Mountain Movers

Mining, Sustainability and the Agents of Change

Daniel M. Franks

• Publisher: Routledge
• Year: 2015
• ISBN:
  9781134656202
• Edition: 1
• Topic: Business
• Subtopic: Business Ethics
• Index: Business

The products of mining are everywhere – if it wasn't grown, it was mined or drilled. But the mining industry has a chequered past. Pollution, human rights abuses, and corruption have tarnished the reputation of the industry across the globe. Over a decade ago the major mining companies embraced the concept of sustainable and equitable development and embarked on an explicit process of reform – but has the industry actually changed?

This book explores the dynamics of change-making for sustainable development in the resources sector, specifically the mining of mineral and energy resources. The author recounts the stories and insights of over forty change-makers both inside and outside the industry, from anti-mining activists to the professionals charged with the task of reform, introducing the people who are moving an industry that moves mountains. The book takes stock of what has worked and what has not, analyzing the relative influence and dynamics of the key corporate, civil society and government actors with a view to developing new approaches for improving environmental and social outcomes from mineral and energy development.

Illustrated with case studies from Angola, Australia, Brazil, Canada, Chile, Colombia, El Salvador, Guinea, Peru, The Philippines, Romania, Sierra Leone, South Africa, and The United States of America, and brimming with the backstories to the major sustainability initiatives, Mountain Movers reveals where progress has been made and where reform is still needed towards a more sustainable and equitable mining industry.

1
Breaking new ground

The ‘long petal of sea, wine and snow’

The story that I will tell across the pages to follow begins in Chile on the Western flank of the South American Andes. This ‘long petal of sea, wine and snow’, as Chilean poet Pablo Neruda famously described his homeland, is also the world’s principal source of copper. Chile accounts for around 32% of world copper production and 27% of world copper reserves.¹ Copper is a commodity central to our daily lives. It carries energy to our homes, and our voices across the telephone. Copper is used in our coins, our plumbing, the wiring of our electronics and even as building product in our hospitals to prevent infection. The copper deposits of the Chilean Andes have been mined for millennia, but industrial mining found its way to the continent in 1915, with breakthroughs in low-grade oxide mineral processing and the opening of the Chuquicamata mine.

I have chosen to start the story here for two reasons. The first is a personal one. Chile is the place where my own involvement with mining industry reform began. I arrived in Chile, an aspiring geologist in the late 1990s. I visited the copper mines of northern Chile and the tin and silver mines of Potosí in neighbouring Bolivia and I was confronted with the striking disparities that seem to typify many parts of Latin America, and indeed the world. In Potosí, the mines, and the forced labourers that once worked them, contributed thousands of tonnes of silver to the Spanish Monarchy during colonialism and are still worked today using the backbreaking methods of centuries past. Potosí is a marvel of inequity. It is the ordinariness of the town that is so striking given the riches that have been unearthed. In Antofagasta, Chile’s mining capital, I stayed with an acquaintance who was an expatriate mining professional. We were stationed in a separate luxury suburb, an enclave of the developed world far removed from the circumstances of ordinary Chileans. While I lugged my baggage toward the enclave, which at the time was not connected by the normal public transport system, I wondered whether the disparities of the present were the children of historic injustices in Chile as they had been in Bolivia. I have since returned many times to the region and witnessed the transformations that have accompanied mining development over the past decade and a half. I have worked with communities, companies and governments globally in the pursuit of better environmental and social outcomes from mining and I will share some of these experiences in this book.

The second reason for starting this story of mining industry change in Chile is that one thread of reform can be traced to events that happened here just a few years before my first visit to the region. A controversial hydroelectric project constructed between 1993 and 1996 triggered a chain of events that led to new standards for private sector investment globally and sustainability reform within the mining industry. That dam was the Pangue Hydroelectric Project.

Pangue, the Bío-Bío and the Performance Standards

Originating in the Andes of south-central Chile, the Bío-Bío River flows eastward, falling around 1100m on its 380km journey to the Pacific coast. Fed at its origin by both lakes and glaciers, the river descends through evergreen Araucaria forests, vestiges of the ancient Gondwana super-continent, and passes by cinder cone volcanoes before meeting the Pacific in the city of Concepción. Prior to the dam the river was one of the last major free-flowing, white-water rivers in the world. The name Bío-Bío comes from the language of the Mapuche, and the river itself marked the borderline, or ‘La Frontera’, between the foothold of the Spanish colony to the north and the Mapuche indigenous resistance to the south. It was not until the 1880s that the Chilean State firmly established its presence here following the ‘Pacification of Araucanía’ military campaigns. Still today there is a timeless quality to both the people and the landscapes of this captivating region.

The river, and the controversy over its damming, is an unlikely setting for a story about change in the mining sector, but change tends to meander an unlikely course. The Pangue Hydroelectric Project was proposed following the privatisation of Chile’s state owned electric utility, ENDESA, by the Pinochet dictatorship in 1989. The 467 MW dam secured part funding from the International Finance Corporation (IFC), the private sector lending arm of the World Bank. Where the World Bank lends to governments, the IFC lends to the private sector with the stated goal to attract private capital into developing countries to foster development. The IFC was created in 1956, more than a decade after the International Monetary Fund and the World Bank, which were both created at the United Nations Monetary and Financial Conference in the resort town of Bretton Woods, New Hampshire, in 1944.² The rationale for the IFC’s creation was that government-to-government lending was argued to be an insufficient source of development spending and that what was needed to mobilise development was private capital.

The World Bank has funded hundreds of dam-building projects since the 1950s. The Bank committed around US$1 billion per year up until the 1970s, rising to around US$2 billion per year until the late 1990s when investment began to tail off.³ Over the course of the 1960s and 1970s hydro-power projects attracted significant opposition from environmental and affected peoples’ groups. Many were also beginning to question whether the model of economic development implicit in large-scale lending to governments and companies for infrastructure projects was indeed leading to widespread improvements in social development.⁴ The World Commission on Dams estimated that the construction of large dams has been responsible for the displacement of between 40 million and 80 million people with many people not receiving resettlement support or adequate compensation.⁵

Under pressure from social movements, the World Bank adopted a series of reforms during the 1980s and early 1990s, including policies on involuntary resettlement (1980), tribal peoples (1982), environmental assessment (1988), and the introduction of an independent complaints-handling body known as the Inspection Panel (1993). Environmental and social policies were progressively strengthened under the banner of Operational Directives (1987) and Operational Policies (1992), and then Safeguard Policies in 1998.⁶

Pangue was a controversial project from the beginning. The project was conceived in a politically charged environment. The Pinochet dictatorship was in its last days and the privatisation of key assets, such as ENDESA, were viewed by many Chileans as a ‘closing down sale’ where allies of the dictatorship lined up to buy public assets at discount rates.⁷ The hydroelectric project itself posed significant risks to the environment and local communities and was thus designated as a Category A project by the IFC (that is, a project with a high potential for significant negative impacts). In November 1995, after the dam was built, a Chilean non-government organisation, the Grupo de Accion por el Bío-Bío (GABB), lodged a claim with World Bank President, James Wolfensohn, alleging that the Pangue project had not followed World Bank safeguard policies or the provisions of the investment agreement, and requesting that the World Bank’s Inspection Panel review the case. The claim was also supported by a large coalition of forty-seven other NGOs, demonstrating the breadth of civil society concern about the matter.⁸ In fact, the claim was just the latest phase of a large civil society campaign that had petitioned the IFC not to fund the project in the first instance.⁹

James Wolfensohn took up the position as World Bank Group President in July of 1995, so he came to the controversy with the energy of a fresh mandate. As an IFC-funded project, Pangue was technically not subject to the same environmental and social safeguards that were applicable to World Bank-funded projects where lending is directly to governments. The IFC evaluated World Bank policies to determine what was relevant to IFC projects, but no clear guidance was available to IFC staff or their clients on what this actually entailed. Critics of the IFC argued that on the one hand the IFC was trading on their association with the World Bank and the safeguards that applied to World Bank projects, but on the other hand those very same policies were not applied consistently to the IFC, because the IFC argued that it was different to the World Bank and could only apply the policies to the extent that they made sense in the private sector context.

In light of this complexity, James Wolfensohn informed the complainants that IFC-funded projects were not within the mandate of the Inspection Panel and he designated an Independent Advisor to undertake an audit of the project. The audit was a first of its kind for the IFC. In May of 1996, Wolfensohn appointed Dr Jay Hair, the immediate past president of the World Conservation Union (IUCN) to the role of Independent Advisor. Jay Hair was accompanied by two other audit team members, Luke Danielson and Benjamin Dysart, as well as a research assistant, Avra Rubalcava.

The auditors reported their findings in April 1997. In a hard-hitting report the audit team identified some commendable aspects of the project, in particular the standard by which eight non-indigenous families were involuntarily resettled, but the report also highlighted serious shortcomings. The report found that: significant project-induced impacts on 12 indigenous Pehuenche families adjacent to the reservoir had not been properly addressed; the cumulative impacts of the project, in light of five other proposed dams in the same catchment, had not been adequately considered by the IFC during decisions about whether to invest; the governance arrangements of a project-supported indigenous social development foundation were questionable; and the IFC had not developed project specific environmental and social standards or criteria that were acceptable.¹⁰

The key conclusion of the report, however, did not relate to the oversight of the Pangue project per se, but to the capability of the IFC as an institution to achieve its stated mandate to foster development. The report concluded that:

There is no indication at this time (April 1997) that IFC has in place the necessary institutional operating systems, or clarity in its policy and procedural mandate, to manage complicated projects such as Pangue in a manner that complies consistently with World Bank Group environmental and social requirements and recognized best practices.¹¹

The audit team recommended that: appropriate management systems and performance standards be established; that a process akin to the World Bank’s Inspection Panel be developed by the IFC; and that environmental and social oversight of projects should be handled by an independent body with direct reporting to the Office of the President. Looking in retrospect, it is clear that each of these recommendations have found their way into the institutional sustainability architecture of the IFC and beyond. In subsequent years the IFC created an Environmental and Social Development Department; adopted Safeguard Policies for IFC projects (and later developed a comprehensive set of Performance Standards on Environmental and Social Sustainability); and established the Office of the Compliance Advisor Ombudsman, a dedicated recourse mechanism to receive and investigate complaints from people negatively impacted by IFC projects.¹²

According to the IFC ‘no other project in the history of IFC has led to such...far-reaching institutional change’.¹³ Pangue is indeed an unlikely candidate for this mantle. The project is one of the lowest impact hydro-electric projects in the world when measured by the amount of land inundated and persons displaced per mega-watt hour of power produced.¹⁴ So why is it that the project attracted so much controversy? And perhaps more interestingly, why was Pangue the catalyst that led to a wave of reform that spread well beyond the IFC. In one answer to the first question, Pangue typifies the underappreciated truism: context matters. Just because a development project looks comparatively low impact does not necessarily mean that it will be accepted in its environmental, social, political and historical context. And as for the second question of why Pangue was the catalyst for wider reform, Pangue reminds us that change is not steady, but is replete with tipping points and recidivism, deep disappointment and deep elation. Change is connected. The ripeness of any one moment is bound to the multitude of other moments.

In the coming chapters I will attempt to answer questions such as this, using as my entry point the people that have involved themselves in driving change in the mining industry. The advocates and campaigners, the institutional reformers and the sustainability professionals working for change from within and from without. It is through the stories of these ‘change-agents’ that I hope to uncover the details of how change is really won (and perhaps lost). What looks on ...

Table of contents

• Cover
• Title
• Copyright
• Contents
• List of figures
• List of tables
• Preface
• Abbreviations
• 1 Breaking new ground
• 2 Rights
• 3 Environment
• 4 Development
• 5 Conflict
• 6 Transparency
• 7 Mountain movers
• Bibliography
• Index