The Multinational Monitor

MAY 1981 - VOLUME 2 - NUMBER 5


Guaymi Indians Make Their Stand Against Mining, Oil and Construction Companies

by Chris Gjording

The government of Panama, with strong backing from multinational corporations, is sponsoring three huge "development" projects that threaten the Guaymi Indians, the largest indigenous population in the country.

For the Guaymi, the most threatening project is Cerro Colorado, a joint venture between the Panama government and Rio Tinto Zinc (RTZ) for a huge open-pit copper mine in the middle of Guaymi tribal lands. Related to Cerro Colorado is the neighboring Teribe-Changuinola hydroelectric project, which would supply cheap power to the mine.

This February, the Guaymi were served an additional challenge when Panama's President Aristides Royo announced plans to construct a 130-kilometer pipeline to move Alaskan oil directly from supertankers in the Pacific to supertankers in the Atlantic. Above the buried pipeline will run a two-lane paved highway, 50 kilometers of which will run through lands presently occupied by the Guaymi. The road threatens to open Guaymi lands to ranchers and peasants in an area which up to now has been exclusively Guaymi territory.

The Guaymi reject all these projects, which they insist should be halted until their land rights are negotiated, to give them legal standing to bargain over the projects that may dislodge them from their land. .

The total territory occupied by the 60,000 Guaymi Indians is about 7,000 square kilometers, a very small space for such a large number of people practicing extensive subsistence agriculture. As for legal claims to the lands, the Guaymi at the moment have none, according to the Panamanian government. Formally, the 1972 Constitution guarantees "the reserve of necessary lands and collective properties for the assurance of Indian economic and social welfare." However, the government alone determines which lands are "necessary." In practice, it maintains that all property not under private title is "national land." of which the government is the rightful owner.

Panama's land policy makes things easy for multinational corporations. The Cerro Colorado contract, for instance, exempts the multinational partner from having to pay any fees to any indigenous individual or group "claiming to have a right or interest" in the ore deposits of the area itself. Instead, the contract rests responsibility for such dealings solely with the Panamanian government.

The foreign companies which are active in the planning stages of each of these projects stand to gain much more if and when they get the go ahead. Charles T. Main International did the feasibility studies for the Teribe-Changuinola hydroelectric complex; should the government give the nod, Main hopes to receive the construction contracts.

The proposed pipeline is to be built by Petroterminal de Panama, which is principally owned by Northville Industries of New York. International Engineering Co., a division of Morrison-Knudsen, has received contracts from Petroterminal for construction of the pipeline. And in early May, the Atlantic Richfield Company (ARCO) reached a three-year agreement with Petroterminal to transport 700.000 barrels a day through the pipeline, beginning late in 1982.

In both of these projects, the Panamanian government actively participates. The Teribe-Changuinola hydroelectric project is owned by the government electricity corporation, the Instituto de Recursos Hidraulicos y Electrificacion. And the pipeline will be 40 percent owned by the Corporacion Financiera Vacional, a government finance company.

The Cerro Colorado Project

The plans for the copper mine have changed hands a number of times since Canadian Javelin Ltd. began studying Cerro Colorado in the early "10s. Panama broke off contract negotiations with Canadian Javelin, however, after the company insisted on too high a take from Cerro Colorado's deposits. After Canadian Javelin left, Texasgulf took over the feasibility studies. But by 1979, Texasgulf has soured on the project, and was unwilling to undertake further feasibility studies which the World Bank insisted on as a precondition for lending financial assistance to the project.

Currently, Rio Tinto Zinc is a minority equity partner in the project. The Panamanian government's mining company, the Corporacion de Desarrollo Minero, holds 51 percent of the equity. This government share is considerably shy of the 80 percent the government held under its previous agreements with Texasgulf. The International Monetary Fund and the World Bank had strongly urged Panama to reduce its risk and indebtedness for the project, and Panama complied. ,

The Cerro Colorado deposit, which stands almost astride the Continental Divide in eastern Chiriqui, contains 1.4 billion metric tons of low-grade porphyry copper ore, with recoverable traces of gold, silver, and molybdenum. Further drilling may confirm the presence of up to four billion metric tons of ore, which would make Cerro Colorado one of the largest copper reserves in the world.

Development of the project would require extensive construction of infrastructure in the tropical mountains, including heavy-duty roads, a port, water reservoirs, sterile rock repositories, concentrator tailings disposal, and four kilometer by five kilometer open pit. Texasgulf estimated in 1978 that construction of the mine project would cost S2 billion.

Cerro Colorado's proponents argue that the mine will:

  • diversify Panama's economy from its overwhelming dependence on the "transnational service platform," which is a haven for banking and insurance and an industrial free zone for multinationals.
  • greatly increase Panama's foreign exchange earnings.
  • ease problems of unemployment, first in the construction period, then with new permanent jobs.
  • create forward and backward linkages throughout the economy.

Those who question the project offer a different reading of its impact. According to critics, Cerro Colorado will be:

  • a drain on Panama's finances. The World Bank has calculated that Cerro Colorado is likely to operate at a loss of up to $350 million during the critical first five years of mining.
  • only a limited source of employment. The number of direct jobs - slightly over 2000-is seen by critics as an unsatisfactory return on an investment of over $2 billion. Moreover. many of the jobs will go to foreigners. not Panamanians.
  • a boom to imports rather than a step toward a dynamic internal economy. The Export Development Corporation of Canada, which offered to arrange about 70 percent of the Financing, calculated that 65 percent of financing would be spent abroad, making Panama dependent on multinationals for technology, management and sales.
  • a source of increased vulnerability in the world economy. Having no control over the volatile world copper market, Panama would be left at the mercy of international terms of trade.
  • a foreign run project. In spite of Panama's majority share, the government's contracts with RTZ give the company considerable latitude in which to carry out major policy decisions over which it has equal say, and full control over day-to-day operations.

The Guaymi Indians

So far, the Guaymi Indians have no legal standing in the Cerro Colorado project. Legally, they are squatters on their own lands, which the government claims to own. Their reserve is not demarcated, and there is no legal protection of their lands (although the government has stopped allowing private individuals to obtain title within the Guaymi area).

When the Guaymi were told that the government considers itself the owner of the land, as "national land," they responded with disbelief. In a community meeting in mid-1980, a Guaymi elder expressed the tradition of his people to the agreement of all present. "God made the land," he said, "and only the one who makes something can own it. We plant our crops and work our fields: the harvest is ours ... But no one owns the land because no one can make more land except God."

For the Cerro Colorado project, Guaymi families have been indemnified for what the government calls "improvement" on lands lost or damaged by the project. The "improvements" are the government-calculated costs of one season's crops destroyed or lost.-The Guaymi have received no other recompense for land loss. No one has sought Guaymi permission to undertake these projects, and no one guarantees them any participation in the project or any share in its profits.

Until the entry of RTZ, no serious assessment had been made of the environmental or social impact of Cerro Colorado. The prevailing attitude was expressed by one Texasgulf official who claimed that the project could bring only benefits to these people who have "nowhere to go but up."

RTZ has commissioned studies of the Guaymi's legal rights and their culture. But RTZ's record of dealing with indigenous people in Namibia, South Africa and Australia provides little cause for optimism about its intentions concerning the Guaymi.

Cerro Colorado will adversely affect the Guaymi in a variety of ways. The most serious of these is the loss of subsistence lands: over 300 square kilometers to the mine, its installations and related infrastructure, and another 280 square kilometers to the hydroelectric project. These losses would involve the relocation of around 30 Guaymi communities - nearly 3000 people (over 2000 live in the area to be flooded by the hydroelectric project). Within the Guaymi area, there are no unoccupied lands available for relocation of displaced people. In any case, the Guaymi do not want to move.

Other significant effects of the proposed project include threats to water supplies because of mine-related runoff and dammed rivers, and a host of severe disruptions of work habits and cultural life. The expected influx of thousands of non-Guaymi males for the construction of the mine has created a great anxiety among the Guaymi, who fear "imported vices": drugs, liquor, prostitution, gambling, and crime. The ethos of construction camps almost anywhere in the world lends substance to Guaymi concerns.

Guaymi resistance to Cerro Colorado and its related hydroelectric projects is growing. At a special congress last April, the Guaymi, represented by 4000 delegates, unanimously endorsed a hard-line position: all projects should be halted immediately, land rights should be legally defined, and only then will the Guaymi negotiate possible participation in the mine.

Chris Gjording. S.J., is a Jesuit priest writing a Ph.D. dissertation in anthropology on the Guaymi at the New School for Social Research.

An Economy Designed to Service Multinationals

For the first four years of Gen. Omar Torrijos' government, 1968 through 1972, real growth of the gross domestic product (GDP) averaged an impressive 7.6 percent per year. Torrijos began extensive projects to benefit the popular sectors of Panama: peasants, Indians, rural and urban workers. Through special loan programs, the government registered impressive improvements in sanitation, health, education and housing for the poor. A modest agrarian reform and pro-union revision of labor laws gained Torrijos considerable backing with the majority of Panamanians.

At the same time, Torrijos consolidated international private sector support. New banking legislation in 1970 fostered the phenomenal growth of Panama's offshore banking business; from 20 banks with total assets of $665 million in 1970, this sector surged to 94 banks with assets of $23 billion in 1979. Torrijos also transformed the sleepy Colon Free Zone into a thriving center, second in size only to Hong Kong's among the 200 free zones worldwide. In 1971, 154 establishments registered $270 million in sales; in 1978, 1,000 companies did $2.8 billion in trade. Minimal registration requirements also made Panama a haven for "paper companies," with an estimated 5,000 corporations finding ways to take advantage of tax and accounting advantages by the mid-1970s.

However, rising oil prices, the Western world's economic recession, and investor uncertainty while Torrijos pressured to negotiate the Panama Canal treaties, combined to plunge Panama into a deep economic crisis. Real GOP growth fell to 6.5 percent in 1973, then averaged only 1.6 percent from 1974 through 1977; real per capita growth declined from 1973 to 1977. Exports and imports fell off; but petroleum bills rose astronomically, even as Panama reduced oil consumption. The oil bill doubled from 1973 to 1974, on four percent fewer barrels. In 1979, the quantity of oil imported was only 45 percent of the high reached in 1972, but the price was more than 30 percent higher. The public debt, $207.6 million in 1968, had risen to $1,053.1 million in 1975. Direct foreign investment also fell off from over $30 million a year in 1973 and 1974, to a total of $7.1 million in 1975-78.

By the time Panama's recession began to reverse itself in 1978, the public debt exceeded the GDP ($2,383.5 million vs. $2,306.1 million), prompting the IMF to worry that "Panama has arrived at a relationship between indebtedness and national income without precedent in the Western Hemisphere. "As government borrowing continued, an increasing portion of the debt was based on commercial bank Credit, bringing rising international interest rates into play.

Panama's unemployment is now estimated at 100,000 out of a work force of 600,000; 20,000 new jobs are needed yearly just to maintain the status quo. In 1979, only 4,00( jobs were created, while early in 1980, IMF pressure led the government to scrap its four-year-old job scheme, leading to the disappearance of 17,000 jobs. The most dynamic sectors of the economy the Colon Free Zone and the banking center, which contribute about 15 percent of the GDP, only employ a total of 11,500 people.

The incentive structure ' of Panama's economy favors capital-intensive investment over creation of jobs, through duty-free import of machinery, generous depreciation allowances, and tax exemptions for re-investment. Direct foreign investment jumped to $40 million in 1979, with the Canal treaties in place and Panama's stability as a part of the Western economy seemingly guaranteed by the legalized U.S. military presence in the Canal Area until the year 2000-or beyond if the U.S. deems its intervention necessary to retaining U.S. access to the Canal.

Government planners in Panama seem committed to shore up what they know best-the economic advantages of Panama's geographic location, and its role as a transnational service platform. Proposed projects include: a five-year, five billion dollar expansion of the Colon Free Zone; continued rapid growth of the banking sector; financing for construction of new shipping facilities; possible construction of a sea-level canal and an oil pipeline; and the Cerro Colorado copper mine.

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