Colombia mining privatization worries Canadian miners

Multinationals bring a poor human rights record and high expectations about profit - while Canadian mines close

By: Ben Lefebvre

  I work for Falconbridge Limited in Timmins, Ontario and I'm also the Bargaining Committee Chairperson with CAW Local 599. On Friday, May 4th, I had the opportunity to meet with several members of the coal mining union Sintracarbon in Bogota, Colombia.
  The unionists are concerned with the treatment of coalminers and indigenous people, and with the way Colombian government is privatizing state owned mines.
  The brothers and sister I spoke to all work at Cerrejon Norte, a joint venture that until recently was operated by the state owned Carbocol in partnership with Intercor, a subsidiary of Exxon.
  El Cerrejon Norte, Latin America's largest coal mining operation, employs about 4,600 people and had an annual output of 15.5 million tonnes in 1998. The members of Sintracarbon are affiliated with the ICEM (International Federation of Chemical, Energy, Mine and General Workers Union).
  The coal mining industry in Colombia employs about 40,000 people, 72 percent of whom work in small and medium size operations. Although the government claims there is little foreign investment in the industry, American companies Exxon and Drummond already account for about 80 percent of Colombian national coal production.
 

Companies exploit the cheap resources of developing countries - while the World Bank and the IMF watch

Colombian miners report contract irregularities
  The miners reported that there seemed to be several anomalies with the new contract that was negotiated between Intercor, the Colombian government owned Carbocol and a third party comprised of a consortium of investors. Of special note, the Cerrejon Norte operation already had a 25-year contract to mine coal in Guajira Department, in the northeastern part of the country. The contract was only set to expire in 2009.
  In spite of this, a new contract was negotiated and signed allowing the third party to buy out the government-owned stake in the operation for $384 million US. Total investment in the project including the mine, the port and all associated infrastructure was $3 billion US.
  Intercor will continue to manage the Cerrejon Norte complex. The newly-signed contract would extend the original one by an additional 25 years and will not be terminated until 2034. The land base for the mine was extended from 38,000 Ha. to 50,000 Ha. (approx. 125,000 acres).
  Why did the contract have to be renegotiated so early? The consensus seemed to be that since the new Mining Code was being debated in Congress, and the outcome of the debate was still uncertain, a new contract would guarantee access to the resource for a longer and more comfortable term. It was believed that these new terms would also help encourage more foreign investment in the Colombian mining industry in the future.
 

Canadian CAW activist Ben Lefebvre (third from left) meets with his counterparts in Colombia

Colombian coal industry very profitable
  Approximately 1.5 million tonnes of coal are mined at Cerrejon Norte every month and production is expected to increase by an additional 33 percent. Plans are now in place to purchase new equipment to allow this to occur and will reduce staff requirements significantly. New trucks have been ordered in the 240 to 360 tonne range, up from the 155-tonne trucks presently being used.
  The potential for profit from Cerrejon Norte is enormous. Even at existing production levels, with costs of about $15 US per tonne and a market price of $35 to $40 US per tonne, the net profit to the corporations involved is expected to be in the range of $30 million US per month.
  The 150 kilometre long standard gauge rail line was built by the government to bring coal to the deep sea port at Puerto Bolivar on the Atlantic coast. Public use of the port facilities was previously allowed when under state ownership. These arrangements have since been terminated.
  This will presumably have a long-term negative impact on the region's economy. A deep sea port would normally provide cheap access for other resource extraction and importation of goods.
 

The price paid by the consortium was a fraction of the original investment made by the Colombian government

Multinationals taking control
  In March 2001, the Government of Colombia sold its interest in another coal mining outfit to a consortium that includes Billiton Plc, Anglo American Coal Corporation Ltd. and Glencore International AG. This consortium is called Carbones de Cerrejon and is the same consortium that negotiated its way into the Cerrejon Norte operation mentioned previously. The new consortium will share the use of the rail line and port facilities with the Cerrejon Norte operation.
  Coal miners report the purchase price ($640 million US) paid by the consortium was a small fraction of the original cost of the infrastructure investment made by the Colombian government in the project just acquired by Carbones de Cerrejon ($1.7 billion US).
  The reputation of certain members of this investment group concerned the coal miners who spoke to me. Human rights abuses as well as social and economic problems are well documented and seem to prevail wherever these companies operate.
  Miners say about 15,000 indigenous people have been displaced by these two particular coal mining operations. Their burial grounds have been desecrated. Few socio-economic benefits have come to the local population during more than 25 years of development in the area.

The Canadian factor
  The coal mining industry in Canada has suffered many setbacks lately. Several CAW members who worked in Cape Breton, Nova Scotia lost their jobs with the closure of mining operations run by Devco. On May 16th the Canadian government announced that a further 450 jobs will be eliminated at the Prince Mine, also operated by Devco, after they failed to find a buyer for the mine. This brings the total coal mining jobs lost in the region to about 1000.
  One would have to suspect that over time, Canadian coal mining on the west coast could also be in jeopardy, as more volume comes on line at lower prices than Canadians can ever hope to produce the commodity.
  In the short term, our lack of competitiveness will likely be the downfall of the Canadian coal mining industry. I believe we will be hard pressed to challenge companies such as Drummond and Exxon as they continue to exploit the cheap and easily accessible resources of developing countries such as Colombia under the watchful eye of the World Bank and the International Monetary Fund.
  In an effort to restructure their national debt, many countries are forced by these unelected and undemocratic entities to adopt neo-liberal approaches to any and all regulation of industry. Such pressure often includes a requirement for changes to environmental, social, labour and human rights legislation. It is feared that rules under the FTAA may further exacerbate these problems.
  The Canadian government must be made aware of these issues and public pressure must be brought to bear at whatever level is necessary to ensure that standards which are acceptable in our country become the baseline in the creation of Canadian foreign policy.
  We must also ensure that Canadian firms with operations abroad comply with acceptable standards of their own. This compliance needs to be monitored and enforced by our federal Foreign Affairs Department.
  I believe the CAW and the CLC have a major role to play in this regard. Only through this kind of leadership and international solidarity can we ensure there is a level playing field upon which Canadian industry can continue to compete and survive in the new and emerging global marketplace.

Posted: June 11, 2001
Updated: June 28, 2001

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