Democracy in the Pits: The Corrosive Effect of Canadian Mining Companies Worldwide

Democracy in the Pits is a two-part series outlining the tarnished reputation of Canada's mining sector and the Harper government's role in supporting it. Read Part 2: How Canada Uses Foreign Aid as PR for Mining Companies.

In a recent article chronicling the demise of Canadian social democracy at the hands of the Harper Conservatives, Marianne Lenabat draws an important comparison: what the financial sector is to the United States, so are the extractive industries to Canada. The similarity isn’t just about the two sectors’ relative size or contribution to GDP, although it starts there. It’s about how each country’s respective darling industry has come to dictate government policy, even when the social harm they inflict far outweighs their economic benefits.

In both countries, the same platitudes are trotted out to justify the government’s helpless devotion: The industry is vital to the economic health of the nation. It leads the world in innovation. It creates the jobs we need to build communities of hard-working families. 

In the United States, where a frenzy of speculation in the housing market spawned a global economic crisis that continues to ravage the world, the government love affair with Wall Street shows no signs of faltering. The big banks were bailed out with no significant strings attached, and the stock market is now back to record highs.

In Canada, the extractive industries enjoy a similarly cozy arrangement. The government spies on activists and meets with corporate executives to help ensure the speedy implementation of pipeline projects. The oil sands are given the green light for massive expansion, despite the indisputable fact that we need to immediately phase out fossil fuel extraction if we want to continue to enjoy a climate that remains hospitable to human life.

Just as the destructive reach of Wall Street is felt around the world, so does the impact of the Canadian extractive industries exceed the nation’s borders. The informal ambassadors for the Canadian way of life are no longer roaming around Europe or Southeast Asia with maple leaves sewn onto their backpacks. They’re hard at work on massive extractive projects in Central America and Sub-Saharan Africa, where the Canadian government has begun to use its foreign aid apparatus to provide crucial support in dealing with local opposition.  

Although the oil sands tend to monopolize our attention, nowhere is the unhealthy relationship between the Canadian government and the extractive industries more visible than in the toxic mix of foreign and economic policy surrounding the mining industry.[view:in_this_series=block_1]

Over the course of its tenure, the Harper government has subordinated both domestic and foreign policy to the mining industry, undermining Canadian democracy at home and damaging the nation's credibility abroad.

Canadian mining assets.

Canada is the Miner of the World

While most people have at least heard of Canadian mining giants like Barrick Gold, what is less well known is the extent to which the global mining sector has its roots in Canadian soil. The statistics are quite surprising: more than three-quarters of all the mining companies on the planet have their headquarters in Canada.

A 2009 report by the Department of Foreign Affairs, Trade and Development summarizes Canada’s dominance:

“Canadian financial markets in Toronto and Vancouver are the world’s largest source of equity capital for mining companies undertaking exploration and development. Mining and exploration companies based in Canada account for 43 percent of global exploration expenditures. In 2008, over 75 percent of the world’s exploration and mining companies were headquartered in Canada. These 1293 companies had an interest in some 7809 properties in Canada and in over 100 countries around the world…Canadian mining companies have invested over $60 billion in developing countries, including about $41 billion in Latin America (including Mexico) and almost $15 billion in Africa.”

It’s no accident that the vast majority of the world’s mining companies are based in Canada—they’re here for a reason. According to a Vice interview with Jamie Kneen, research coordinator at MiningWatch Canada, the preponderance of Canadian companies in the global mining sector can be partially attributed to a high degree of homegrown expertise in services related to the mining industry, particularly in law and finance.

But the more compelling explanation is simple: Canada is a comfortable place for mining companies to do business. As Kneen explained to Vice, it’s easy to get listed on the Toronto Stock Exchange, disclosure requirements aren’t overly demanding, and the Canadian government doesn’t subject companies to too much pesky scrutiny about their activities in foreign countries.

The Dark Side of the Commodities Boom

The first decade of the 21^st century was a great time to be in the mining business. Driven by a combination of increasing demand for raw materials from the rapidly growing BRICS economies and speculative hot money looking for high returns after the dot-com bubble burst, commodities underwent a decade-long boom that saw prices soar to unprecedented levels all across the board. All commodities, from wheat to uranium and everything in between, were affected by the massive price increase.

Between 2001 and 2011, the price of gold rose by 528%, silver 1130%, copper 666% and platinum 435%, to name but a few examples.  

Price of gold from BuisnessInsider.

With such a disproportionate share of mining companies flying the Canadian flag, good times for the industry meant good times for Canada. But as the decade wore on, the social costs of the mining boom became increasingly difficult to ignore. Canadian mining companies were being implicated in a range of flagrant human rights and environmental abuses around the world.

The litany of offenses is too long to catalogue, and ranges from involvement in gang rapes and massacres of anti-mining activists to the poisoning of crucial water sources for rural communities. It includes the 2009 murder of Guatemalan community leader Adolfo Ich Chamán by security forces employed by CGN, a subsidiary of Manitoba’s HudBay Minerals. Chamán was a prominent community leader involved in anti-mining protests in Guatemala. In addition to the murder of Chamán, HudBay is accused of responsibility for a 2007 gang rape of 11 women during a land dispute. Claims by 13 Mayan Guatemalans against HudBay Minerals are currently awaiting trial in Canadian courts. 

By the end of 2009, the problem had become too glaring for even the industry to ignore. Research funded by the Toronto-based Prospectors and Developers Association of Canada (PDAC) produced a stunning report that was never published, though it was obtained by the Toronto Star. As the report claims, “Canadian mining companies are far and away the worst offenders in environmental, human rights and other abuses around the world.”

Excerpt from HudBay Minerals Corporate Social Responsibility 2012 report.

Social Irresponsibility

But the problem had been visible much earlier on. In 2005, the flood of criminal accusations against Canadian mining companies spurred a parliamentary report that called for a complete overhaul of the regulations governing the industry. Specifically, the report recommended that legal norms be established so that Canadian companies would be held accountable by the Canadian justice system for abuses committed in foreign countries.

Concerned by the fact that the reputation of the industry and of Canada as a whole was being undermined by the violent and unscrupulous conduct of Canadian companies operating overseas, the report also mandated the organization of Corporate Social Responsibility Roundtables. Held in Vancouver, Calgary, Toronto and Montreal, the roundtables examined the conduct of the Canadian extractive industries in developing countries, compiling input from a variety of stakeholder groups with the aim of producing a report for parliament.  

Published in 2007, the report advocated a series of sweeping changes to governance of the extractive sector, including mandatory accountability measures. But rather than implement the changes, Stephen Harper took a trip to Tanzania that same year to promote the beginnings of what has come to be a radical overhaul of the relationship between the Canadian government and mining companies.

Harper met with representatives from Barrick Gold while in Tanzania, where the company was seeking to replace a thousand miners who were striking in what Barrick deemed an illegal work stoppage. During a press conference, Harper made a seemingly innocuous announcement of what was on the agenda for his meeting with executives from Barrick and other Canadian companies operating in Tanzania: “We’ll be discussing, obviously, the general business climate, what the government of Canada can do to assist in building our investments here. And obviously we always want to promote notions of corporate social responsibility.”

What was not obvious at the time was the extent of the government support for the mining industry that Harper planned to implement. Rather than create a legal framework to address the disastrous conduct of Canadian mining companies operating in developing countries, Harper planned to turn the Canadian International Development Agency (CIDA) into the taxpayer-funded corporate social responsibility wing of the extractive industries. 

Read Part 2 of Democracy in the Pits: How Canada Uses Foreign Aid as PR for Mining Companies.

Image Credit: United Nations Photos via Flickr