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  November 14, 2011

Is Canada's Gold Corp. Good for Guatemala?


Lyuba Zarsky: 85% of gold revenues leave the country, where majority live in poverty
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biography

Lyuba Zarsky is a Senior Research Fellow at the Global Development and Environment Institute at Tufts University and a member of the GDAE-sponsored Working Group on Development and Environment in the Americas. She is an Associate Professor in the Graduate School of International Policy and Management at the Monterey Institute of International Studies in Monterey, California. She is co-author of the book Enclave Economy: Foreign Investment and Sustainable Development in Mexico’s Silicon Valley (2007); and contributing editor of International Investment for Sustainable Development: Balancing Rights and Rewards (Earthscan Press, 2005)



Pt2 Coming soon


transcript

PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Toronto. The Canadian Goldcorp company owns a mine called Marlin in Guatemala. For nearly a decade this mine has been a matter of great controversy. People have accused the mine of doing terrible environmental damage and damage to people's health and not being of much economic benefit to Guatemala. Goldcorp, on the other hand, has studies to show quite the opposite. A new study's been done to assess Goldcorp's claims, by the Global Development and Environment Institute at Tufts University. The report's called Searching for Gold in the Highlands of Guatemala: Economic Benefits and Environmental Risks of the Marlin Mine. Now joining us is one of the authors of the report, Lyuba Zarsky. She joins us from our studio in Washington. Lyuba is an associate professor at the Monterey Institute for International Studies. She's also a senior research fellow at the Global Development and Environment Institute at Tufts University. Thanks for joining us, Lyuba.

LYUBA ZARSKY, GLOBAL DEVELOPMENT AND ENVIRONMENT INSTITUTE, TUFTS UNIVERSITY: Thank you for having me.

JAY: So give us the headlines of what your research discovered.

ZARSKY: Well, first of all, I'd just like to clarify. The reason that this mine became so controversial was really on human rights grounds. The mine moved into a community in the Highlands of Guatemala where--is an indigenous area of Guatemala, and an area that suffered intensely during the civil war of the 1980s and into the 1990s. So highly conflictual. A very marginalized part of Guatemala. And when they did so, there was not an adequate consultation and consent period. The company received project support from the International Finance Corporation, which required that it consult with local people. But in their own referenda that were conducted, actually, first in one of the municipalities that borders the mine, Sipacapa, but also throughout the region following, the indigenous people overwhelmingly voted no to the project and to mining in general in the Highlands. So there is a--and that's really what attracted so much controversy, this issue of whether this mine was really accepted by the people. And, in fact, the evidence suggests that it was not. This study picks up some years later (that vote happened way back in 2005; the mine has been operating now for a little more than five years), and to really understand whether--what kind of benefits the mine is bringing in economic terms and what are the long-term environmental risks of the mine.

JAY: Right. So let me read to you one of the contentions of Goldcorp in terms of economic benefits. They say that over 50 percent of the 1,900 people working at the mine are local residents at their time of hiring; 98 percent are Guatemalan residents. In 2008, they say, the Marlin operation spent more than $90 million in Guatemala on supplies and services and paid over $20 million in taxes. So, first of all, do you agree that that's true? And if so, is that not of some benefit to Guatemala?

ZARSKY: We--in our research, we found that--documentation for all those claims. But let us unpack them a little bit. First of all, the most important benefit to a host country and to communities from a mine come in the form of royalties and taxes. Remember, these are the resources that belong to Guatemala and that are under the ground there, and they can use those to maximize, hopefully, in the best of circumstances, some revenues that could be used for development. Guatemala is very, very poor. Well over 50 percent of the population lives in poverty. So--but when we look at the royalty and taxes flow in Guatemala, first of all, the royalty rate is set at 1 percent by law. And this was a law that was passed in the 1990s. Even in Guatemala, the royalty was by law about 6 percent before that. So we have a very low rate. And this was a rate that was encouraged by the International Monetary Fund as a way of attracting foreign investment. So right from the beginning you have a very, very low royalty rate and a fairly low tax rate. And what has been happening on the international markets is that the price of gold has soared, largely due to the financial crisis, but also increasing demand for jewelry. So, you know, there is a bonanza here that is being reaped by, mainly, I would argue, the shareholders of Goldcorp. Last time I looked, the gold price was over $1,700 an ounce. It had even gotten to $1,900. So there's a lot of money being made at this mine. So the question is: what is Guatemala getting from that, what might be called super profits, what economists call rents, oil rents? What's the percentage? When we added up all the taxes and all the royalties that have been paid since 2006, we come out with a share for Guatemala about 15 percent, 15 percent of the total. That means 85 percent are flowing elsewhere, out of the country, to shareholders. We also didn't find many shareholders in Guatemala. So this is a very, very low rate, even by Latin American standards, where royalties tend to be more in the range of 4 to 6 to 8 percent.

JAY: Now, is it your sense that Guatemalans, especially in the communities that are most affected, they want a bigger piece of the royalties to go to Guatemala, and then to go more to local people and safer practices? Or they want this mine closed?

ZARSKY: I think there are different points of view within Guatemala. In the Highlands themselves, these are people whose livelihoods depend on agriculture, subsistence and some cash farming--and, in fact, also on remittances, people going to the United States and sending money back. The potential for water contamination means that in the long term they could lose the potential--if the contamination was severe, if the water becomes contaminated (there have been already cases of, people claim, the cattle dying, etc.), then they would lose their long-term ability to farm in the Highlands. And for these Mayan groups, that also means a cultural loss of identity. So there's quite a strong feeling in the Highlands of not wanting mining, to rather invest in agricultural type of development strategies.

But I think there is also a feeling that if there's going to be mining, there needs to be conversation about a fair share of the benefits of the mining. The fact that there are super profits being generated by this mine, that the environmental risks are going to be held locally while the benefits are actually mostly distributed to shareholders in Canada, Europe, and the United States is seen as deeply problematic.

JAY: Thanks very much for joining us.

ZARSKY: Thank you.

JAY: And thank you for joining us on The Real News Network.

DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.



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