Reflections on the Mining Mandate

By , May 2, 2008

en espaniol cuando tenga un chance..

Reflections on Ecuador’s Mining Mandate.

It’s easy to see why Canada’s mining companies have spent so much money on publicity to try to lessen the public relations nightmare caused by the Constitutient Assembly’s 95-1 passing of Ecuador’s Mining Mandate, which annulled 88% of the country’s mining concessions- including all of the big ones held by the Canadian companies. It’s even understandable that Canada’s Ambassador to Ecuador would go with a squad of Canadian mining company owners and managers to meet with Ecuador’s president so publicly as they did last week. When there’s so much at stake, anything goes.

Just what is at stake? The Mining Mandate abolished 4,474 mining concessions by passing the Mining Mandate this past 15th of April; approximately 600 were left after the onslaught, most are small mines and medium non-metallic projects (cement and building materials). Not a single large-scale metallic mine project should be left standing if the Mandate is implemented as it was meant to be by the Assembly. The main parameters for the abolition of concession rights include:

Concessions owners may only own three concessions (totalling 15,000 hectares)
It forbids mining in protected areas and their buffer zones, as well as if the project threatens water resources (what metallic mining project doesn’t?);
It abolishes concessions rights if the concessions were given to government functionaries, or their relatives. There’s rumors that this could hit the Ecuacorrientes project, among others.
It puts a freeze on all mining activities: the only exceptions are the 600 small projects not affected by the Mandate
It prohibits the approval of new mining concessions
Any concessions owner not up to date on their payment of patents to operate lose their concessions.
The Mandate also calls for the creation of a state-owned mining company- which has a lot of mining company owners very worried.

The mandate does allows mining to go ahead if the companies have invested in exploration and related activities, but not if it falls under the other categories. In other words, none of the large project will remain viable.

These measures are effect until a new mining law is drafted, in about six months time- which must be approved by the same Constitutient Assembly that approved the current Mandate! And not even the president can veto the mandate.

By the way, the anti-mining crowd cheered the Mandate, though not too loudly, because some expected the mandate to once-and-for-all call for a large-scale mining ban.

The parameters, if applied objectively, will stop all of IMC, IAMGOLD, Aurelian, Dynasty’s, All Metals, Corriente Resources (Ecuacorrientes project), and Lowell’s – as well as most other metallic mining project in the country, unless they were exploiting at the time of the Mandate’s approval. Ascendant Copper lost their JUNIN concessions in January of this year, but this new legal mesures means the loss is permanent (the project poses a great threat to water resources). None of these companies were exploiting minerals- and most- if not all- do not even have their environmental impact studies approved for exploitation or exploration.

What happened in Montecristi? The Mandate’s overwhelming approval took pro-mining circles here by surprise (to say the least). This was in part because many thought Assembly members would go a bit easier on the Mandate, given President Correa’s seeming support for mining. But, inside the Assembly there is a very strong anti large-scale mining faction, led by the very popular ex-Minister of Energy and Mines, Economist Alberto Acosta, who belongs to Correa’s Alianza Pais political party. Mr. Acosta has no problem stating his anti-large scale and open pit metallic mining stance. He’s an economist and knows very well what mining means to developing countries.

This issue, more than any other to date, has caused a deep divide within the Alianza Pais, who won 60% of the Assembly’s seats in last year’s election.

Counter attack….. So, nowadays the companies are applying tremendous pressure– not to have the Mandate abolished or vetoed (which is impossible), but to soften it as much as possible. They’ve also enlisted Canada’s Ambassador (!) and Ecuador’s Chamber of Mining (plus, unfortunately, the press is blindly-and well paid- on their side). The companies and their public relations firms are using scare tactics (thousands laid off, the country will go bankrupt, investors will flee….!!), and threats (we’ll hold off on the international lawsuits if only…). And, a lot of money is being spent on trying to convince Ecuadorians that mining will really lift them out of poverty and will solve all of the country’s problems- and it won’t pollute!!

Mr Correa has recently shown signs of weakness by making pro-mining statements and rabidly attacking the opposition to mining every chance he gets- though he has been vague enough to possibly let it be interpreted that he is not against STATE-OWNED mining. The President also means to renegotiate mining deals if private mining is permitted in order for Ecuador to actually make money from mining (a radical idea indeed…!) This would include high royalties (perhaps as high as20%), and a 70-80% Windfall Profit Tax (which has been discussed by Ministry of Energy and Mines official this year).

The upshot of all this is that there are many mining company owners that are worried sick- and not just about losing a few hundred million dollars here in Ecuador, but about the potential spread of the Mining Mandate affect to other developing countries. They may not be too worried about whole-scale nationalization of mines (though I would be if I was them), but the steep rise in royalties and windfall profit tax must keep them up at night.

Everyone knows that natural resources of these countries have been ripped off left and right by transnationals for centuries, ruining economies, and leaving the people impoverished, and to face long-lasting social and environmental havoc. All Ecuadorians have to do is look over the Andes at the horror left behind by 30 years of petroleum exploitation in the Amazon to know this isn’t just talk.

So… the rush is on by the transnationals and their in-house plenipotentiary representatives to kill this initiative before it spreads like wildfire. A Mayor from an anti-mining local government has publicly said there are hundreds of millions of dollars earmarked by mining companies to win the hearts and votes of Assembly members. On the other hand, the resistance to large-scale metallic mining has never been stronger in Ecuador.

Unlike in the past, the resistance now includes all of the powerful indigenous organizations, who this year joined with all of the human-rights, communities, and environmental groups. And, given that the vote was so overwhelmingly pro-communities and anti- mining last month, there’s every chance that no matter how much the companies spend, the Assembleistas are not going to sell their vote to betray they something they so whole-heartily belive in- an Ecuador free of large-scale metallic mining.

Carlos Zorrilla


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