Mining War in Ecuador

by Al Gedicks

Z magazine, March 2005


Ecuador has recently been the setting for intense resource conflict. In May 2003 attorneys representing more than 30,000 Ecuadorian Indians filed a billion-dollar lawsuit against ChevronTexaco Corporation. They charged Chevron-Texaco with systematically destroying the environment and homeland of a number of indigenous groups. From 1971 to 1992, the company dumped millions of gallons of crude oil into human-made lagoons in the region, causing massive contamination. The suit was filed in Lago Agrio, a small oil town in' the Ecuadorean Amazon. As the trial continues, the reckless practices of the oil industry are being held up for public inspection in Ecuador and elsewhere.

Less well publicized, but of great significance to Ecuador's attempt to attract foreign mining investment, are growing conflicts between peasant, indigenous, and environmental alliances, and transnational mining companies. At the urging of the World Bank and the International Monetary Fund, Ecuador, along with many other countries, passed new mining laws in the 1990s to encourage investment. Ecuador provided a long list of tax breaks and replaced mineral royalties with minimal annual payments ($1.00 to a maximum of $16.00 per hectare of mining concession during the peak production phase) to local and national governments. Environmental regulations were also weakened. Moreover, the Mining Development and Environmental Control Project, financed by the World Bank, provided investors with a networked computer database providing comprehensive information and management of mining claims on a provincial basis.

Biodiversity Hot Spot

The proposed Junin open pit copper mining project is situated in the largest remaining remnant of Ecuador's western cloud forests. After decades of logging and agricultural encroachment only 12 percent of these forests remain. Nonetheless, the remaining forests are considered to be, botanically, some of the most diverse on the planet. It has one of the highest rates of endemic species of any forest in the world. Jaguars, ocelots, spider monkeys, and Andean spotted bears inhabit this region. The proposed mining area is also located within a protected community conservation reserve and in the buffer zone of the state-owned Cotacachi-Cayapas Ecological Reserve. Cotacachi county has about 30,000 inhabitants and covers approximately 580 square miles.

Bishimetals Exploration of Japan, a subsidiary of Mitsubishi Corporation, was the first transnational with rights to the mining concession. That company's environmental impact study predicted that the mine would cause widespread deforestation, desertification, and contamination of rivers and underground water sources with heavy metals such as lead, arsenic, cadmium and other toxic substances. Construction of the mine would also require the resettlement of more than 100 families from 4 communities. One indication of the company's disregard for the community was the latrine employees built on the banks of the Junin river so that human waste flushed directly into the major source of water for residents downstream used for domestic and farm needs, including cooking, drinking, bathing, and irrigation.

In May 1997, after repeated attempts to meet with government officials to express their opposition to the project, about 200 residents from 8 communities surrounding the mining area occupied the company's mining camp. When mining and government authorities failed to appear for the meeting requested by residents, protestors burned the camp's wooden structure as an expression of the community's rejection of the mining project. Prior to lighting the match to the gasoline-soaked building, furniture, utensils, etc. were inventoried and stored in the community center. Several weeks later, the items were transported by mule to the parish seat three hours away where they were delivered to municipal authorities. Three peasants were charged with terrorism, subversion, and destruction of private property. Members of the Organization for the Defense and Conservation of Intag (DECOIN) and Accion Ecologica, an environmental organization in Quito, were named as unindicted co-conspirators, though neither organization was involved in the mining camp incident. Mitsubishi pulled out of the project shortly afterwards.

Alternatives to Mining

Realizing that it would only be a matter of time before another company came along to exploit Junin's copper, local residents worked to develop sustainable development alternatives to the boom and bust economy of extractive resource exploitation. With its primary forests, waterfalls and biodiversity, the area has great ecotourism potential. With help from U.S. and European environmental groups, Carlos Zorrilla, president of DECOIN, raised funds so that the community was able to buy about 5,000 acres of land and set up an environmental preserve.

There is also a "fair trade" coffee-growers' association that markets shade-grown organic coffee in fair trade venues in the United States, Japan, and Europe. Association members receive more than double the price paid by local buyers for their coffee. In September 2000 the Cotacachi Municipal government approved the declaration making the county the first Ecological County in Ecuador.

The ordinance provides for the municipal government to "prioritize and encourage sustainable economic activities over all others, declares the conservation of native forests and biodiversity a priority, and prohibits the establishment of industries that contaminate the environment with toxic substances, such as heavy metals."

Mining Conflict: Round Two

All this did not discourage Ascendant Holdings from acquiring the Junin property in July 2004.

Ascendant is not a mining company; it is a mine promotion company. They speculate on new mining properties, do feasibility studies, and then sell the property to a large mining company for a hefty profit. With China's recent industrial expansion, Chinese corporations are on a mineral acquisition binge and are willing to pay premium prices for a reliable supply of copper. Ascendant is registered in Canada and listed on the Bermuda Stock Exchange. The company is working on a public offering on the Toronto Stock Exchange, according to CEO Chris Werner of Sheboygan, Wisconsin. The firm's president, Paul Grist, has an office in Quito.

In contrast to the recent past, most mining companies have recognized that controversial mining projects cannot proceed without the informed consent of the local community, or a "social license to operate." Not Ascendant. Without informing the local government, the in the world" at 1.36 billion tons. This figure exceeds Mitsubishi's earlier estimate of 318 million tons by such a large margin as to raise serious questions of misleading and inaccurate information being sent to potential shareholders. While market conditions frequently result in upwardly revised estimates of economically recoverable ore, the magnitude of this discrepancy stretches credibility. The earlier estimate was based upon diamond drilling; the upwardly revised estimate is based upon Ascendant's in-house reevaluation.

Resisting Colonialism

The time when resource corporations could ride roughshod over the rights of resource-rich communities in Latin America is long since past. The centralizing and anti-democratic tendencies of neoliberal reforms advanced by the World Bank and the IMF have generated decentralized and democratic tendencies among indigenous people, peasants and workers. In 2002, popular protests halted the Bechtel Corporation's privatization of Cochabamba's water system and several mining ventures in Bolivia. The following year, President Gonzalo Sanchez de Lozada tried to push through a controversial deal to export Bolivia's natural gas through Chile to the U.S. The move provoked mass protests and he was forced to resign. His successor, President Carlos Mesa, offered a referendum to give Bolivians a voice in the government's plans for the gas industry.

In neighboring Peru, the Manhattan Mineral Corporation, a Canadian company, had mistakenly assumed that because they had acquired a concession from President Fujimori to develop the Tambo Grande copper-zinc deposit, they could construct a mine. In June 2002, residents conducted a referendum on the question of whether the mine should go forward. Over 93 percent of those participating voted "No." Manhattan Minerals' stock price fell approximately 30 percent in the following days. In 2003 the Peruvian government terminated the company's option on Tambo Grande. Canada's Northern Miner, a mining industry newspaper, editorialized (12/3/04) about the lessons of Manhattan Minerals, which was forced to write off a $60 million investment for a penny on the dollar. "It wasn't legal uncertainty that killed the Tambo Grande project. The development met with sustained resistance from both local landowners and First World activist groups, who raised the public's consciousness with a tendentious advertising campaign against Manhattan Minerals. "


Al Gedicks teaches sociology at the University of Wisconsin-La Crosse and is the author of Resource Rebels: Native Challenges to Mining and Oil Corporations (South End Press, 2001). Mary Ellen Fieweger provided much of the information for this article. She is a teacher, writer, and translator who has lived in Ecuador for 27 years.

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