glistened like elicit gold.

How CIDA Works to Trim Royalties

Prior to August 2001, royalties were set at a minimum of 10 per cent for coal exports above three million tons per year, and a minimum of five per cent for exports below three million tons. After the code was "streamlined," with the help of CIDA, CERI and their Colombian legal team, the royalty tax for private owners of Colombian subsoil was reduced to 0.4 per cent, regardless of the amount of material extracted.

Refugees displaced by the Cerrejon mine in La Guarija. photo: Chris Arsenault

It's difficult to determine exactly how much money the Colombian people lost because of these changes to royalty rates. One thing is clear: In a country where an estimated 80 children die per day from hunger and curable diseases and where 64 per cent of the population lives in poverty (earning less than $3 per day), the extra royalties pocketed by mining companies could be doing more than increasing stock dividends.

The new code also increased the length of mining concessions from 25 years to 30 years, with the possibility that concessions can be tripled to 90 years.

In 2001, the final year of new code's development and the beginning of its implementation, 1,667 homicides were committed in Colombia's mining regions, twice the average rate of previous years, according to Mr. Ramirez's calculations.

The process by which CIDA helped alter Colombia's mining code has been called 'Canadianization,' but that isn't quite accurate. "Do as we say, not as we do," would be more appropriate. "Canadian royalty rates vary, but they tend to be more like three to four per cent," said Jamie Kneen, Communications Co-ordinator for MiningWatchCanada, a union-funded research and advocacy group. Moreover, payroll taxes and provincial taxes are generally higher in Canada, bringing increased revenue to support programs like decent public health care, necessities not granted to average Colombians.

It's worth noting that, under Colombia's post-CIDA mining code, the 0.4-per-cent royalty tax is not ubiquitous. "This notion of 0.4 per cent as the royalty rate is absurd, you should check your sources better," said Edgar Sarmineto, Director of land acquisition for Cerrejon, the world's largest open-pit mine, which supplies coal to power plants in eastern Canada and the northeastern United States.

"Our mine has paid more in royalty taxes every year for the last five years. Today, in royalty taxes alone, we're paying around $300 million a year," said the senior mine official as he brought up pie charts on his computer screen.

The aberration in Cerrejon's royalty rates stems from Colombia's earliest mining code proclaimed in 1886. It was based on a French/Spanish model where subsoil resources are the property of the state, as opposed to the Anglo-Saxon model of full private ownership. Cerrejon is a useful example because of its size and political importance; Hernan Martinez Torres, recently appointed Minister of Mines and Energy by Colombian president Alvaro Uribe, worked at the Cerrejon mine for 17 years.

Cerrejon is divided into three main zones: north, central and south. The pre-CIDA royalties are in place for the north and south zones because the subsoil is still owned by the state. Thus, as high oil prices push up demand for coal and extraction increases rapidly, the mine ends up paying more royalties. The centre zone, operated by the Swiss company Glencore (but still owned by Cerrejon) is private property, and thus the 0.4-per-cent royalty rate is in full effect.

Mining trucks carrying coal and kicking up dust. photo: Chris Arsenault

The focus on royalty rates is misplaced, however, according to a mid-level official from Colombia's Mining and Energy Planning Ministry (UPME), the bureaucracy responsible for administering the new code, who spoke on the condition of anonymity. "The real issue here isn't the royalty tax, but the regular taxes that all businesses pay. That's where most government money in the mining sector comes from."

But article 229 of the post-2001 code states: "The obligation to pay royalties on the exploitation of non-renewable natural resources is incompatible with the establishment of national, departmental and municipal taxes on the same activity, of whatever denomination, method and characteristics." Legalese aside, this means that if a company is paying royalties, it no longer has to pay other taxes to state or municipal taxes.

If the UPME source is correct in his claim that regular taxes are the key component for government mining earnings, then Article 229 essentially decapitates the state's ability to garner public good from the exploitation of non-renewable resources.

Technicalities aside, it's clear to people likeFrancisco Ramirez and institutions like MiningWatch and the North-South Institute that mining companies have benefited more than the people of Colombia from the changing Colombia's mining and energy legislation, . And thanks to vast public-education initiatives, senior CIDA officials seem to realize they now have some explaining to do.

Half an hour and a couple of tough questions into the interview with the senior CIDA official, the UPME source was getting irritated. "The mining code in Colombia was developed by Colombian government officials. We had almost negligible involvement in developing the code. They asked us to make one or two comments on specific areas," he said.

While discussions of royalty rates weren't appreciated by CIDA sources, they were happy to discuss peace-building initiatives and conflict-resolution schemes in Colombia with which the organization is currently involved. "With the Ministry of Mines and Energy and the Ministry of the Environment, we provided training and information on how to conduct community consultations and conflict resolution," said the senior CIDA official.

Company Bulldozers Move In

These 'consultations' ring hollow for 700 former residents of Tabaco, a farming town in Colombia's northwestern La Guarija Peninsula, which was reduced to rubble by Cerrejon mine company bulldozers in 2001.

"There were 300 soldiers and police in anti-riot gear. There were also representatives from the mine, the mayor and a priest. They smashed the houses with large machines. They took our farms," said Jose Julio Perez, the former Tabaco residents' elected leader, when discussing the 'community consultations' Cerrejon mine conducted before displacing the farmers.

"Mistakes have been made in the past. We are working to be better community partners," said Edgar Sarmineto, the senior Cerrejon mine official. Apparently, CIDA's information on how to conduct community consultations wasn't properly communicated.

Tabaco was one of several villages destroyed by this particular mine, and three more-- Chancleta, Pantilla and Roche-- are on the chopping block.

"People from the mine have been threatening me to leave and they're stealing my cattle," said Tomas Ustatie, a farmer in Roche who milked his cows as we spoke.

Two menon horseback who don't live in the community watch are conversation closely. Ustatie says the mine is paying goons to eavesdrop on community members and create problems.

Sarmineto admits the mine hires private citizens, i.e. vigilantes, to watch property and garner information. "This is a very large site and there is a lot going on here with the guerrillas and other problems. We need to keep informed," says Mr. Sarmineto.

Along with irregular forces and paramilitaries who often guard mine sites, gather information and sometimes harass local residents, the military also works closely with Cerrejon and other mines.

Peace Without Justice

Most residents in towns near the mine site are indigenous or Afro-Colombian. According to international law-- International Labour Organization (ILO) Convention 169, ratified in Colombia in 1991-- indigenous persons must be consulted on issues that affect their land and any agreements affecting them must come through negotiation.

By the admissions of Edgar Sarmineto at the Cerrejon mine, the company never conducted serious negotiations with the people of Tabaco before smashing their village.

Workers at Cerrejon beside a company dump truck. photo: Chris Arsenault

To circumvent pesky international protocols and domestic legislation, the Cerrejon mine hired an anthropologist who claimed there was only one Afro-Colombian in Tabaco. "It's not enough to deny them land. Now the company is denying who they are as a people," countered one international observer.

In fact, any indigenous groups on the Guarija Peninsula and beyond say they were never consulted when the mining code was altered in 2001. Thus the CIDA-backed legislation likely violates ILO 169.

The trajectory of dispossession, privatization and government impotence that CIDA's code helped spawn is being accelerated by Colombia's right-wing, Harvard-educated President, Alvro Uribe. On July 25, the Colombian government announced it was privatizing 20 per cent of Ecopetrol, the state oil company -- a ludicrous move considering the profitable firm puts large amounts of money into the public purse and will only continue doing so as oil prices rise.

President Uribe was re-elected over the summer with a strong mandate. Questing for peace in Colombia, Uribe made a deal with the devil, providing amnesty to some 30,000 members of right-wing paramilitary groups, many of whom have been implicated in massacres and other crimes. Thus far, the devil has delivered.

While tenuous peace may become part of Mr. Uribe's legacy, critics argue that justice will not. The country's vast natural wealth has been siphoned off by well-connected government functionaries and sold away to foreigners at bargain-basement prices.

Ramirez says he has lasted this long, "because I believe in God and run very fast." Solidarity activists say Colombians need more than crucifixes and cross-trainers to deal with the current theft of resources. They need our support not because we're nice people, but because we caused many of their problems.

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The Dominion is a monthly paper published by an incipient network of independent journalists in Canada. It aims to provide accurate, critical coverage that is accountable to its readers and the subjects it tackles. Taking its name from Canada's official status as both a colony and a colonial force, the Dominion examines politics, culture and daily life with a view to understanding the exercise of power.

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