Envío Digital
Central American University - UCA  
  Number 432 | Julio 2017



Mining brings us neither growth nor development

This environmental engineer shares information and his views on the extractivist model dominating the national economy. More specifically he analyzes the rapid advance of metallic mining, particularly for gold in our case, which takes everything out, leaving nothing but massive destruction, contamination and illness.

Victor M. Campos Cubas

There is increasingly frequent and concerned talk in Latin America about the expansion of extractive industries and their activities. These industries have been around for a very long time in Nicaragua, including gold mining, intensive monocrops such as cotton and bananas, and the extraction of timber from our forests and fish from our seas. Over all those years they have generated economic growth for some, particularly foreign corporations, but no development for the country.

This age-old extractivism is now actually increasing in our country, particularly both gold and silver mining and the promotion of monocrops linked to the use of technological packets of intensive agro-toxins. Let’s look at some of the most important extractivist activities in Nicaragua’s economy today.

African Palm: Official figures confirm 40,000 hectares planted with African Palm, particularly in the South Caribbean region, with the tendency to expand this monocrop by tens of thousands of hectares more. What are the common characteristics of this and other monocrops? They cover huge areas of land, favor its concentration in few hands, use agro-toxins extensively, affect soil quality and the availability and quality of water, and impact biological diversity and agro¬biodiversity.

The Cukra Development Corporation, responsible for massive African Palm plantations, imports 7% of the nation’s herbicides. The peanut crop, grown mainly in the northwest of the country, uses 22 different kinds of agro-toxins, while rice uses 8 and sugar cane and tobacco at least 4 in undisclosed doses. The presidency’s annual report released this February indicates that the government has facilitated the import and formulation of these poisonous chemicals, having created the National Commission for the Registry and Control of Toxic Substances last December. That commission says it has already issued 13,508 permits to import toxic substances, which clearly indicates the government’s policy to promote monocrops in the country.

African Palm and the oil derived from it, which is used both in the kitchen and in cosmetics and candle-making, are relatively new in Nicaragua. The first plantations were planted in Boca de Sábalos in the department of Río San Juan, in the 1980s and since then have expanded rapidly through the South Caribbean. We in the Humboldt Center have been specifically monitoring the Cukra Development plantation in Pearl Lagoon. That company bought land from smallholders, turning them into agricultural workers on its plantations. It also leases indigenous lands, which by law cannot be sold, and land from small farmers unwilling to sell, for palm cultivation, thus creating the landowners’ dependence on the corporation, which has the only available capacity to process the fruit. In a recent report, we determined the persistence of parameters in the effluents of the Cukra Development’s industrial plant that fail to comply with Decree 33-95, which regulates the discharges of residual household, industrial and agricultural water.

Extensive cattle-raising: Another extractive activity that has been developing for a very long time in our country is cattle-raising, mainly in its extensive form with a small number of head per unit of pastureland. Its main impacts include removal of the forests and soil and water degradation. In a study we do on soil use every five years, we showed that between 2011 and 2016 the country’s pasturelands increased by nearly a million hectares. The majority of these lands now dedicated to cattle were established in areas originally covered in forest or to a lesser extent used to cultivate basic grains.

Sugar cane: Sugar cane is yet another extensive crop that’s growing rapidly in Nicaragua. The government announced in its Production, Commerce and Consumption Plan for 2017-2018 that the planting of sugar cane will increase by 3,000 hectares in this two-year period. We have evidence that the area could be even greater, as an important part of the foothills that slope down from the Carazo plateau toward the Pacific Coast is rapidly being planted with this crop. Something similar is happening in the country’s northwest region.

Peanuts: The planting of peanuts is also advancing rapidly in the same northwest area. A total of 30,000 hectares were planted between 2011 and 2016, making peanuts the most rapidly expanding crop in Nicaragua in recent years. This crop employs the greatest diversity and amount of agro-toxins per unit of land, while also generating severe wind erosion problems making it one of the main causes of the dust storms that batter that region of the country.

Tobacco: People in the northern region are now experiencing the consequences of expanded areas planted with tobacco. The municipality of Jalapa has suffered a water crisis because human beings have to compete with the tobacco for that basic resource.

The introduction of transgenic seeds

The policy of promoting monocrops is further complicated by the introduction of transgenic seeds. In the same Production, Commerce and Consumption Plan for 2017-2018, the government agreed to introduce such crops (transgenic yellow corn and soy) into Nicaragua. We consider this a harsh blow to small peasant production as it creates a great level of dependence on the companies that commercialize these products and causes genetic contamination, mainly in the cultivation of the maize, native to our country, that is essential to our diet and cuisine.

The Seeds of Identity Alliance has been working to avoid the introduction of these crops due to the risks they represent. Although its campaign talks about the dangers to production of introducing transgenic seeds and a number of nongovernmental organizations are supporting the use and protection of native seeds, we believe that actions are needed to warn of the potential effects of transgenic products on the health of those who consume them.

Motors of development or machinery of depredation?

As can be seen, we are living with an economic model that is implacable with the environment and gravely affects the basic natural goods we need to live. Big private enterprise calls these monocrops motors of development, but the reality is that they are the motors driving enormous machinery that’s razing the land, depredating the environment and placing Nicaragua in a very unfavorable cost-benefit relationship that doesn’t assure the country’s economic, social or environmental sustainability.

Although we haven’t yet reached the peak of the extractivist gamble as a model of development, the rapid rate at which extractivism is advancing here is worrying. The country has assumed extractivism as a route of economic growth synonymous with development, but that concept is mistaken, because without environmental sustainability no economic activity can achieve the development we need and are demanding.

Metallic mining…

When we argue that mining is an extractive industry with particularly serious environmental and social consequences, we’re told that it’s impossible to renounce because its products are in absolutely everything we use. Nonetheless, it must be said.

Nicaragua has metallic and non-metallic mining, although fortunately we don’t yet have the extraction of rare metals such as lithium, coltan and others that have extremely damaging environmental and social impacts. Metallic mining in Nicaragua is just for gold and silver, while non-metallic mining extracts mainly stone and sand. But these latter activities also have environmental impacts because they remove the forest cover and leave unprotected holes in various areas of the country. The Humboldt Center doesn’t work directly on the issue of non-metallic mining; rather we focus mainly on the disorder in the concessions granted by the municipal governments.

We do, however, have accumulated experience on the issue of metallic mining. And in fact our concern about it has been one of our main commitments to Nicaragua. Nearly three decades of experience have taught us to work directly with the affected populations, as we are currently doing with the populations faced with the British company Condor Gold in Mina La India (Santa Rosa del Peñón, León) or those resisting the Golden Reign company in Mina San Albino (El Jícaro, Nueva Segovia).

Mining is harmful by definition

Every two years we do a study on the environmental impacts of mining in Nicaragua. The mining companies come here armed with prepackaged campaigns proclaiming “mining for everyone,” or “green mining” or “new mining.” But we need to be clear and unequivocal: All of today’s mining concessions are for open-pit mining, an extraction method that requires the removal of seven tons of earth to extract 1 troy ounce of gold. And every last one of them has a track record of environmental and social damage. Moreover, all of them avoid consultations and transparency in their technical and financial operations.

The life of a mine depends on having proven mineral reserves in sufficient concentrations to make their extraction economically profitable. The average life of Nicaragua’s current mines is roughly 25 years. All the gold in the mine in La Libertad, Chontales, has already been extracted, leaving only holes. Where once there was a hill there’s now an abyss 200-300 meters deep. And it’s the same story elsewhere: once the mining activity comes to an end, all that remains are economic ghost towns with difficulty finding quality drinking water and a population that has to emigrate since the environmental impacts left behind make it impossible to survive there.

Acid drainage is one of the most serious environmental problems mining exploitations leave behind. Cyanide and mercury are used to amalgamate the gold. Both are invisible, highly toxic substances washed into rivers by rain and into underground water sources by infiltration. They affect the entire ecosystem, with mercury even incorporating itself into the flesh of living beings. A subterranean aquifer contaminated with them can never be cleaned.

Industrial mining is highly lucrative…

Unlike other raw materials, the international price of gold isn’t strictly subject to the law of supply and demand. Other factors intervene in this sui generis market. The mining companies themselves have recently declared that their break-even point is around US$700 per troy ounce of gold. And given that its current price is in the neighborhood of US$1,300 per troy ounce, they have close to a 100% profit if those prices hold true. Considering that the companies operating in Nicaragua are reportedly extracting 300,000 ounces a year, we’re talking about US$180 million a year, almost all of which leaves the country.

Nicaragua has one of the most favorable laws for mining investment in Latin America; it’s one of the most “condescending” to the mining industry. We’re certainly the most backward with respect to environmental regulations compared to the mining laws of Peru or Colombia, for example, which have established the highest standards, the biggest tax rates and the best regulation and control systems.

…yet contributes little to its host country

This past April the Humboldt Center and the Institute of Strategic Studies and Public Policies (IEEPP) presented the results of a joint study titled “La minería industrial en Nicaragua – Una mirada desde la óptica fiscal” (Industrial mining in Nicaragua – A view from the fiscal perspective), which provides important data on how little mining leaves in the country. Its contribution to Nicaragua’s gross domestic product (GDP) is extremely small: only 2.7%. It also generates barely 0.6% of the formal jobs in our country: metal mining and non-metal mining provide barely 4,000 jobs covered by the Nicaraguan Social Security Institute. And even though gold is one of the country’s main export products, it generates insignificant fiscal income. In 2015, gold accounted for 15.4% of the total value of the country’s exports yet only 3.6% of its tax income. In sum, then, mining can be defined as a classic extractive enclave as it doesn’t make a substantive contribution to the GDP, employment or fiscal income and fails to establish solid links with the domestic economy.

What taxes does the mining industry in fact pay? First a mining company pays the Public Property Registry Fee, a one-time payment equivalent to some US$10,000 made to the municipality in which the bulk of the conceded area is located. Any other municipality included in the area only receives a symbolic payment of 500 córdobas (a little over $16). The company also pays for the Right to Land Validity, a progressive payment for use of the land surface granted starting at US$0.25 per hectare per year until reaching $12 per hectare by year 12. Then there’s the extraction right or royalties payment, which is an economic compensation to the State for the right to superficial exploitation. In this respect, the law establishes a 3% monthly quota against the billing of the company’s mining exports. Next is the Municipal Enrollment Tax, which is an annual payment of 2% of the average monthly gross income obtained from the sale of goods or provision of services the last three months of the previous year. And finally it pays income tax as a major contributor, which for the mining companies is 30% of the net profit from its activities.

So what does all that add up to? The mining sector generated its greatest amount of taxes in 2015, a peak year for the industry in our country. Yet after exporting more than US$400 million dollars in gold, barely US$3.27 million were collected in taxes from it that year. If 3% of what it exported had stayed in the country, much more would have been collected in taxes, but exonerations reduce this export industry’s fiscal contribution to the bare bones of only 1.6% of what it claims as profit on those sales.

The Special Law on Mining Prospecting and Exploitation (Law 387) dates back to 2001, when gold prices were at US$300-400 a troy ounce, and was designed to promote mining more than regulate its exploitation. And, like other laws approved to attract investments in Nicaragua, it isn’t modified in line with changes in prices and the market. The many tax exonerations given to mining are stipulated in that law, including the following:

1) extraction rights or royalties are considered an expense deductible from the income tax calculation; 2) the company is given the right to deduct 50% of any investment in forest plantations from its income tax; 3) “Corporate social responsibility” expenses are also deductible from that tax calculation; 4) the company is exonerated from property taxes, import duties, selective consumer tax and value-added tax; 5) minerals extracted for social purposes or the execution of public works are exonerated from the royalties tax; 6) the company is exempted from paying tax for either the import or local purchase of materials, machinery or instruments used for the industrial process; 7) it is charged zero export duties for the minerals it extracts from Nicaragua and sends out of the country; 8) it has free access to the trade in available foreign currency and free convertibility of hard currency; 9) it is permitted to make transfers abroad of either its invested capital or income from the dissolution, liquidation or voluntary sale of its investment; and 10) permission to remit any earnings, dividends or profit generated in the country after payment of the few taxes corresponding to it. And finally, Law 525, which amended Law 387 four years later, committed the State to guarantee fiscal stability for national and foreign investment in mining.

Mining companies’ environmental obligations

When a company comes to set up either exploration or exploitation operations, it has to do environmental impact studies at two different moments, which it must submit for approval to the Ministry of Environment and Natural Resources (MARENA). The first study is for the exploration phase, when the company only makes small perforations to take samples that involve no major physical works with the kind of environmental repercussions involved in the exploitation phase. But even though the impacts are small, those perforations are the first warning to local residents. If it confirms that there are gold reserves in the area, the company has to work with MARENA-authorized consultants to present a new environmental impact evaluation for the exploitation phase, which MARENA then uses to design the environmental management plans and grant the permit. It very rarely denies the concession.

Our exhaustive analysis of these studies has shown that they all contain similar contents, and that even when they are for different parts of the country they all apply a general recipe for environmental care. In fact, many are lifted word for word from books of generic content and then handed in to MARENA. Once the exploitation gets underway, MARENA is supposed to follow up on the environmental management plan, checking every so often to see that the company is complying with the limited environmental care established in it. But the studies aren’t specific enough and the authorities engage in minimal follow-up.

National authorities have a very complacent attitude toward mining companies for fear of them leaving. Given such low environmental standards, the companies are only obliged to implement a few small mitigation activities, and even then they are seldom done. For example, the environmental management plan establishes that when a mine closes it must reforest the area where it worked. I don’t know of a single case in which that was done.

The Humboldt Center has responded to that negligence by monitoring the mining company’s activities for evidence of contamination. We monitor the water quality and take cases through the administrative processes so MARENA can demand the company’s compliance with the environmental norms as it corresponds to the national government institutions to insist on compliance with the environmental management plan, ensuring the least damage to the environmental conditions.. The citizenry has also filed various charges through the administrative path, with evidence and results in hand, but has yet to obtain any results or even response from MARENA.

An alarming change in the mining investment framework

The framework for mining investment in the country was transformed a few months ago and in June the National Assembly approved a law creating the Nicaraguan Mining Company (ENIMINAS) to continue favoring mining investment in the country. ENIMINAS is a public company through which the Nicaraguan State will participate in the mining business. Not unusually, only representatives of the big business umbrella organization known as the Superior Council of Private Enterprise (COSEP) and the Nicaraguan Mining Chamber, a COSEP member, were invited to participate in the consultation process with the relevant governmental institutions.

Before approval of this law, approximately 12% of the country’s land was under mining concession, but in less than a month after its passage that had gone up another 10%, increasing the land conceded to mining from 12,000 to 26,000 square kilometers.

Adopting an executive decree from 2012, which establishes areas of “mining reserves” tested and formally recognized by the Ministry of Energy and Mines, the new law establishes that the State will decide which companies it will associate with to exploit the areas in these mining reserves. With the reserves now under the total control of the new state company, any company the government decides to associate with will be directly protected by state authorities. In such a privileged new situation, the State will foster unfair competition with other, already established mining companies.

In sum, the new law means the State is reserving for itself the administration of those concessions with the best mining potential and mineral wealth in the territories. We have no idea how far this will go, but we do know that the power circles controlled by Nicaraguan capital have a particular interest in mining. The Ministry of Energy and Mines has also officially announced that it has 1,800 requests for new mining concessions currently in the approval process.

What’s actually in these mining reserve areas?

Of the 12,000 square kilometers of mining reserves referred to in the ENIMINAS law, 5,859 have already been decreed as such and 6,515 are still in the proposal stage, but there’s no doubt they’ll be approved. Moreover, 8,538 square kilometers of those mining reserve areas are in protected areas. In fact, many are in the buffer zone of the Bosawás Biosphere Reserve, virtually at the edge of that reserve’s nucleus.

After the National Assembly approved the ENIMINAS law we did a quick exercise to learn what was actually in the mining reserve areas ready to be turned over in concession. Over 400,000 hectares of closed and secondary forests are now available to the new state company, which will select the best partner to turn the lands over to in an exploitation concession. Municipalities that have half or more of their lands in mining reserves covered by the new law are Wiwilí de Jinotega, San José de Bocay, Waslala, Rancho Grande, Jalapa, El Jícaro, Telpaneca, San Juan de Río Coco, Mozonte, Macuelizo, Ciudad Antigua and Las Sabanas.

The government’s concession of the San Albino Mine in El Jícaro, Nueva Segovia, to the Canadian mining company Gorden Reign a few months ago is particularly controversial due to its historic value, as it was at that very mine that General Augusto César Sandino began his nationalist and patriotic struggle. The mine was abandoned in the 1920s and should have been designated a place of historic heritage and conserved back then, but instead it has now become just another mining concession that, as always, will cause serious environmental and social impacts.

Varying interests oppose industrial mining

While the population in San Albino and other places has reacted to the mining companies, it must be recognized that diverse interests are at play in the social movements currently standing up to them. At one end of the scale is the community organization known as Guardians of Yaoska, a movement born in the Matagalpan municipality of Rancho Grande and named for the river that would be most damaged. Its resistance is total as Rancho Grande is a fertile agricultural valley that has never had mining and doesn’t want it coming in now.

At the other end are municipalities such as Santo Domingo, department of Chontales, which have always had both industrial and small-scale mining. While the individual artisanal miners known as güiriseros and the company need each other, we find conflicts between them there because the law that establishes that güiriseros can search for gold on up to 1% of the large private company’s concession doesn’t specify the exact location.

It needs to be said that small-scale mining also contaminates. To separate the gold from the surrounding material and amalgamate it, industrial mining uses the highly toxic cyanide, which contaminates the soils and water. The güiriseros use mercury instead, but it is just as toxic and contaminating. Some small groups are now using less contaminating techniques to separate the gold, but the difference has yet to be felt.

This doesn’t mean that small-scale miners aren’t interested in caring for the environment. But the fact that their own activity is contaminating poses a dilemma for many families that have depended on this livelihood for generations. Moreover, small-scale mining is itself stratified and over time has evolved a high degree of intermediation. On the lower rung are those who directly search for the gold, and we’ve found some openness among them to improving their environmental practices. But above them are numerous rungs of subcontractors who hire miners to chip away at the gold-bearing rock which the subcontractors then processes, keeping the lion’s share of the profits. The result of this stratification is that the demands of the different rungs of that small-scale mining hierarchy differ, although complementing those of the movements fighting to defend the environment, protect human rights and get decent working conditions in industrial mines. But only on some occasions do these different groups actually come together to fight the big mining companies.

The social movements opposing mining

I want to recall a few of the most relevant resistance actions since 2013. That year kicked off with a massive protest on March 22 by the Guardians of Yaoska to prevent the B2Gold mining company entering Rancho Grande. More than 32 organizations in Matagalpa, with the local Catholic Church in the lead, supported the protest. They mounted a second demonstration on October 13 of the same year in which more than 2,500 people participated.

In between those two protests in Rancho Grande was one on August 1, 2013, in Santo Domingo, a municipality where mining has been present for centuries. While the güiriseros’ confrontations with the mining company over their demands are ongoing there, a movement called “Let’s Save Santo Domingo” is also fighting for the environment and water. The municipality’s once excellent source of drinking water, which supplied inhabitants 24 hours a day, has now been reduced to 4 hours a day because it has been contaminated by the mining company. The movement’s slogan is “We want water, not gold” and it is fighting hard for it. That particular protest ended with 12 people from both groups arrested. They were held illegally for 15 days in Managua in infrahuman conditions. A charge was filed with the Organization of American States’ Inter-American Commission on Human Rights, but before the case could be aired, the prisoners were put under the order of the judge of Juigalpa, the departmental capital of Chontales where Santo Domingo is located, and were finally released after a series of important protests.

Strong confrontations between güiriseros and government authorities took place on May 6, 2015, in Bonanza, one of the towns of what is known as the Mining Triangle in the northwestern part of the Caribbean Coast region, sparking the creation of an important protest movement. While there has always been small-scale mining in that area as well, the higher price of gold has enormously increased the number of güiriseros.

October 6 of that same year kicked off various confrontations over the rights of mining company workers in Mina El Limón in the department of León, a long-time mining town with a tough reputation. The confrontations lasted days, leaving 1 person dead and 32 wounded, while 10 miners were arrested on orders of the government of the party they had always supported. On October 18, women took to the streets in protest at the arrests and violence, during which a famous photo was taken of one woman with equipment she had managed to wrest away from one of the anti-riot police sent to repress the demonstrators. The arrested miners were transferred to El Chipote jail in Managua, where they too were held in infrahuman conditions until December 24, when after 56 days of illegal detention they were “generously” freed on the personal order of President Ortega. Ignoring the judicial system, he argued that Christmas was a “time when Nicaraguan families gather together.” Despite our efforts on various occasions, we’ve been unable to talk to any of those miners since that time, as they aren’t authorized to talk to anyone for unspecified reasons.

On October 4, two days before the start of the confrontation in Mina El Limón, more than 3,000 people again mobilized in Rancho Grande against B2Gold entering its Cerro Pavón concession. While both the company and the departmental authorities had engaged in numerous maneuvers to win over supporters and disparage the opposition, they failed to break its unity. Nine days later, on October 13, the government declared that mining project “unviable,” an extraordinary victory we’re all still celebrating. But that was only one of seven concessions granted in Rancho Grande, three of them also held by B2Gold, so the municipality has to remain vigilant and mobilized to protect and extend that victory. More worrisome yet, some of those concessions passed to the mining reserve mentioned above under the new law that gives the State control over them. Will all mining activity remain “unviable” in Rancho Grande? Nothing is certain in this country if it depends on the government authorities. Nonetheless, the Rancho Grande movement is firm and we’re trusting in its clear determination to defend its territory.

The most recent conflict we’ve learned about is over an arbitrary indictment by the British mining company Cóndor Gold against seven environmental defenders in Mina La India. The company had to cancel the trial because the entire town opposed it, accompanied by the Humboldt Center and the Nicaraguan Human Rights Center. But that’s barely the first step in the struggle against that company. We know that foreign companies really don’t like getting bad press in their countries of origin. An eight-column headline in a Managua newspaper denouncing Condor Gold’s arbitrariness in Mina La India has less impact than a small note in The Guardian or any other British medium. We also know that 8% of Condor Gold’s capital stock comes from the World Bank, which is useful information for international advocacy. According to declarations by the representative in Nicaragua of the World Bank’s International Financial Corporation, which injects resources into the private sector, it has a commitment to account for 20% of the company’s capital stock. We’re awaiting the mechanism established by the bank to demand suspension of this project.

Is it right to say an unequivocal NO to mining?

We need to respond to this question not as individuals, but as a nation. The Humboldt Center’s position, however, is that open-pit mining concessions shouldn’t be given in places that aren’t traditional mining districts, and particularly not in the Río San Juan basin and protected areas. As an institution we work with everyone, from people totally opposed to mining to those struggling to improve things where there are already mines. We’ve learned that having only one point of view on mining isn’t the best option.

A law totally prohibiting mining was recently passed in El Salvador and I think that was because all sectors, of all political ideologies, understood that stopping mining was a life or death issue in that country. Such a radical law was obtained because the Salvadoran people as a whole recognize that their small country already has too few natural and environmental resources. Nicaraguan’s self-identity is different, rooted in the idea that our country has infinite natural resources. In their speeches, political, business, religious and public opinion leaders constantly repeat that “we’ve been blessed by God with a super wealthy country; we have it all…” But that’s no longer true. Our resources are becoming increasingly scarce because we’re destroying them. We have to change that self-image. And in the case of mining, we need to act even more urgently because the social and environmental destruction it is causing affects large portions of the population.

A new kind of social movement

The National Environmentalist Movement against Industrial Mining was created on June 22, around the same time as the law creating ENIMINAS and as a direct consequence of the speed with which unregulated, highly-privileged mining has been taking over our country. It brings together various territories in resistance, each of which has numerous organizations that are starting to link up. The first territories to join the movement that day were Santo Domingo, Rancho Grande, Nueva Segovia and Mina La India. Its board of directors—four men and four women—has been assigned the task of engaging in processes to strengthen it.

It’s an unprecedented move because we hadn’t previously been able to put together a national movement in response to mining, as the territorial and communal movements were dispersed. Like the peasant movement opposing the canal, this anti-mining movement is a new breed of social movement in Nicaragua. Its member organizations and individuals have no party links and aren’t looking for an electoral solution; they’re committed to fighting for rights and demands important not only to them but to the entire nation. These two emerging social movements have demonstrated that social mobilization is both possible and necessary in order to achieve fundamental demands for the Nicaraguan nation as a whole. That’s why they give us hope and renewed energy to continue working for a better Nicaragua.

Victor Campos is the director of Centro Humboldt, a nongovernmental organization created in 1990 to promote alternative territorial development and sustainable environmental management.

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