Thursday, November 18, 2010

A mining update

Our friends at the Voices from El Salvador blog have a post about the fact that 73 applications for metallic mining permits are pending before the country's environment ministry (MARN). Apparently any action on these permit applications will wait until MARN receives the result of a consulting project by the TAU Group. This study, costing $200 million, is being funded by the Spanish government and is intended to provide improvements for El Salvador's process of receiving, evaluating, and granting such mining permits.

The existence of so many pending permits has to raise a fear for the Salvadoran government of more international arbitration claims if permits are denied. The government is currently defending itself against multi-million claims brought by the Commerce Group and Pacific Rim before the World Bank. In that context, I think the Tau Group study is a good idea by the Salvadoran government. The weakness the government has in the pending arbitrations is the appearance that there is not a well constructed and followed process for deciding on mining permits. If the Tau Group study helps the government strengthen that process, the country's risk in investor arbitrations will diminish.

To look in depth at the process followed in the Commerce Group case, you can now read the in-depth analysis by Global Trade Watch titled CAFTA Investor Rights Undermining Democracy and the Environment: Commerce Group Case. The report concludes:

At stake in the Commerce Group and Pacific Rim CAFTA cases is whether the operations of the fragile democracy that emerged from 12 years of civil war in El Salvador and the policies by its elected leaders to ensure mining does not further damage the country’s ravaged environment will prevail – or whether CAFTA will allow the demands of multinational mining firms to reign supreme.

Although Salvadoran civil society has been effective in getting the government to think more seriously about the potential environmental and social impacts of mining in El Salvador, the government has made no final decision about future gold and silver mining policy. CAFTA’s extreme investor rights now loom over these policy decisions, with the government forced to calculate potential CAFTA liabilities against publicly demanded improvements in environmental and human rights policy.
Meanwhile, Voices from El Salvador also reports that Pacific Rim has filed a lawsuit against seven anti-mining activists, accusing them of robbery and damage to property. Read more here.

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