Caribbean & Central America - August 2013 (ISSN 1741-4458)

Last month President Otto Pérez Molina triggered alarm bells in the mining sector, when he demanded that the national legislature approve a two-year moratorium on new metal mining licenses as part of efforts to address what has been a significant source of social tensions in the country. Pérez Molina’s call, which have yet to be heeded, nonetheless comes amid other signs that his government is intent on pressing ahead with unpopular natural resource extraction projects.

Pérez Molina called for a moratorium on 10 July, to allow for “national dialogue” over the development of the mining sector. It comes as his government is promoting a bill introducing 36 changes to the 1997 mining law, aimed at updating it in order to attract more foreign investment. The call also came the day after the murder of an anti-mining activist, Santos Ajau, who opposed the exploitation of the El Tambor gold mine, which is owned by a subsidiary of Canada’s Radius Gold Inc and is at the heart of one of five major conflicts related to metallic mining in the country. Ajau’s murder follows a string of similar killings earlier in the year, which attracted attention from institutions like the United Nations (UN) Office of the High Commissioner for Human Rights (OHCHR). Meanwhile a flare-up of social unrest back in May over the proposed Escobal silver mining project - another major source of conflict - which is owned by Canada’s Tahoe Resources, led the Pérez Molina government to declare a state of emergency in four municipalities.

Pérez Molina’s proposed moratorium prompted complaints from business lobbies like the Gremial de Industrias Extractivas which warned that it could deter investment. As the UN Economic Commission for Latin America and the Caribbean (Eclac) pointed out in its recent 14 May report on Foreign Direct Investment (FDI), Guatemala’s most important project announced in 2012 was Tahoe Resources’ US$500m investment in the Escobal project, although a subsequent court ruling has raised doubts over the project’s future (see box). As well the private sector, environmentalist groups also criticised the moratorium, complaining that it does not go far enough given that as of 2 July 2013, 107 metal mining licenses have been authorised in Guatemala, and a further 359 are pending according to the energy & mining ministry (MEM).

• Uncertainty over Escobal project

On 24 July a Guatemalan appeals court challenged an exploitation licence awarded by the MEM to Tahoe Resources for the Escobal mining project, work on which was due to begin this month. The ruling was in response to a joint appeal presented by indigenous leader, Kelvin Jiménez, and a local NGO, Centro de Acción Legal y Ambiental (Calas), which argued that the MEM had failed to take into account some 250 appeals against the project before awarding the licence.

  The ruling - the full details of which are not publicly available - has generated considerable uncertainty. Calas maintains that it calls for the project to be suspended, while Tahoe denies this accusing the NGO of “misrepresenting the court’s limited ruling”. In a 24 July press release, the mining company claimed that the court ruling stated that the MEM “should have conducted a hearing of a written opposition to the Escobal exploitation license during the permitting period”, but it “did not rule on the substance or validity of the opposition”, merely stating that “MEM is obligated to hold an administrative hearing.…The legality of the license is not in question and it remains fully effective”. The statement added that “MEM and the Company are appealing the lower court’s ruling to the constitutional court, which is expected to issue a decision in the next several months”.

• Moving ahead with other projects

While Perez Molina’s proposed moratorium on metal mining might suggest some effort to assuage what has been a significant source of social protest, there are other signs that his government is intending to continue with unpopular extractive projects. On 19 July work finally began on the San Gabriel cement plant in the municipality of San Juan Sacatepéquez. Located some 30km north of Guatemala City, the US$720m project by local firm, Cementos Progreso, is one of the most contentious construction projects in the country. According to the local media, some 20,000 people led by the indigenous and peasant organisation, Comité de Unidad Campesina (CUC), staged protests outside the site of the proposed plant, construction of which is expected to take three years. Cementos Progreso boasts that, once built, it will be the largest cement plant in Central America, capable of producing 2.2m tonnes per year.

Since it was first proposed seven years ago, the project has aroused considerable concerns regarding its impact on the environment and local farmers. In an unofficial popular consultation, held on 13 May 2007, the project was overwhelmingly rejected by the local community (by 8994-4 votes). This opposition has not only caused problems for President Pérez Molina – who deployed a team of riot police to prevent protesters from interrupting the project’s inauguration ceremony – but also his predecessor, Alvaro Colom (2008-2012), who at one point decreed a temporary “state of prevention” (restricting the right of citizens to take part in public protests and to carry arms) in response to protests.

The inauguration of the San Gabriel cement plant also came two weeks after Mining & Energy Minister Erick Archila announced that 25-year concessions, extendable for a further 15 years, had been awarded to six foreign oil companies: France’s Perenco Guatemala Limited; Panama’s Galax Garden Corporation; Island Oil Exploration Services and Greenfields Petroleum Guatemala (both of the US); Colombia’s Trayectoria Oil & Gas; and Zacapa Energy Ltd. of Russia. This is in line with Pérez Molina’s declared efforts to boost oil production, announced in August 2012. Guatemala (along with Belize) is one of just two oil-producing countries in Central America, but production has been on the wane due to a lack of exploration and the poor condition of existing wells. Archila’s announcement of new concessions attracted concern from environmental groups including Calas, which has previously opposed other oil exploration projects - in particular the controversial extension in 2010 under the Colom administration of Perenco’s 15-year exploration license covering the Laguna del Tigre, a Maya Biosphere Reserve in the northern province of Petén.

• Landmark ruling

In a decision hailed by local and international human rights groups alike, on 22 July a Canadian judge ruled that a case against Canadian mining company, Hudbay Minerals, regarding alleged human rights abuses which took place at its formerly-owned Fénix Mining Project in El Estor, in the eastern Guatemalan department of Izabal, can proceed to trial in Canada. This signifies the first time that a Canadian court will hear a lawsuit against a Canadian mining company over alleged human rights abuses that have taken place abroad.

Hudbay bought Guatemalan mining company, Compañía Guatemalteca de Níquel S.A. (CGN), and its Fénix ferronickel mine in August 2008. It then sold it to a Russian company, Solway Group, in August 2011. According to Solway Group the mine, a fully operational nickel laterite mining and smelting operation in the 1970s until it was closed for maintenance in 1980, is due to begin operating again in 2014.

The case against Hudbay involves three lawsuits which centre on: the murder of an indigenous community leader, Adolfo Ich Chamán, who was allegedly hacked and shot to death in 2009 by private security forces employed by the Fénix; 11 gang rapes allegedly carried out by uniformed mining company security personnel, police and military during the forceful ejection of Mayan Q’eqchi’ families from their remote community of Lote Ocho in 2007; and the 2009 shooting of another member of the local community, German Chub Choc, who was left paralysed.

• Cerro Blanco

Along with the Escobal and El Tambor projects, there are three other major conflicts related to metal mining in Guatemala: the Marlin gold & silver mine, owned by Canada’s Goldcorp; the El Estor nickel mine, owned by Russia’s Solway Group; and the Cerro Blanco gold & silver mine, which belongs to Entre Mares de Guatemala (a subsidiary of Canada’s Goldcorp). On 25 July Goldcorp announced that it was suspending the Cerro Blanco project, due to “recent declines in…metals prices”. The mine had been a major bone of contention not only in Guatemala but also in neighbouring El Salvador, where anti-mining activists warned that El Salvador’s largest river, the Lempa, which flows across the border from Guatemala into Lake Güija, could be contaminated by the mine.

• Petrol concessions

Mining & Energy Minister Erick Archila recently told the media that between 2000 and 2011 just five bidding processes took place for eight oil concessions, producing a total of 13 offers, of which only five were awarded. According to Archila, with the latest bidding process, in which nine companies submitted 15 offers, the government of President Otto Pérez Molina (which assumed power in January 2012) has generated more interest in the sector than the past three administrations combined. Archila also said that each company had pledged US$40m in the first three years of each contract.