Corporations and Investment versus Communities and Territory

Tobías Roberts

18/01/2013

Opinión

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In 1886, during a legal battle over the expansion of railroads, the Supreme Court of the United States ruled that corporations have the same rights as people under the 14^th Amendment to the Constitution. Since that time, our globalized economy has persistently increased the power and legal reach of corporations, more often than not to the detriment of local communities. In Central America there have recently been three emblematic cases which attest to the heightened power that corporations yield over local communities and even over sovereign national governments.

In recent years, multinational mining companies have discovered a vein of gold running from Mexico down to Costa Rica. According to the El Salvadoran government, the vein is thickest in El Salvador. With the price of gold at historic highs, applications for mining permits began to flood the government offices with applications for these permits compromising around 5% of El Salvador´s territory.

Previous right-wing governments that advocated neoliberal economic policies began to dole out exploration permits. Pacific Rim, a small, Canadian based mining company received one of those permits and began exploration of a mine in the northern state of Cabañas, one of the poorest areas in the country.

Despite the company's claims that the mine was to be one of the most environmentally friendly in Latin America, the local population rose up in resistance to the mine. Feeling the ecological stress of living in a crowded country with little land and less water, the communities feared the negative environmental effects of a gold mine in their communities.

This grassroots opposition led to severe conflicts and division within the community. In 2009, a series of unresolved murders of community leaders that opposed the mine forced Pacific Rim executives to testify before Canadian Parliament. These murders also spurred a more organized and country-wide hostility to mining in the country. Later that year, right wing president Tony Saca, despite being a pro-business champion of foreign investment, put a moratorium on mining and refused to grant licenses for exploration or exploitation of mines in the country. Since then, the new left leaning government of the political party FMLN has introduced legislation to become the first country in the world to outlaw mining. The law is slated to be debated by the Salvadoran Congress in the first semester of 2013.

It would seem that this struggle against mining in El Salvador was a victory for grassroots and community organizations joining together to make their voices heard and respected through policy decisions of the national government. However, in our globalized, capitalist society, the right of corporations to invest trumps the right of individuals and communities to decide over their lands, and even undermines national sovereignty.

Shortly after the government of El Salvador opted to respect the voice of its people and prohibit mining, Pacific Rim took the government to an international arbitration court, seeking over 70 million dollars in reparations. According to Pacific Rim, the free trade agreement that El Salvador signed with the United States in 2003 obligated the country to indiscriminately open its borders to foreign investment. Despite a series of appeals by the Salvadoran government, it appears that Pacific Rim has won the arbitration and El Salvador will have to pay up.

Two other interesting cases involve ENEL, the Italian-based multinational energy company. ENEL is one of the biggest energy companies in the world. It operates in 40 countries worldwide and generates 98 GW of energy. According to its website, in 2011 ENEL posted revenues exceeding 79.5 billion dollars. Two of ENEL´s recent investments in Latin America shed light on this issue of the legal partiality towards the rights of corporations.

In 2009, ENEL began construction on the Palo Viejo Dam in the town of Cotzal in the Ixil region of northern Guatemala. The dam was built on the land of a private coffee farm that was stolen from the Maya Ixil people 100 years ago by a European land baron. Since the beginning of construction of the dam, local rivers have been ecologically devastated and thousands of local families living downstream from the dam have lost the ability to subsist from fishing the rivers which was once their main livelihood. The arrival of the multinational ENEL also brought much social conflict as communities divided between those that supported the company and those that protested it. Community claims that their rights as indigenous peoples over their ancestral lands had been violated brought the response of military occupation.

All of this tension eventually led to a dialogue between ENEL executives and local indigenous authorities. The dialogue was heralded by many as a unique chance to create a new type of relationship between multinational corporations and local, indigenous communities where mega-projects were to be put into operation. Unfortunately, the dialogue was used by ENEL as a strategy to divide communities and buy time before finishing the construction of the project. This blatant disregard towards the rights of indigenous people led to the failure of the dialogue and the result of the local communities leaving the negotiations empty handed.

In 2002, ENEL partnered with the El Salvadoran government to invest in the national geothermal energy plant “La Geo” that provides 25% of the country´s energy needs and yielded around 80 million dollars in annual revenue for the government. ENEL, recognizing that “La Geo” was a profitable business venture, sought to inject 127 million dollars into the company and thus increase its participation to 53% of the shares effectively privatizing a national energy industry. The government of El Salvador blocked that investment and ENEL took them to an international arbitration court that ruled that ENEL had the “right” to invest and thus will become the majority stakeholder of the previously national geothermal plant.

In both cases of Guatemala and El Salvador, the right of ENEL to invest as a multinational corporation trumped the rights of both indigenous people over their ancestral lands and a national government over its strategic energy reserves and production. But who are these international arbitration courts that so favor the rights of multinational corporations?

The International Centre for Settlement of Investment Disputes (ICSID) is the most important of these courts. The ICSID was created in 1966 as a branch of the World Bank to encourage the international flow of investments. According to its website, “The primary purpose of ICSID is to provide facilities for conciliation and arbitration of international investment disputes.”

However, it is evident that the ICSID is biased towards the multinational corporations in these disputes. When the Bolivian Government opted to withdraw from the ICSID a few years ago, it stated that it was doing so because of this obvious bias. Of the 232 arbitration cases brought before the ICSID, 230 had been planted by multinationals against national governments. Of those cases, 36% were ruled in favor of the private investor and another 34% of the cases were resolved with the private investor being compensated outside of the courts. Furthermore, in 74% of the cases, poor countries were the ones being sued compared to only 1.4% of cases being brought against the governments of the G-8. It would appear that the ICSID is nothing more than the private courtroom for powerful and wealthy multinational corporations to prey on the governments of poor countries.

These three cases expose a clear tendency of courts like the ICSID to favor the rights of corporations to invest over the territorial rights of communities and national governments. They also consolidate the power of companies like ENEL and Pacific Rim and encourage them to increase and expand their investments. ENEL recently disclosed its plans to invest more than 2 billion Euros by 2016 in the renewable energy markets of Latin America. How many of those investments will come at the mercy of indigenous populations losing access to their ancestral lands or national governments losing the sovereignty over their natural resources?

Even more forbidding is the precedent that these cases create. According to James Fredrick in World Politics Review: “Other gold mining companies with operations in Central America, such as Goldcorp (owner of the Marlin Mine in Guatemala), say they may use the Pacific Rim case to adjudicate disputes of their own.”

When a foreign corporation has more rights over a piece of land than the people who have lived there for centuries; or when the demands of a multinational corporation trump the sovereign decisions of a national government, something is dreadfully wrong in our society.

https://www.alainet.org/es/node/164017?language=es