The Narco News Bulletin

Canadian Company Seeking to Assure Exploitation in El Salvador

Violence in Central American Nation's Cabañas Region Escalates as Corporate Mining Interests are Threatened

By Jillian Kestler-D'Amours
Class of 2010, School of Authentic Journalism

March 4, 2010
This report appears on the internet at http://www.narconews.com/Issue64/article4074.html

Some 3,000 miles separate Canada from the Central American nation of El Salvador. But that has not prevented a high-stakes legal battle, pitting a Canadian mining company against the government of El Salvador, from playing out in the court of corporate free trade.

The litigation is proceeding against a backdrop of controversy marked by the murders of several anti-mining activists in El Salvador and concerns over the environmental impact of the mining operations.

Pacific Rim Mining Corporation formally presented its case against the government of El Salvador on April 30, 2009, under the International Centre for Settlement of Investment Disputes (ICSID), an affiliate of the World Bank.

Pacific Rim argues that the Salvadoran government has breached international trade laws by not issuing the company the permits needed to begin exploiting gold deposits at the El Dorado gold mining site, located in the Cabañas region some 40 miles east of the capital city, San Salvador.

Since June 2009, three Salvadoran anti-mining activists from the Cabañas region have been murdered: Dora "Alicia" Recinos Sorto (who was eight-months pregnant at the time of her death), Ramiro Rivera Gomez, and Marcelo Rivera.

Violence, kidnappings and threats of violence have also increased in the area, according to Emily Carpenter, National Coordinator of the U.S.-El Salvador Sister Cities Network.

"The region of Cabañas had one of the lowest crime rates in the country before Pacific Rim arrived, " Carpenter wrote in an e-mail to Narco News. "Now, as early as 2006, we've seen threats against local journalists and community leaders; we've seen community leader Marcelo Rivera disappeared, tortured, and murdered; we've seen a kidnapping attempt against a Catholic priest; we've seen murders where the political aspects of these murders, the existence of 'intellectual authors,' has gone un-investigated. We've seen a general atmosphere of impunity. "

Pacific Rim claims that El Salvador has violated Chapter 10 of the Central America-Dominican Republic-United States Free Trade Agreement (CAFTA-DR), because it failed to issue the company an exploitation license despite the fact that Pacific Rim completed an Environmental Impact Study (EIS) in accordance with national law.

While Pacific Rim is a Canadian corporation based in Vancouver, British Columbia - and therefore would not be included under CAFTA - the company also has three wholly-owned subsidiaries: Pac Rim Cayman LLC in the United States, and Pacific Rim El Salvador and Dorado Exploraciones in El Salvador.

It is Pacific Rim's U.S.-based subsidiary, Pac Rim Cayman LLC, that has filed the claim under CAFTA. It is seeking damages that include US $77 million for out-of-pocket expenses, as well as an unspecified sum related to losses on investments plus interest.

El Salvador signed on to CAFTA in 2006. In addition to El Salvador, Honduras, Guatemala, Nicaragua, the Dominican Republic, Costa Rica and the United States are also parties to the agreement.

CAFTA's Chapter 10 lays out the protections granted to investors and a process for arbitrating grievances. The international pact, created to advance the interests of global free trade, includes provisions that prohibit the participating nations from discriminating against investors or companies based on nationality. In addition, the agreement prohibits governments from expropriating a company's private property (which includes current assets and potential profits), among other things.

Chapter 10 of CAFTA also outlines how a claim can be brought before the International Centre for Settlement of Investment Disputes (ICSID) to enforce those corporate rights, and states (under Article 10.26) that while the court is not authorized to grant punitive damages, it can award monetary damages or restitution of property.

Pacific Rim's History in El Salvador

Pacific Rim has been operating in El Salvador on its own or through subsidiaries since 1993. In 2002, it received a permit to explore the potential for gold mining in the country.

In addition to the El Dorado project, Pacific Rim has explored two other potential extraction sites in the same Cabañas region: the Zamora and Santa Rita gold projects.

The El Dorado project is the company's main interest, however, and is located near the town of Sensuntepeque, a very rural and densely populated area made up primarily of farmers and cattle ranchers.

Since 2008, however, Pacific Rim's El Dorado project has been on hold.

In 2009, both Salvadoran president Mauricio Funes and his predecessor, Antonio Saca, announced that they would not grant exploitation licenses to mining projects in the country.

According to a filing with the U.S. Securities and Exchange Commission, Pacific Rim has lost money every year since 2005, for a total of just under US $53 million.

Growing Opposition on the Ground

An Environmental Impact Study (EIS) conducted in 2005 and sponsored by Pacific Rim argued that its mining project would have little to no negative environmental effects. However, that corporate-sponsored study has not alleviated the concerns of anti-mining activists in the region, who fear the El Dorado project will have dire consequences for the environment - especially on ground water resources and farming - as well as on the health of local residents.

Robert Moran, an American hydro-geologist, released a report in 2005 that concluded Pacific Rim's EIS "lacks basic testing and data necessary to adequately define baseline water quantity and quality conditions. It is especially weak in areas relating to the definition of ground water resources."

Moran also found that Pacific Rim lacked a sense of openness and transparency in providing the public with EIS results, and that overall, the company's EIS "would not be acceptable to regulatory agencies in most developed countries."

At stake for Pacific Rim, and those in El Salvador benefiting from its payroll, is millions of dollars in foregone revenue should its mining operations be permanently shuttered and its ICSID claim prove unsuccessful.

With that kind of money on the line, the potential for intimidation against those seeking to close the mining operations is heightened, according to human rights advocates working in the region.

A December 2009 press release issued by the U.S.-based Committee in Solidarity with the People of El Salvador states that, "the ongoing violence in Cabañas, including numerous assaults, attempted kidnappings and death threats, [as well as three murders since the summer of 2009] seems to be centered around the controversial presence of Pacific Rim Mining in the region, with prominent anti-mining leaders coming under attack."

Pacific Rim and its subsidiaries have denied any accusations linking the company to the violence, however.

"The same anti-mining groups that have wrongfully implicated PacRim in the (recent) murders have portrayed the incidents as the result of an allegedly hostile conflict related to the debate over mining in El Salvador, " Pacific Rim stated in press release issued on January 4, 2010. "However, there is no evidence indicating these violent acts bear any relation whatsoever to the debate over mining in the country."

While the International Centre for Settlement of Investment Disputes (ICSID) cannot force El Salvador to grant the mining permits, it can force the government to pay damages. This, according to Carpenter, would set a dangerous precedent for the country to be sued again in relation to other mining operations.

However, if Pacific Rim fails to score a win in the ICSID litigation, it could well represent an ultimate victory for the people of the Cabañas region of El Salvador, who have far more than money at stake in this struggle.

"This is the homestretch, where we prove in law what people have proved in practice: That life is more important than gold and profits," Carpenter wrote in her e-mail to Narco News. "It's not often that there is such a clear opportunity like this for people to win such a victory."