Thank you very much, and thank you for the invitation.
My comments will focus on the relationships between mining and development, and they draw on a decade of research exploring relationships among extractive industries, social conflict, governance, livelihoods, and development in Latin America. I, along with postgraduate students and a range of research partners, have been involved in that work. The comments also draw on relatively close collaborations with civil society and governmental organizations in the region.
I want to begin by suggesting that rather than talking about development and development projects, it's perhaps more appropriate to talk about the relationship between mining and transformation. The appearance and the expansion of large-scale mining changes so much, so profoundly, that achieving development in such a context becomes particularly complicated and difficult. While these transformations do not make development impossible, they are of such a magnitude that any effort to foster development cannot simply focus on projects. Instead, it must focus on institution-building and regulation. It must also get sequences right. Very often mining expansion happens first and then efforts are made to build capacities later, usually after conflicts begin to emerge. By then it's too late, and the train has already left the station.
With that opening gambit in mind about transformation and the difference between projects and institution-building, I want to organize my remaining comments around three themes: mining and social conflict, mining and possible pathways to development, and the whole issue of legitimacy and legality.
On mining and social conflict, which has been a topic of our work, not all mining leads to social conflict; however, much does. The Peruvian human rights ombudsman consistently reports that over half of social conflicts in Peru are socio-environmental and related, in particular, to mining and, secondarily, to hydrocarbons. Similar patterns, though not so extreme, are visible in Bolivia and Ecuador, and mining-related conflicts are a particularly serious governance challenge for the government of El Salvador at present.
There's a narrative that says that these conflicts are manipulated. But who is deemed to be the manipulator depends very much on who's making the allegations, and that can range from the communist party to international NGOs to USAID. Those are all from allegations in the last few months.
This very diversity, and who's being accused of agitating, already weaken this interpretation of conflicts. More seriously, it's impossible to explain why so many people take to the streets, risk their physical safety, and invest so much time in protesting, if they're simply being manipulated. It seems more reasonable to conclude that their own motivations and frustrations lead them to put themselves in harm's way and to run such risks. I think it's also worth noting that in many cases people who are protesting and questioning are often themselves capitalists, agricultural producers, dairy farmers, fruit exporters, and the like.
So how do we understand this conflict?
I think one way into it is to look at maps of mining concessions, which are at the end of my paper. Those maps reveal that very significant areas are already affected by mining concessions. They reveal concessions overlapping with water resources. Fifteen of Peru's largest rivers have 25% or more of their drainage basin under concession. They reveal concessions overlapping with other forms of governing territory. Some experts calculate that about 55%—at least over half—of Peru's registered peasant communities are affected by concessions, and concessions overlap with landscapes that mean something to many people.
Of course, concessions are not mining projects. Projects cover far smaller areas.
So what do these concession maps tell us?
I think, from our research, that they can be best understood as maps of uncertainty. When people know that their land has been concessioned, their understanding of the future changes profoundly. They perceive new risks, new threats, and new opportunities. How much threat they perceive depends very much on the context in which they are living. In cases like Peru and El Salvador, where a whole range of people worry so very much about water, it's not surprising that people mobilize, worried about the effects of concessions on water sources.
Now while some people see threats, others see opportunities. Indeed, a recurrent feature in our research has been that the areas that are caught in the expansion of mining are characterized by severe internal divisions. Just as an illustration, in 2008, I was present as an invited speaker at the public consultation of Ecuador's Constituent Assembly on mining. We went to Loja and Zamora Chinchipe, a region where Canadian mining actually happens to be active. At two meetings, each with around a thousand people, the room was divided down the middle by police. It's the only time I've ever spoken to a room divided by police, and hopefully it will be the last time.
Much more detailed work at a local level by one of my graduate students shows how that polarization reaches into everyday life. School kids shoot notes or fight in playgrounds depending on whether their families are pro- or anti-mining. People's decisions on where to buy food, where to have their hair done, or even what taxi to take depend on the whether the provider is pro- or anti-mining. Shopping, she notes, has never been so complicated.
Under conditions where everyday social relations have become so polarized, achieving development is that much harder.
I also want to say one more thing about social conflict before moving to my next point—very quickly—and it has to do with the effects of fiscal transfers on conflicts. One of the primary contributions, of course, to the extractive industries is through the taxes and the royalties that they pay.
A colleague of mine, Dr. Javier Arellano-Yanguas, has shown through very careful econometric work and field study that, in the last few years, the primary source of conflicts in Peru has been related to struggles over, and conflicts over, what to do with these tax transfers. Groups struggle to get access to local government to control those resources. Groups inside communities struggle to control those resources. Neighbouring administrative unions struggle to get increased access to those resources. The submission has an example, which I won't speak to now, that shows one case of how that works out in practice.
I have just a few words about conflicts. I want to say something about mining and pathways to development, related to this observation on conflict, because such conflict is undesirable in itself. It's a negative development outcome, but it also affects other possible links between mining and development.
Discussions on mining and development generally identify three pathways through which mining can contribute to development: through multiplier effects, such as employment service purchasing and so forth; through CSR and community development programs; and through these tax transfers to local authorities. These pathways, however, don't occur automatically. They require institutional, organizational, and social conditions to be in place if they are to operate. The first pathway needs organizations that will train skilled labour that can respond to the demands of companies. The second pathway requires that CSR and community development initiatives of companies have a degree of autonomy from the other operations of companies, so they can respond to development dynamics rather than mine dynamics. The third pathway, above all, requires relationships of trust and collaboration in society so that people can agree on what to do with these fiscal transfers, which are so significant.
There are critical questions there. Do those institutions that need to be there actually exist? Can they be built, and how easily? Does the presence of mining facilitate or undermine that process of building these institutions?
I think the answer to the first questions is very often, no, they don't exist. To the second, generally, yes. They can be built, but this takes time and should precede the expansion of mining. The troubling question is really the third one, because I think there's reasonable evidence to suggest that in many cases—and the comments on conflict beforehand suggest this—the presence of mining can undermine the very social institutional arrangements that need to exist for mining to be translated into development.
I won't speak anymore on that because my time's running out.
I want to say something now about legitimacy.
I shared a panel with a twice-former minister of energy and mines in Peru. The minister, by then, ex-minister, once said that what matters most is not legalities around mining, but questions of legitimacy. If distrust and uncertainty are so dominant in areas affected by mining, and if trust is so central to economic development and to the fostering of partnerships, and if actors and processes must have some legitimacy before others will begin to trust them, then it is absolutely vital to seek that legitimacy.
Of course, not all companies are of the same feather, but the point I think is an important one. If a Canadian company in northern Ecuador even appears to be associated with the use of force as it pursues its legal rights, what does that do for the possibilities of partnership and trust in the future? Or if a different Canadian company in Central America professes its commitment to development, but then pursues a legal case against the government of El Salvador for various tens of millions of dollars, how legitimate is its claim to being committed to development going to appear to the Government of El Salvador and the population of El Salvador? How will that contradictory combination of orientations affect the claims of other Canadian companies that they are committed to development?
Questions of legitimacy apply to the sector more generally, as well. As long as governments have minimal professional and technical capacity to exercise binding environmental oversight over companies, many people will simply not believe in the environmental claims of mining companies through no fault of the companies themselves. El Salvador's office to regulate mining, for instance, only has three professionals to regulate the whole sector, and none are trained in environmental or mining sciences.
Until the approval of environmental impact assessments and the monitoring of the environmental and social performance of mining companies are placed in autonomous environmental authorities that are independent of the executive office, the approval of environmental and social impact assessments will always have legitimacy problems with the population.
We conclude from our work so far that these are the sorts of long-term institution and capacity building that need to precede the expansion of mining, if that mining is going to have the legitimacy it needs to contribute to development. Once again, the link between mining and development is not a question of development projects. It's a question of institutional development and addressing institutional constraints.
Also related to these thoughts on legitimacy, I have one final observation. My comments have really not been Canada-specific, but the case of Canada does come up in our research and our interviews. I want to share three quotations—two are literal and one is paraphrased.
The first two are from a pretty middle-of-the road minister of environment in Latin America who is concerned with mining. He said to me, in the context of a discussion about mining and Canadian policy, “I don't know if Canada has been quite so discredited in its history.” Then he went on to say, “I don't think they really care.”
My paraphrasing of a quotation from a then sub-secretary in a ministry of energy and mines is, “As far as I can tell, the Canadian ambassador here is a representative for Canadian mining companies.”
It seems to me that these sorts of comments matter. They're not from raving, left-of-centre activists. They're not from MiningWatch. They're from politically appointed technocrats trying to build public policy, and address questions of poverty and vulnerability in very practical ways.
If someone were to say similar things about my faculty members in my department then I would conclude that something was seriously wrong.
Thank you very much.
. Good Afternoon.
Mr. Chairman, honourable members of Parliament, thank you for the opportunity to present before the Standing Committee on Foreign Affairs and International Development.
As the second-largest gold producing company in the world by market capitalization, Goldcorp is very pleased to appear before the committee to share with you our view on how Canada's international development initiatives can be enhanced by the participation of the private sector. However, before sharing our experiences, challenges, and opportunities with regard to the role of the private sector, allow me to briefly describe our company and operations.
Goldcorp is a Canadian gold mining company with its head office in Vancouver, and a worldwide workforce of approximately 14,000 employees. If you take a look at a world map where Goldcorp currently has its operations, you would think that we were focused on the Americas. We have operations in Canada, United States, Mexico, Guatemala, Dominican Republic, Chile and Argentina. However, the majority of our company's production still remains here in Canada, representing 47% of total production. Mexico is in second place at 23%, and Guatemala is at 16%. Our mines in Dominican Republic, Chile, and Argentina are under construction. At the beginning of 2012, our company announced our commitment to the construction of both of these projects in Chile and Argentina, which represent an approximate investment of $5 billion.
Our company is known for being a growth leader in the industry, and a company that is responsible and welcomed in stable jurisdictions with low political risk.
While Goldcorp continues to expand significantly at the international level, we are also committed to managing and expanding our operations in Canada. Goldcorp currently has three mines in Ontario and one under construction in Quebec. The mines in Ontario collectively produce 1.2 million ounces of gold, which represents 80% of the gold produced in the province of Ontario.
Our other Canadian mining project, which is currently under construction, is located in northern Quebec and represents an investment of $1.8 billion.
The reason for mentioning these operations is to demonstrate that our experience with our operations and stakeholders, whether government, aboriginal groups, or academic institutions, has led, and continues to lead, to significant economic and social growth. For example, our company recently signed a collaboration agreement with the Cree Nation of Wemindji for the development of our Quebec project. The agreement, considered to be the first of its kind in Quebec, included the creation of several joint committees with Cree officials dealing with jobs and skills creation, education, and economic and business development activities.
To date, the significance of this agreement has been impressive. In 2012, Goldcorp awarded $49 million dollars worth of contracts at this mine in Quebec. Of this total amount, $39.7 million was awarded to Cree companies, which represents 81% of the total contracts awarded. This is a clear example of how a previous development project in Canada, which was the James Bay hydro project, led to the economic and social development of communities in northern Quebec. The Cree leaders had the vision and capacity to use the funds derived from this project to reinvest in their communities, develop the skills of their people, and invest in businesses that now supply Goldcorp and other projects in the region.
The most important aspect of the development activities was to increase the capacity of these communities to negotiate collaborative agreements with large multinational companies, in this case Goldcorp. With this collaborative agreement the Cree Nation will directly benefit from the success of the mine. This is the model we strive for at all of our international operations, and we have encouraged Cree officials to also reach out to local communities to share their positive experience where we operate.
However, challenges do exist when our company attempts to replicate similar collaboration agreements in other areas of the world. Our challenges often deal with the lack of capacity of local governments and businesses, the lack of capacity of national governments to provide essential services that are necessary for the social and economic benefit of local communities, and the lack of adequate skills and labour to provide services to the mining operation.
We see this as an incredible opportunity for the private and public sector to significantly contribute to Canada's international development interests. Goldcorp operates under the premise of sustainable prosperity, meaning our mining operations must contribute to significant economic and social development activities in the regions and countries where we operate. As a condition, these activities, whether directly or indirectly related to the mining operation, must be sustainable during and after the life of our mine.
While we do see improvements in the quality of life in the areas where we operate, we also see opportunities to increase this effect by partnering with organizations such as government, development institutions, financial and academic institutions, and non-governmental organizations with expertise in performing and delivering economic and social development activities.
Mining operations are often called upon to provide many basic services to our employees in communities where foreign governments have traditionally not been able to perform. In addition to job creation, our company also invests in many activities related to health, education, and business creation. As we know, mining companies are very skilled at providing and building the technical infrastructure needed to provide these services. Where we lack the skills and knowledge is in the training of the human capital and resources needed to actually manage and deliver the services within the clinics and the schools that we build, and manage the funds that we directly transfer to communities.
The very fact that our company funds many infrastructure projects also creates challenges for us with local and national governments by creating a dependence on the management and operation of these facilities. While our company has the ability to provide funding for the operation of the facilities, the strategy is not sustainable in the long term. A strategy to decrease this dependence needs to be implemented, and Goldcorp does believe that leveraging the skills of the Canadian government and NGOs will decrease the dependence and, therefore, increase the overall development activities in foreign countries. This is why we suggest that a trilateral partnership could be established with the Canadian government and NGOs, which are more capable of performing economic and social development activities.
From an extractive industry point of view, mining companies make investment decisions that are over the long period. Therefore, we have an interest in ensuring that we are operating in an environment that is considered stable over the long run. Our investments also include funding community development projects, which are an important part of our social licence to operate in communities and countries.
If governments believe that the extractive industry can contribute significantly to the economic development strategy of their country, they must ensure that they have the necessary capacity to regulate, monitor, and report on activities of operating companies. Perceived increased stability and confidence in their ability to accomplish these activities will result in an increase in foreign investment, thereby allowing the government to increase their revenues and provide more basic services to their communities.
By also participating in this partnership, non-governmental organizations will have further ability to capitalize on funding for extensive development activities in these communities.
Overall, this type of trilateral partnership will achieve the main objective that all three parties strive for; that is, increasing the social and economic benefits to the communities where our industry operates, and also the country as a whole. Therefore, to be successful, we need to implement these types of private-public partnerships, which will lead to the increased effectiveness of Canada's development initiatives, and certain criteria should be met.
Partnerships must include increasing the capacity of national and local governments in regulating, monitoring, and reporting on the extractive industries in their respective countries. Development activities must ensure that transparency initiatives within the development process are included, while advocating strong consultative processes with local and municipal communities. There must be a commitment by all parties to implement activities that are sustainable in the long term. We must also further partnerships with NGOs and government institutions that can supply much of the technical skills to increase the potential benefit of CSR activities. Finally, partnerships need to be established with the donor communities. This will increase credibility, and will bridge the path to long-term sustainability.
Goldcorp firmly believes that these types of strategies, which promote strong cooperation within the private and public sector, will enhance Canada's international development initiatives.
In addition, we believe that such partnerships will contribute to preserving the integrity and reputation of Canada's extractive industry as a strong contributor to economic and social development in the countries where we operate.
Thank you very much.
Mr. Bergeron, I'll put two questions to you, and perhaps we'll have time to hear your answers.
We heard from witnesses earlier—Revenue Watch Institute and other colleagues in your industry—about the Dodd-Frank legislation in the United States requiring companies to disclose payments made to foreign governments. Without getting into the details, obviously there are jurisdictional issues in Canada, constitutional issues about securities regulators, and the devil is always in the details as to how one reports, whether it is a level playing field and so on, and what it means for junior companies. I appreciate that, but as a principle I found it interesting.
We saw some of the confusion—that's the polite way of putting it—that SNC-Lavalin is facing with respect to payments they made or didn't make in Libya. If there were a legislative framework that was level, transparent, and applied in the U.S. to companies trading in the U.S.—and many companies are traded in both jurisdictions—I'm wondering if, in principle, you think there would be merit in that kind of idea, subject, of course, to seeing how it's applied and how it would be implemented.
I was interested in some of the good work your company has done with regard to helping local communities where you have large investments to develop social infrastructure. You said something important, that a partnership between local NGOs, and perhaps government actors as well, is the long-term way to make these investments succeed.
Maybe you could expand on that. I always thought that a company investing a large amount of money in a jurisdiction was questionable. The rule of law is pretty important. If something goes wrong with your lease you want to be able to go to a court and have it enforced. If you have a judicial system that is dysfunctional or corrupt, it's obviously a huge challenge.
Your company won't be training judges or helping to build a judiciary, but perhaps investments or contributions with other partners would help build a courthouse, and then governments could help train those people. It's capacity building. I'm curious how companies as large and successful as yours view that kind of activity from a corporate perspective.
Thank you both for appearing here with us today.
Mr. LeBlanc sounded like he was quoting Dr. DeSoto when he was here. I don't know if you were here at the time but he showed the importance.... I think he factored in two main issues. Number one was that we expect the governments we're dealing with to be at the same level as we are, and of course, we've gone through this process for a millennium. If you think about England and where we've obtained the parliamentary procedure, for instance, that's just not possible. We try to have the same rules and that's just something that hinders us so much. Property rights was the other thing that he noted as so important in moving these things forward.
Dr. Bebbington, you mentioned something about mineral extraction, and I don't know if I want to talk about that but I'm curious. You said that we should slow things down. When you say that, I think about, for instance, slowing our extraction down. There are probably many people who thought the United States had gone a little bit too far with oil extraction back in the early 1900s, and today we're finding out that there's a whole lot more oil. And that seems to be the history of the world too.
I remember when we first were elected in 2006, peak oil was the big issue, and all of a sudden they were talking at that time of natural gas running out by the end of the century, if we were that lucky to have that. Now they talk about 400 or possibly 500 years, so we keep finding these new resources and we have complications, and that seems to be the history of the world.
I think everybody would agree mining has been a great source of revenue—labour, trade, and then especially building infrastructure. I think about British Columbia when I see those roads. Well, most of those roads were probably built to get to the trees, and once that was established, then of course villages and towns opened up and commerce started to expand from there.
I know you probably want to mention it but before you do, I want Mr. Bergeron maybe to tell us what you've seen as spinoff. And I know many of us have been to Africa. When I was in Ghana, I saw a number of spinoffs from some of the projects that the NGOs were working with and how that started to improve the economy.
Can you tell us about maybe some of the spinoffs? We talk about the $80 billion, but what about the people who supply your mines and the jobs that are established there, and maybe the new roads that open new frontiers? Are you seeing some of that where there are areas that they can farm and maybe grow coffee? Can you maybe just tell the committee about that a bit?