Stop private firms exploiting poor states

[Judi Lynn]

Stop private firms exploiting poor states
A Cafta provision means a mining corporation can sue El Salvador for its gold. Obama can stop this from happening again

Kevin Gallagher
guardian.co.uk, Friday 5 February 2010 11.00 GMT

As a senator, Barack Obama voted against the Central American Free Trade Agreement (Cafta), because it did "little to address enforcement of basic environmental standards in the Central American countries." A conflict over gold mining in El Salvador reveals that Cafta and similar deals may enable private firms to circumvent environmental laws and then parachute away with large sums of government money. This has to change.

The Vancouver-based Pacific Rim company says it has discovered gold deposits in El Salvador and wants to extract them. Gold extraction can require enormous amounts of water and toxic chemicals. Interestingly, the conservative government of Antonio Saca did not accept Pacific Rim's environmental impact statement and thus effectively denied the company the authority to extract gold.

In March last year, the left-leaning Mauricio Funes was elected president of El Salvador. Influenced by a broad civil society coalition and an external review of Pacific Rim's environmental impact statement conducted by an independent US hydro-geologist and geochemist, Funes backed the denial of permits as well.

The next month, Pacific Rim filed a claim under a provision in Cafta that allows foreign companies to bypass the domestic legal systems. The so-called "investor-state" dispute system in Cafta grants foreign investors the right to take El Salvador to an arbitral panel at the World Bank and sue the government for damages. Pacific Rim claims that El Salvador is obliged to let the firm start extracting gold.

But Canada is not a party to Cafta. So, Pacific Rim filed its lawsuit via its US subsidiary. According to the Investment Arbitration Reporter (pdf), Pacific Rim seeks damages of approximately $100m from El Salvador. The claim is almost double the amount of US foreign aid to El Salvador, a country where 34.6% of the population lives on less than $2 per day.

More:
http://www.guardian.co.uk/commentisfree/cifamerica/2010/feb/05/el-salvador-gold-pacific-rim-mining