Evidence of meeting #73 for Subcommittee on International Human Rights in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was firms.
A recording is available from Parliament.
Liberal
The Chair Liberal Michael Levitt
Colleagues, before we begin today's session, we're just going to do a bit of housekeeping. No need to go in camera, but I would just like to ask for approval of the two budget documents that you have in front of you.
The first is for this study. The second is for the emergency briefing we did on the Rohingyas last week. You have all the details there.
Can I get approval, please, on the budget for the current study, human rights surrounding natural resource extraction in Latin America?
Liberal
The Chair Liberal Michael Levitt
And also on the briefing on the human rights situation of the Rohingyas?
Liberal
The Chair Liberal Michael Levitt
Thank you. Good.
We can now get down to the work at hand, our second session on the study of human rights surrounding natural resource extraction in Latin America.
I want to welcome our two witnesses today. We have Paul Haslam. Dr. Haslam is an associate professor of international development and global studies at the University of Ottawa. His current research focuses on corporate social responsibility; resource nationalism; state-firm relations in Latin America, particularly in Argentina and Chile; and the international regulation of foreign direct investment in Latin America.
We also have Jeffery R. Webber with us. Dr. Webber is a senior lecturer at the school of politics and international relations, Queen Mary University of London. His research focuses on Latin American politics and international development studies, including the impact of extracted industries as it relates to these topics.
I want to thank both you gentlemen, particularly Dr. Webber. I know you've travelled a fair distance to be here today. We're going to give you each about eight minutes or so to provide us some testimony and then we'll open it up to my colleagues on the committee for a couple of rounds of questions.
With that, Dr. Haslam, are you okay to begin?
Dr. Paul Haslam Professor, School of International Development and Global Studies, University of Ottawa, As an Individual
Thank you very much.
I understand that I've been invited before the subcommittee because of my research in mining, social conflict, and CSR. I'm very happy to have this opportunity to present my work to the subcommittee.
At the outset, I'd like to clarify that my qualitative work and knowledge is focused on the countries of Argentina, Chile, and to a lesser extent, Peru, and then my quantitative work has looked at the determinants of social conflict in general, not with regard to specific cases. I don't focus on human rights issues per se, but I am interested in both the causes of conflict and the remedies to it.
To begin, I'd like to talk about the determinants of conflict and what we know for sure about the behaviour of Canadian mining firms as a group. My research partners and I have done the first large-scale quantitative analysis of the determinants of social conflict in the Latin American mining sector based on a dataset we constructed with 640 mining properties located in five major countries of the region—Argentina, Brazil, Chile, Peru, and Mexico—which has been published in the leading international journal of development studies.
Within this universe, 21% of mining properties had known social conflicts associated with them—that's 133 firms with, and 507 without—and Canadian firms, defined by the location of their headquarters, owned 36% of those mines. Our main findings here support much of the case study literature that conflicts are associated with both livelihood concerns—perceived incompatibility between mining and existing agriculture activities—and distributional concerns. That's to say, concerns of populations about who gets what benefit from a mining investment.
These concerns are related to local socio-economic and socio-environmental conditions. As economic opportunities for people become more scarce in the presence of a mining project—meaning that agriculture options are harder, poverty is generalized, and state services are absent—the likelihood of social mobilization increases. Other things being equal, a community with fewer agricultural opportunities, lower incomes, and worse state services is more prone to conflict.
We also find a number of firm-level factors that are statistically significant. For example, the type of mine is important. Open-pit mines are much more likely to have conflict associated with them. The size of the firm is important. Interestingly we do not find, contrary to the literature, that juniors are associated with conflict. Instead we find that mid-cap sized mining firms are more likely to be associated with conflict. We also find that the mineral is not that important. Gold, contrary to expectations, was also not significantly associated with conflict.
I think the take-away here is that social conflict around mining is multi-causal, and that's even when mining advances with full respect for the law and without considering possible bad behaviour by companies and their representatives.
The distributional concerns I raised, which basically means concerns about who gets what from the investment, merit some extra attention because they are so often related to allegations of human rights violations.
It's worth noting that mining firms create a pole of economic rents—that's to say, wealth or possible benefit—in extremely poor contexts in developing countries. This basic fact means that some local people benefit while others do not, creating passionate interests in favour and against the project. In this context, human rights abuses can occur especially when those who would benefit, including state representatives, organize to defend those benefits from protesters.
I think when you look at many human rights reports, you'll find that many of the human rights abuses around mining are conducted by, as it were, people who are seeking to defend the benefits of a mine for themselves and not necessarily that abuses are instigated directly by companies in most cases.
A recent extension of this statistical work I mentioned, using the same data, focused on separating Canadian firms from the rest of the sample—in other words, separating them from foreign but non-Canadian firms and locally owned firms—which allowed us to see if Canadian firms as a group were more or less prone to be involved in social conflicts than mining firms from other countries.
First, we found that foreign firms as a group are more likely to be involved in social conflict with local communities than locally owned firms. When we split the foreign-owned firms into those that had Canadian headquarters and those that were headquartered in other foreign countries, we get some interesting results. The quantitative analysis showed that Canadian mining firms as a group are less likely to be involved in social conflicts than foreign non-Canadian firms. These results are extremely statistically robust and withstand a wide range of statistical robustness tests.
The marginal effect analysis on our modified sample, which slightly overrepresents the likelihood of a social conflict, shows us the probability of a mine being associated with conflict. I think these percentages are useful when we're thinking about human rights abuses and social conflict around mines. Locally owned firms have a 5% to 7% probability of being involved in a social conflict. Canadian firms have a 21% probability; foreign non-Canadian firms have a 27% to 28% probability.
I need to underline that these results are about Canadian firms as a group and neither confirm nor repudiate any particular allegation of human rights abuses. I do not regard these results as a defence for complacency with regard to efforts to improve the human rights and social conflict performance of Canadian firms. Nonetheless, they do suggest that Canadian mining firms as a group are doing something better than their foreign peers. In this context of the study of this kind of committee it is worth asking what that is.
CSR has often been cited as a possible corrective to poor social performance in lieu of home or host government regulation. That has been the approach of the Canadian government over the last decade or so. A lot of my qualitative work in the mining sector has been about how CSR codes work on the ground in practice and has been based on stakeholder interviews at the local level.
From this experience, I volunteer a few observations.
First, companies increasingly have a material interest in doing CSR better, to gain and maintain social licence but to more broadly manage the social risk, which has proven itself to be extremely costly to mining firms. CSR has professionalized throughout the industry over the last decade that I have been studying it. Second, adherence to international CSR codes is usually necessary but never sufficient to assure effectiveness. Codes need to be specific, measurable, with reporting and third party verification to be effective as a self-governance mechanism. Ultimately, effectiveness depends on having good people on the ground with the authority to take decisions important to the community and that can affect key aspects of the project. In reality there is often a governance gap between what is decided at the head office and what is implemented on the ground.
Best practice in CSR has two additional requirements: one, institutional mechanisms that allow broad-based participation and dialogue with the community that give the community effective voice; two, a broad-based distribution of substantial benefits to the community in development projects, supplier contracts, training opportunities, community infrastructure, and services, etc. In other words, CSR requires a legitimate process for participation and wide distribution of material benefits, which can change community perceptions about a mining project.
My final point is that CSR is not a panacea to the problem of human rights abuses or social conflict. It is above all a management tool that can, when used well, generate some degree of social licence or community consent, or at least keep protest from spiralling out of control. It reduces the likelihood that people will protest but it does not necessarily eliminate grievances or the drivers of conflict mentioned previously.
Thank you for your time and the opportunity to present my work to the subcommittee.
September 28th, 2017 / 1:20 p.m.
Liberal
The Chair Liberal Michael Levitt
Thank you very much, Dr. Haslam.
We will move right on to your testimony, Dr. Webber.
Dr. Jeffery Webber Senior Lecturer, School of Politics and International Relations, Queen Mary University of London, As an Individual
Thanks to the committee for the invitation to speak today.
My name is Jeffery Webber. I'm a senior lecturer in the School of Politics and International Relations at Queen Mary University of London in the United Kingdom. My academic training is in political science and political economy with a regional specialization in Latin America. Most recently, I co-authored, together with Todd Gordon of Laurier University in Brantford, a book called Blood of Extraction that was published in November 2016. Canadian mining investment and associated human rights violations in Latin America are at the centre of this book.
To begin today, I will very briefly summarize some of our key findings, but first a word on our sources.
Much of the research for the book was funded by a Social Sciences and Humanities Research Council grant, which allowed for extensive fieldwork throughout the region; dozens of interviews over the period from 2008 to 2013 in Guatemala, Honduras, Equador, and Venezuela; exhaustive collection and collation of access-to-information materials; a collection of statistical data from StatsCan and the United Nations Economic Commission for Latin America and the Caribbean; research in databases of the online industry journal The Northern Miner; and extensive collection and review of relevant local reports from Spanish-language newspapers, NGO documents, and the reports of relevant civil society organizations throughout Mexico, Central America, the Andes, and into the southern cone. Every detail of the book is forensically documented in 1,164 endnotes so that replication or verification of our data is possible. I am also tabling this book for the panel as part of my testimony.
In terms of our findings, first there are the issues of the extraordinary scale and rate of growth of Canadian investment in mining in Latin America and the fact that the primary driver of this investment is by far and away, above all other considerations, profitability. Canada's mining industry is the largest in the world. Approximately two-thirds of the world's mining companies are based in Canada, with its permissive tax and legal regime, long mining history that has nurtured an aggressive exploration and producing sector, and unflinching foreign policy support for companies with international ambitions.
Latin America and the Caribbean accounted in 2012 for over half of Canadian mining assets held abroad, that is, $72.4 billion Canadian. The 80 Canadian mines in operation in 2012 generated a combined revenue of $19.3 billion Canadian in 2012 for Canadian companies, according to the Canadian international development platform, whose numbers are drawn from the industry database InfoMine.
According to The Northern Miner, an industry web publication database, in 2014, 62% of all producing mines in the region were owned by a company headquartered in Canada. The size and international leading role of the Canadian mining industry is no doubt the reason Toronto is the most important financial node of the global mining industry. In 2013, for example, $6.9 billion Canadian was raised in equity financing on the city's two exchanges, the Toronto Stock Exchange and the Toronto Venture, representing 84% of the global total.
The dominance of Latin America's natural resource markets has showered the owners of Canadian companies with extraordinary profits. For example, we examined the publicly available company data from Barrick, Yamana, and Goldcorp using their annual financial reports and corporate social responsibility reports.
If you look only at the earnings for mines that were still operational in 2013, 15 gold mines in total, the three largest gold mining companies by revenue were Barrick, Yamana, and Goldcorp, and they earned a combined net profit of $14.9 billion U.S. between 1998 and 2013. The rate of profit for these operating mines was an astounding 45%. With taxes and royalties factored in for Barrick, it was still an incredible 42.4%. The average rate of profit of the Canadian economy as a whole from 1998 to 2013 was 11.8%. I stress this issue of profitability because these are the high stakes that are behind Canadian firms presenting their activities as benevolent, even beneficial for Latin American communities.
The second point, following on from profit, is redistribution. Is this wealth being generated distributed? This is a central issue of human rights, although it is not always considered as such.
The typical justification for the big profits accrued is that it is not only Canadian companies that are getting rich. Rather, Canadian investment is improving the living standards of the communities where they are digging gold, silver, copper, and other natural resources from the ground.
In actuality, very little of company profits is invested in local communities. Barrick and Yamana's combined “community investment spending” part of their corporate social responsibility agendas was a mere 1.4% of net earnings in 2012, and 0.9% in 2011. Comparable figures for Goldcorp were not made publicly available by the company.
Beyond these community investments, after construction of the mines, there is very little new inflow of money from these companies into the countries in which they are operating mines. The construction costs of new mines are usually made back within a few years of the mines' operations. In other words, most of these profits leave the country after the construction period, and mining represents after that period a significant net outflow of value.
Still on this point, it is important to keep in mind as well how few jobs are created by industrial mining. For example, a recent report from the United Nations Economic Commission for Latin America and the Caribbean demonstrates that of the 12 major industries it surveys in terms of investment into Latin America, mining and oil investment created fewest jobs, with only 0.5 jobs created per $1 million U.S. invested. In short, Canadian mining companies are investing in activities that are often associated with displacement of peasant and indigenous communities, irreparable ecological damage, and wide-scale human rights abuses, violence, assassinations, and killings. This investment is generating extraordinary profit, but very few jobs and very little community reinvestment.
Third, it is also important to stress the role of Canadian government support in this process of Canadian mining expansion in Latin America. Canadian mining companies have received the steadfast support of the Canadian state, from the Prime Minister's Office to Foreign Affairs and the Canadian International Development Agency. As of 2015, Foreign Affairs, CIDA, and International Trade are now part of Global Affairs Canada, National Defence, and Natural Resources Canada.
Canadian embassies in the relevant countries in Latin America with mining industries have devoted huge amounts of their resources and staff energies to promoting and facilitating the interests of Canadian mining investment in this area. This is one of the most striking and consistent findings of the regular embassy communiqués to Ottawa and other documents we retrieved through access to information requests.
Latin America was clearly on the radar of the Jean Chrétien and Paul Martin Liberal governments of the 1990s and early 2000s, which signed the initial free trade agreements in the region as well as a series of bilateral investment treaties, or foreign investment protection agreements as they are called in Canada. These included the North American, Chilean, and Costa Rican FTAs, but foreign policy engagement in Latin America was given an extra boost and received clearer articulation under the Harper Conservatives, who signed another four FTAs while attempting to publicly and privately sketch out an agenda for Canadian intervention. There is no indication of a break in these bipartisan trends under the present Trudeau government.
Fourth, our book documents decisively that Canadian mining activities in Latin America are associated with peasant and indigenous dispossession of land, and displacement, violence, assassinations, criminalization of protest, and socio-ecological degradation of livelihoods and community environments. Our evidence suggests that this is irreducible to a few bad apples, and that it is an ongoing, systematic problem, not something resolved in the recent past.
Since we published our book, similarly robust findings have been exhaustively documented in the November 2016 publication, The “Canada Brand”: Violence and Canadian Mining Companies in Latin America, by the Justice & Corporate Accountability Project under the coordination of lawyer and legal scholar at Osgoode Hall Law School, Shin Imai. I am also submitting this report to the panel for their records as part of my testimony.
Using an intentionally conservative methodology of only reporting incidents corroborated by at least two independent sources, that report concludes that there were 44 deaths associated with Canadian mining activity between 2000 and 2015 in Latin America, and that 30 of these were targeted killings. There were also 403 injuries, 363 of which occurred during protests and confrontations with the local police, the military, or the private security of mining firms.
There were additionally 709 cases of criminalization, understood as legal complaints, arrests, detentions, and charges against individuals involved in opposition to Canadian mining activities.
In concluding, I think it is important to bring up the fact that the Mining Association of Canada has recently cited a draft scholarly article co-authored by Paul Haslam, the other witness appearing today, in order to present Canadian mining corporations in a better light than other foreign firms operating in Latin America.
I want to suggest that in its public statements, the Mining Association of Canada, hereafter referred to as MAC, has distorted the article's conclusions by very selectively drawing from its core arguments. MAC has latched on to the fact that in the article Haslam and co-authors note that “our statistical analysis suggests that Canadian firms perform slightly better, are less associated with conflict in comparison to non-Canadian firms.” However—
Liberal
The Chair Liberal Michael Levitt
Dr. Webber, we're over 10 and a half minutes now and I want to have time for questioning. I think if we can now move to the questioning, I'm sure you'll be able to follow up on that in your questions.
Senior Lecturer, School of Politics and International Relations, Queen Mary University of London, As an Individual
Okay.
Liberal
The Chair Liberal Michael Levitt
Thank you very much.
The first question is going to be from MP Anderson, please.
Conservative
David Anderson Conservative Cypress Hills—Grasslands, SK
Thank you, Mr. Chair. I want to thank our witnesses for being here today.
Mr. Webber, your numbers and facts are very different from some numbers we got the other day. I did ask a question about trying to square the circle between the reports that we hear and some of the testimony we have. You mentioned an Osgoode Hall Law School project study and our previous witnesses mentioned one as well.
I'll just quote the witness. “As we mentioned earlier, there are 930 Canadian projects in Latin America”, so that's different from the number that Mr. Haslam used today. It said, “There was a well-publicized report by people from Osgoode Hall Law School last year that named nine projects with incidents from 2014”, and then out of the nine he explains what those incidents were. He says “no specific case was a specific allegation made against a Canadian company, nor did the report state that the Canadian company caused the incidents in question”.
That's in contrast to what you've said here today. Can you square that circle? If you can do that fairly quickly, that would be good. We have limited time here and I have some other questions as well.
Senior Lecturer, School of Politics and International Relations, Queen Mary University of London, As an Individual
Sure. There are no allegations in the Osgoode Hall Law School report of direct allegations involving a Canadian mining company being specifically responsible for the violence. The argument is a proximity of Mining Association of Canada activity with the various aspects of that report: criminalization, peasant displacement, and so on.
Then they also argue about what is called possible complicity using a definition of “complicity” involving the International Commission of Jurists, which suggests that complicity involves not just an action that led to violence, but the failure to act when you could be contributing to a situation of increased violence.
If you read that report closely, I think you'd find that quotation you were giving was a selective reading of that report, and I would have a different reading of the report. But I'm submitting the report so you can have a look at the details yourself.
Conservative
David Anderson Conservative Cypress Hills—Grasslands, SK
If we were to read through your writings, would we come across at any point that you would support natural resource development through private companies?
Senior Lecturer, School of Politics and International Relations, Queen Mary University of London, As an Individual
Natural resource development....This is....
Conservative
Senior Lecturer, School of Politics and International Relations, Queen Mary University of London, As an Individual
Well, it's not a simple yes-or-no question. There would be all kinds of questions to be asked in terms of developmental strategies, alternative components of extractive development, and so on. What I would say is that the role of Canadian mining companies in this area I would not support, because of their detailed records of violations in the sense that I've given them.
Conservative
David Anderson Conservative Cypress Hills—Grasslands, SK
Okay, so you don't support Canadian companies investing in natural resource development in Latin America is what you're saying?
Senior Lecturer, School of Politics and International Relations, Queen Mary University of London, As an Individual
That's true under the current context.
Conservative
David Anderson Conservative Cypress Hills—Grasslands, SK
Okay, that's fine.
These projects typically require outside investment in order for them to happen. Where would that investment come from if it's not going to come from private companies in Latin America?
Senior Lecturer, School of Politics and International Relations, Queen Mary University of London, As an Individual
There is little reason to conduct much of this mining extraction at all. If you look at the jobs generated, as the statistics from the UN Economic Commission for Latin America and the Caribbean suggest, you see this generates very little employment and the use value of the mining minerals that would actually be used for productive ends would be a much lower rate than if it were driven by the profitability concerns of Canadian mining companies. There would be much reduced extraction if you were interested in environmental sustainability and production of jobs for the internal market.
Conservative
David Anderson Conservative Cypress Hills—Grasslands, SK
The reality in rural areas is if they want to have economic development, they do need investment from outside, and typically, whether that generates a lot of direct employment right off the bat, it changes the structure and it changes the economy, and usually for the better in those rural communities.
I'm just wondering, because using some of your own phrasing, is it any less imperialistic to deny rural areas' development than it is to promote it?
Senior Lecturer, School of Politics and International Relations, Queen Mary University of London, As an Individual
As I have noted, the reality of investment in this area is that it is not producing jobs, and the job rate declines rather than improves with time. There is no justification for Canadian mining investment based on job production. It has a job creation rate of 0.5 per $1 million U.S. of investment, which is the lowest rate in 12 industries surveyed in the Economic Commission for Latin America and the Caribbean, the most widely recognized mainstream accounting service in Latin America.
Conservative
David Anderson Conservative Cypress Hills—Grasslands, SK
Mr. Haslam, I am wondering if you could help us out here. You used the words “known conflict”, and I am just wondering what qualifies as a known conflict. What would be the level of behaviour at the bottom of the chain, and what would be the most egregious level? Could you just help us out with that?
Professor, School of International Development and Global Studies, University of Ottawa, As an Individual
One of the problems of doing empirical research on this sector is that there is no central clearing house of information on social conflicts between mining companies and local activist groups.
I use the term “known conflicts” very specifically to indicate conflicts that have been identified by activist groups and recorded. The data we use for our list of conflicts comes from various Latin American activist groups. We basically take their accusation of conflict having occurred as a.... It scores a “1” on our database, and it therefore enters the database as a conflict.