Thursday, December 1, 2011

Paying the High Price of Gold

By Brooke Denmark
Witness for Peace International Team- Nicaragua

This article originally appeared in the Canadian journal Alternatives International.

It is no secret that gold mines wreak havoc on the environment. Less widely known is the incredible amount of power free trade agreements have granted to gold-mining corporations to cause this damage. The North American Free Trade Agreement (NAFTA) and the Central American Free Trade Agreement (CAFTA), as well as other pacts, include chapters that allow corporations to sue signatory nations for lost profits if a new law, such as an environmental or health regulation, threatens its investment. This is exactly what is happening now in El Salvador. A decision is imminent in the first case of its kind to be heard under CAFTA, Pacific Rim Mining Corp. vs. El Salvador. Anti-mining groups, environmentalists and trade justice activists throughout the Americas are poised for a response from the CAFTA tribunal, which could set a precedent for mega-projects throughout the region.

Pacific Rim, a Canadian-based mining corporation, is suing the government of El Salvador for violating its investor rights under Chapter 10 of CAFTA. The company claims that the government of El Salvador violated its investor rights by failing to issue a permit to begin operations. Since Canada is not a member of CAFTA, Pacific Rim is suing El Salvador under a U.S. subsidiary. The government of El Salvador acted in response to calls from a wide network of civil society groups, including communities potentially affected by the mine, environmentalists and the Catholic church, who rallied together to block the mine. They argued that the mine will contaminate El Salvador’s already limited water supply and cause serious environmental and health issues. Individuals involved in the movement have met violent repression for their opposition and the case is already stained with blood. Four Salvadoran anti-mining activists have been assassinated over the past two years. Those cases remain unresolved.

As Pacific Rim struggles to open its gold mine in El Salvador, another Canadian based company, Goldcorp, is closing up shop in Honduras after over a decade. In the mine’s wake, surrounding communities face chronic health problems and depleted natural resources. The situation is a testament to the kind of destruction the anti-mining movement in El Salvador is fighting to avoid.

The striking jade greens and golden yellows visible in the stream photographed are a result of acid drainage that will last for up 100 years. This is the water that communities near the San Martin mine use daily to bathe and wash laundry. According to a recent report by Honduran human rights leader Dr. Juan Almendares, the Honduran government has documented high levels of arsenic in the blood and urine of children living near the mine. Almendares’ report also shows that the Honduran government dragged its feet in revealing information about the contamination and in doing so, allowed the gold mine to continue harmful operations. Now Almendares and other human rights groups are calling for Goldcorp to pay for the environmental and health problems it left behind.

There are many international actors at play in the corporate web of gold mining. To trace the genealogy of the San Martin mine in Honduras, for example, we begin with Honduran company Entre Mares. Entre Mares used to operate as a subsidiary of Glamis Gold, a formerly Nevada-based gold company which was bought out by Goldcorp in 2006 to form the world’s third largest gold mining company. Three years before merging with Goldcorp, Glamis Gold was entangled in a similar struggle as Pacific Rim.

In 2003 Glamis Gold began a suit against California under NAFTA’s Chapter 11 for $50 million in damages. Glamis Gold brought the case against California after the state denied the corporation the right to construct an open pit mine. California reacted to outcry from environmental and indigenous rights groups arguing that the mine would cause environmental destruction and encroach on sacred sites. In this case, in order to submit a claim under NAFTA, Glamis Gold attempted to file as a Canadian company even though it was based in Nevada at the time. The tenuous nature of this claim is one of the reasons why it failed.

Ultimately, the tribunal ruled in favor of California. While the United States is not immune to being sued by corporations under these free trade agreements, so far it has been on a winning streak. Not all nations and states attempting to block damaging mega-projects have been as lucky. NAFTA tribunals have already awarded over $200 million to investors claiming lost profits. NAFTA’s Chapter 11 provided the model for CAFTA’s Chapter 10 and similar measures in other free trade agreements. Public Citizen calculates that there are currently $12 billion in pending claims under NAFTA-style tribunals related to the environment, health and transportation.

With the price of gold reaching record highs in light of the global financial crisis
, gold mining will remain a hot issue. One analyst quoted in a U.S. News and World Report article on gold mining states that “if gold prices continue to remain elevated, then [gold] prices are up, costs either stabilize or go down if the economy weakens further, and that could be a recipe for fat profit margins [for gold mining stocks]." As the gold mining industry stands to further benefit in the coming years, those being poisoned by its deadly practices, such as children living near the San Martin mine, will continue to suffer.

For now, social and environmental justice groups hope that the Pacific Rim decision will fall on the same side as the NAFTA tribunal’s ruling in the Glamis Gold case. A win in El Salvador would show the international community that groups resisting invasion of these mines stand a chance against a Goliath.

All photos taken by Fernando Reyes in Valle Siria, Honduras.


  1. This article is one of the worst examples of shoddy "reporting" I have witnessed, and we have seen a lot of it.

    Firstly, the proposed El Dorado mine is NOT an open pit operation - it is an underground mine with a surface footprint about the size of a suburban school yard.

    Secondly, neither Pacific Rim Mining, nor it's subsidiary PacRim Cayman, nor any of its other subsidiaries has contravened any of El Salvador's environmental or health and safety laws. In fact, the El Dorado mine design far surpasses many of El Salvador's environmental laws, guidelines and regulations. To suggest PacRim Cayman filed for CAFTA arbitration because a new law threatened profits is complete and utter falacy.

    Thirdly, the El Dorado deposit has virtually no sulfide minerals and is an alkaline system. It is chemically impossible to generate acid mine drainage from this deposit.

    The fact is, in part due to the nature of the deposit and in part due to the world class, standard-setting mine design, El Dorado will be one of the most environmentally safe mines in the world.

    Groups and individuals opposed to mining have the right to their opinions but it is despicable to use lies, misinformation and contorted facts to support their position as Ms. Denmark has done in this egregious article.

    Barbara Henderson
    Pacific Rim Mining Corp.

  2. Dear Ms. Henderson,

    Thank you for the clarifying that the El Dorado mine is not an open pit operation. The article does not refer directly to the El Dorado mine as an open pit operation, however other cases discussed in the article are. I can take out "open pit" from the first sentence of the article to avoid any confusion, but regardless of the type of operation it is still true that environmentalists and the government of El Salvador fear environmental effects from the El Dorado mine. As I mentioned in the article one of the concerns is the amount of water needed for operations will put a strain on an already limited water supply. Additionally, even if the El Dorado mine has been designed to avoid acid drainage there are other concerns about possible contamination. According to an article published in the Houston International Law Journal, "Pac Rim Cayman v. El Salvador: Confronting Free Trade's Chilling Effect on Environmental Progress in Latin America," there is also concern that the environmental impact assessment does not adequately address the possibility of a cyanide spill into the Rio Lempa, which provides drinking water for many and sits near a fault line.

    Also regardless of the type of operation or the potential environmental effects, as the article discusses this issue is more broad than just one case. CAFTA and NAFTA style tribunals have had an impact throughout North and Central America and have changed the stage for the way in which disputes are handled.

    We welcome any further discussion or comments from anyone on either side of the debate.

    -Brooke Denmark