Canadian capital rips off the Third World
By Harold Lavender
Capital is flowing across national borders at an accelerating pace. Canadian capitalists are playing a prominent role in the globalization rush, behaving no differently in their imperative to maximize profits than US, British, German, Japanese, French and other foreign investors.
Canadian nationalists focus on the large amounts of US capital invested in Canada. However, they ignore or minimize the astronomical rise in Canadian direct foreign investment and its nefarious role in the Third World in such areas as mining and resource extraction.
Statistics Canada defines direct foreign investment in terms of ownership control and permanence (ownership of more than 10 percent of a company in another country). Over the last 15 years, total investment by Canadians in other countries has risen 500 per cent.
Throughout the 20th century Canada had significant foreign investments, primarily in the US but also in the Caribbean and Latin America. Although the value of those investments was much less than the total amount invested by other countries in Canada, since 1997, the reverse has been true. And the gap is widening. In 2004 Canadian foreign direct investment grew by 10 per cent – far faster than the economy as a whole. It now stands at $445 billion, nearly 40 per cent of the Gross Domestic Product (up from 5 per cent of GDP in 1970).
A substantial majority of global foreign direct investment occurs within imperialist countries. Canada is no exception. About 43 per cent of Canadian investment is in the US. Today, 25 per cent (up from 17 per cent in 1990) goes to a heterogeneous group of countries variously described as non-industrialized, developing or Third World countries. The largest part – 15 per cent – goes to Latin America and the Caribbean; another 8 per cent goes to the Asia Pacific.
As the world’s fifth largest foreign investor, Canada fits the description of a mid-size imperialist power.
Canadian foreign investment is centered in the spheres where domestic capital is strongest. For example, 46 per cent is in the financial sector. But even where there is substantial foreign capital invested here at home – as in the oil and service sectors – Canadian investments in these sectors abroad are greater. Not surprisingly, the Canadian government is a leading proponent of the General Agreement on Trade in Services.
Canadian foreign investment in manufacturing is less prominent due to the smaller scale of the domestic industry. However, it is increasing in some areas. The Montreal-based transportation company Bombardier AeroSpace has significant foreign holdings, as does another Montreal company, Gilden Sportswear (Canada’s largest maker of T-shirts), which operates sweatshops in Haiti.
Myth vs Reality
Widespread myths about Canada the Good, and Canada’s domination by the US empire tend to severely distort public perception at home and abroad.
Few people are aware that half the world’s mining companies are based in Canada, and account for 40 per cent of global mining exploration. Nor do they realize that the Toronto and Vancouver stock exchanges are world leaders in raising mining capital.
A look at how such companies as Vancouver-based Glamis Gold operate serves as a useful corrective. On January 11, some 800 Guatemalan police and army troopers escorting a piece of mining equipment to Glamis’ Marlin mine attacked a Mayan roadblock on the Pan American Highway, killing one campesino and wounding others. Another person died March 13, after being shot by the company’s security guards. Death threats have been issued against community and church leaders opposing the mine.
Meanwhile, Glamis had received a US $75-million World Bank loan for the project. As a condition of the loan, it was supposed to consult the community. The consultation consisted of telling the local population what it planned to do – a process that would have been illegal in Canada.
Community members are concerned that the huge quantities of water required to support the company’s mining operations will rob them of what is needed for their crops, while environmentalists warn the cyanide used in the process will contaminate soil and ground water.
Despite a huge outcry in Guatemala, the Canadian Embassy has leapt to Glamis’ defense. Ambassador Lambert said in January that protesters were “breaking the law,” adding, “we had people complaining to us that they could not get their products to port.”
The embassy has also published pieces in the national dailies selling the benefits Canadian mining companies will bring to Guatemala; debated environmentalists (whom they blame for manipulating the local indigenous communities) on television; and sponsored pro-mining forums and seminars. It even used a BC band chief to promote the benefits First Nations receive from mines on their territories. Ironically, this was Chief Jerry Asp of the Telegraph Creek Band whose office has been occupied by the Tahltan Elders Council who are demanding a moratorium on mining on their lands.
Increasing Scrutiny
Ugly incidents like those in Guatemala have led to increased scrutiny. This spring, the House of Commons Standing Committee on Foreign Affairs held hearings. Their conclusions were critical, calling for more regulation of Canadian mining abroad. They called for stopping Canadian taxpayers financing destructive projects abroad and making Canadian corporations legally accountable for environmental and human right violations in “mining related conflicts where regulations governing the mining sector and its impacts on the economic and social well being of employees and local residents are nonexistent or not enforced.”
However, the report may simply gather dust. James Knech of Mining Watch Canada wrote, “Despite Canada’s dominant role in the global mining industry, the government has consistently refused to develop the necessary tools to hold Canadian companies accountable for what they are doing in other people’s backyards.”
Rewriting the Rules
In the neo-liberal era, resource exploration and development has spread to the remotest corners of the globe and often to lands occupied by Indigenous Peoples. Mining Watch Canada (www.miningwatch.ca) offers critical material on the activities of Canadian mining corporations in Canada, the US, Latin America, Asia Pacific, Africa and eastern and southern Europe.
Canadian capital is second to the US in Latin America, which is in the midst of a mining boom. This boom coincides with the triumph of neoliberal economic policies. The main cannons of neoliberalism include trade liberalization, deregulation, privatization and slashing of state social spending.
Third World economies were forced open after running up large foreign debts in the 1980s. The International Monetary Fund and World Bank imposed harsh interfering conditions for loans through so-called Structural Adjustment Programs. Economies were reoriented to exports to earn the foreign exchange needed to pay the debt. As part of this process, country after country rewrote their mining codes to favour foreign investment.
The ideologues of the free market would have us believe that they are pursuing a model of “development” and now “poverty reduction.”
The Canadian government continues to vigorously promote such initiatives as the New Economic Partnership for African Development as the road to salvation. The NEPAD model relies heavily on attracting foreign capital, including investment in resource development.
What’s wrong with this picture? To begin, foreign investors are invariably lured into a country on the basis of major concessions. These include huge tax breaks, very low royalties, lifelong access to large tracts of land, unlimited access to water and minimal environmental regulations. Mining companies are allowed to repatriate the vast majority of their profits (with little remaining in Third World economies). Most of the equipment is not purchased there. Export Development Canada provides generous loans to domestic companies to facilitate the export of their products to mining operations abroad.
Mining, once built upon the harsh labour of many thousands, has become increasingly capital intensive. Huge open-pit mines cast a large swath of environmental destruction but now employ relatively few workers.
Meanwhile, thousands are displaced from their homes or threatened with disastrous consequences like spills from contaminated tailings (or residues) and dams containing such toxins as arsenic.
The notion of national, community and Indigenous control of resources and self-determination that could interfere with profits is anathema to foreign investors. Instead they insist on writing the rules. One example is Honduras, which passed a new mining law in 1998 that was written by the Mining Association – a group primarily consisting of US and Canadian companies.
And in January of this year Colombian President Alvaro Uribe issued Decree Law 254 that liquidated the state mining company Minerol Ltd. The measure wipes out its employee union and allows for a wholesale turnover of exploration, exploitation and administration of mineral, energy and public resources to foreign capital. Nongovernmental organizations funded by the Canadian International Development Agency played a key role in drafting this law.
Many Resistances
Burma’s military government is among the world’s worst human rights abusers. Among other things, it makes widespread use of forced labour to build roads, etc. The largest mining investment is Montoya Mines owned by Ivanhoe Mines, a Canadian company registered in the Yukon. The company receives generous tax breaks in Canada for foreign exploration and development. Canadian and Burmese activists are now targeting such foreign investments.
For years one of the world’s deadliest civil wars raged in southern Sudan. Oil revenues helped the Sudanese government wage war. One of the main producers was Calgary-based Talisman. Talisman has since sold it interests, but a story tucked in the back of the business pages reports that the company faces ongoing court action in the US from victims of the war who accuse it of complicity in genocide.
This September, 500 people blockaded the PT INCO mining site in South Sulawesi, Indonesia despite intimidation by hired men. Toronto-based INCO, the world’s second largest nickel producer, has refused to settle with local Karonsi’e Dongi Indigenous People or to compensate those whose land they took – land that once was used for community gardens.
INCO’s Goro and Prony concessions in New Caledonia, a territory of France, contain the world’s largest nickel reserves. Last February, Indigenous Kanaks blockaded the Goro entrance. After a few days, a number of leaders were arrested and later charged. The Kanaks were demanding INCO negotiate with their recognized authorities. They noted INCO had agreed to such negotiations with the Innu in Voisey Bay, Labrador. They are also demanding an independent, environmental assessment and a halt to construction until then. Meanwhile, the company has found the funds to open a multi-million-dollar INCO Innovation Centre at Memorial University in St. John’s.
At the Utkal project, Montreal-based Alcan would build a bauxite mine and smelter on tribal lands in Orissa state in India. The community (where three tribal villagers were shot in 2000) is engaged in ongoing protests.
Militant Fight Backs
Toronto-based Noranda Mines wanted to build a smelter in Chile, in the Aysen region of Patagonia where the population is dependent on fishing and sustainable farming. A “No-Alumysa” (No-Aluminum) protest campaign forced the Chilean government to ask Noranda to look for another site.
Manhattan Minerals of Vancouver sought to dig an open-pit mine in northern Peru at a site containing an estimated $2 billion worth of silver, copper and zinc. Local villagers, whose homes and farms were threatened, went so far as to destroy the model homes in which they were to be relocated. The Peruvian government was sufficiently alarmed by the vigorous response that it cancelled Manhattan’s concession on a technicality.
This September, Calgary-based EnCana, Canada’s largest producer of natural gas sold its Ecuadorian oil operations to a Chinese company for $1.4 billion. As the deal was being negotiated, there was a revolt against foreign oil companies in Ecuador’s largely indigenous Amazonian provinces. A civic strike was launched to call for higher wages, more jobs, local purchasing, construction of better roads, funding for school and health clinics and more tax revenues for the provinces. Some strike leaders wanted Ecuador to take half of the foreign companies’ profits. Others went so far as to demand outright nationalization of the country’s leading oil producer.
President Alfredo Palacio proclaimed a state of emergency suspending human rights. Thousands protested in Nueva Loja and other centres. The police and army attacked protesters with teargas bombs, water canons and rubber bullets causing numerous injuries and made mass arrests. On August 25, an agreement negotiated between the companies and the national and provincial governments (largely behinds the backs of strike leaders) made enough concessions to temporarily end the conflict. But it did not address the fundamental issues.
Sentiment is growing that private direct foreign investment is not a solution to development.
In Canada, corporate activities are being monitored. Activists have launched small-scale solidarity protests at corporate headquarters. And there are efforts to link these companies’ international records to bad labour and environmental records in Canada. However, a larger movement targeting Canadian capital and state activities that support it remains to be built.
