Philippines To Be Drilled

The Philippine Supreme Court in December decided that the country’s Mining Act is constitutional — giving the go-ahead for an expected surge in foreign investment in mining. The decision completely reverses a prior ruling by the Court in January 2004 that said foreign-led mining is tantamount to constitutionally proscribed foreign ownership and control of the country’s resources.

Indigenous and environmental organizations have described the 1995 Mining Act, or Republic Act 7942, as a legal instrument that essentially sells the country’s sovereignty in managing its resources [see “Philippine Gold Rush,” Multinational Monitor, October 1997]. The Mining Act allows the government to enter into Financial or Technical Assistance Agreements (FTAAs) with mining companies in the extraction of mineral resources abundant in the country.

The Court’s decision comes against the backdrop of a fiscal crisis in the country, with the government arguing that mining resources are crucial to address its fiscal woes.

“Economic development” through mining investments was the goal of R.A. 7942. For the World Bank, which pushed for the passage of the law, this means the Philippines should live up to its reputation as the fifth most mineralized country in the world. The message to the government was clear: export your natural resources through foreign companies in order to pay your debts.

Arroyo goes for the gold

President Gloria Macapagal-Arroyo authored the Mining Law a decade ago when she was a senator.

As president, Arroyo has turned out to be the heaviest borrower among Philippine presidents. Her administration eventually faced a financial crisis characterized by ballooning debts, widening budget deficits and falling tax collection.

Desperate for investments, she set her sights on the one sector she has promoted for years — the mining export industry.

Proving that she can walk the talk after saying her government is shifting its mining policy from “tolerance” to “actual promotion,” she unveiled the Minerals Action Plan (MAP) in 2004. MAP is basically a policy document taken entirely from the Mining Act, but only added a few provisions on “social and environmental protection” to make it appear that large-scale mining can indeed be “responsible and sustainable.”

Anti-corporate mining groups denounced the government’s mining policy, and clamored for the junking of the mining law. They formally started challenging the constitutionality of the Mining Act with regards to national patrimony in 1997, with a petition filed by B’laan tribal groups under the La Bugal Tribal Association.

The Supreme Court has now rejected the petition, however, apparently convinced of the mining industry’s arguments about “economic benefits for the majority.” While the decision is taken as a go-signal by the government and mining leaders, communities and people’s groups vowed that they would not take it sitting down.

Arroyo was elated with the court ruling, describing it as a “stroke of good news.”

Trade officials have taken to the road, hawking the country’s rich mineral potential at a road show in China to attract cooperative ventures with Chinese mineral firms.

Government expectations are high. Trade and Industry Secretary Cesar Purisima said the government hopes to attract $6.5 billion in mining investments over the next six years and export some $3.1 billion worth of minerals annually.

The government claims that new and expanded mining projects would generate $490 million in tax revenues and employ 34,800 workers, aside from providing more than 200,000 indirect jobs.

Arroyo, in an interview by a major daily, said that the country’s mineral worth of more than $840 billion is more than enough to erase the government’s budget deficit and other fiscal woes for years to come.

But communities throughout the country and advocacy groups say such claims ignore past experiences with mining companies, failing to recognize costs incurred and overestimating revenues. Mine-affected communities have suffered displacement from their homes and livelihood, destruction of their water systems and resources areas and human rights violations. NGOs have estimated countless millions in actual social and environmental costs.

On the revenue side, billions of pesos have been lost in potential tax revenues as a result of incentives given to mining firms under the Mining Act, according to anti-mining activists. They say that while Arroyo may be dreaming of peddling the idea of sustainable mining as a fiscal savior, she is basically courting disaster by opening up almost all mining sites and making people pay for whatever bad would come out of it.

Fool’s gold

The Supreme Court in January 2004 had decided that the Mining Act was unconstitutional because it allows foreign control of the country’s natural resources through FTAAs.

In overturning this decision in December, the Supreme Court said, “the Constitution should be read in broad life-giving strokes.” The justices apparently came into agreement with the government’s argument of the importance of investments and the mining industry’s claim that the Supreme Court should not intervene in “urgent” economic matters.

But activists say the claim of a public interest in authorizing mining — and in shunting aside the constitutional proscription against foreign control of natural resources — is deceptive.

The MAP for instance allows various leeways for mining corporations to evade social responsibility altogether and to simply secure their investments.

The country is not even assured of increased tax revenues, say mining opponents, since the government can collect taxes from companies only after the company has earned its capital, which can take at least seven years — enough time for mining firms to under-declare their profits or simply pull out and claim “unstable investment climate” or other reasons.

About 23 big-ticket mining projects, including those of companies with questionable environmental records, such as Lepanto and Philex Mining, are included in the government’s Investment Priority Projects (IPPs). IPPs afford a range of special incentives, including six-year tax holidays, three-year tax holidays for expansion projects, a 10-year exemption from export taxes and other fees, and exemption from corporate income tax.

In short, the government’s mining policy allows mining firms to fully repatriate their earnings, including any excess capital, in their first decade of operation and even beyond.

Also worrisome, say indigenous and environmental organizations, is the control the act will give to foreign banks through loans to for mining companies. A provision in the MAP gives foreign banks rights to re-classify mining lands whenever a mining company defaults on its loan payment.

All that glitters

In essence, public interest groups and people’s organizations say that the Supreme Court decision opens the floodgates to more disasters since the government’s “revitalized” mining policy expands, if not advances, the perks and incentives already provided to mining companies under the Mining Act.

The Mining Act itself allows foreign control of resources through rights over use of water resources, the right to classify mining lands, and the right to displace communities in the right-of-way of exploration projects.

This has been concretely experienced by many mine-affected communities and indigenous groups around the country, such as the Subanon people, who have been calling Arroyo’s attention to the recent spate of militarization in their areas as a result of mineral operations by Canadian company Toronto Ventures, Inc.

Communities are also expressing concerns that the MAP’s “one-stop shop” process of rushing approval of mining permits will diminish the environment department’s ability to review the environmental and social responsibility records of mining firms before they are permitted into the country.

Above all, say mining-affected communities, the issue of national patrimony in the extraction and use of natural resources can only be addressed if people themselves are the ones directing its development and benefiting from it.

— Ibon Features. Ibon is a
Philippine research organization
and information service.

Nuke Power Deal Put to Rest

The Brazilian and German governments agreed in November to discard a nuclear cooperation accord and replace it with a broader umbrella agreement on sustainable energy cooperation.

Following long discussions between the German government and parliament, the German government finally requested, by diplomatic note to the Brazilian government, the conversion of the nuclear accord. Just days before the deadline on renewal of the cooperative agreement, the Brazilian Foreign Ministry accepted the proposal.

The Brazilian government has nevertheless declared that it does not plan to abandon nuclear energy.

The bilateral nuclear agreement is a relic of the Brazilian military dictatorship and the “atomic euphoria” of the 1970s. It was inspired by the military leadership’s desire to construct nuclear weapons. The bilateral agreement itself was intended to facilitate the construction of eight nuclear power plants and further nuclear facilities.

To date, only one plant has been built as a result of the cooperative arrangement, mostly because of the major economic crisis affecting the Brazilian government since the early 1980s but also because of rising nuclear construction costs. Plans to expand nuclear energy were mothballed during the 1980s and 1990s.

Brazil experienced an energy crisis in 2001, caused by insufficient rainfall and lack of water in Brazilian dams, spurring the government to look anew at the nuclear energy option. Up to 80 percent of Brazil’s energy is produced by large hydropower facilities. Now old plans for expanded use of nuclear energy have been revived in order to reduce the dependence on hydropower.

The German nuclear industry has pressured the German government to support the new nuclear euphoria in Brazil and renew the nuclear cooperative agreement. In 2002, the German public bank KfW showed interest, through a “letter of intent,” in financing the construction of the Brazilian nuclear power plant Angra 3.

In reaction to this proposal, the German Foreign Ministry stated in a letter to German public interest groups that the government’s official position did not support the construction of Angra 3. It argued against the provision of public credits and investment guarantees to German companies.

In another reaction to this dispute, the coalition treaty between the Greens and Social Democrats in 2002 explicitly states that “nuclear treaties should be reviewed in order to check if they should be canceled or renegotiated.”

Ending the accord

Every five years, either or both parties can terminate the German-Brazilian nuclear agreement. In 1994, parliamentarians from the German Social Democratic party, then still in opposition, struggled to end the nuclear agreement. However, the right-wing government of the time rejected the proposal.

Five years later, despite the Social Democrats and Greens assuming power, the new government decided to continue the nuclear agreement.

In 2004, environmentalists in both countries lobbied the German government once again to definitively stop this bilateral nuclear cooperation. German parliamentarians also applied pressure on their government by pushing forward a resolution on the issue.

Only a few days before the deadline for cancellation expired, the Foreign Ministry gave the Brazilian government verbal notice, stating that the bilateral nuclear accord is “no longer up to date.” The German government expressed interest in converting the nuclear agreement into an overarching energy deal focusing on renewables, energy efficiency and reduction of energy consumption and emissions.

In response, the Brazilian Foreign Ministry stated that the German proposal was “opportune,” as the nuclear agreement “has already achieved its most important objective.” It also said that it considers a Memorandum of Understanding, signed between the environmental ministries of both countries at a renewable energy conference in June 2004, a “solid base for future negotiations on a broader sustainable energy cooperation.”

During a visit to Brazil in November, Foreign Minister Joschka Fischer affirmed that the nuclear accord was incompatible with Germany’s drive to get rid of nuclear power by 2025. Fischer told reporters that “in Germany we have a [nuclear power] phasing out policy and this is moving into our international relations.”

Nuclear dreams persist

The Brazilian government’s readiness to terminate the nuclear cooperation deal with Germany does not indicate willingness to halt its nuclear program, however. Brazil has already found new allies in its efforts to continue its nuclear ambitions.

Construction of Angra 3, which the Brazilian government is expected to decide on soon, depends on equipment and services from the Franco-German Framatome (a joint venture between Siemens and the Areva Group, a French energy company). It is now most likely that the financing and public guarantee for this work, if it proceeds, will come from France, even though the work will be done at the Siemens factory in Germany.

— Barbara Happe is with the German environmental
group Urgewald. This item first appeared in
the WISE/NIRS Nuclear Monitor.