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The IDB—50 Years, Zero Reflection

Posted by Laura Carlsen on April 3rd, 2009
Americas Policy Program, Center for International Policy

At the end of March, the Inter-American Development Bank (IDB) celebrated its 50th anniversary in Medellin. The occasion presents an opportunity to revise concepts and move toward a fairer development model. It is logical to think that among the festivities, a process of evaluation and self-critique would begin regarding the bank's actions and work in the region.

The circumstances demand it. The continent has been plunged into a grave economic crisis, in part because of the string of structural reforms, deregulation, foreign market dependence, and privatization that the IDB has supported in the region. Limits on the use of non-renewable fuels have become more and more obvious while climate change threatens to affect the production of basic foods and increase the frequency of natural disasters. Forced migration characterizes modern life and growing inequality has become the most important challenge faced by all the countries in the region.

      Medellin: site of the 50th anniversary of the IDB. Photo: www.skyscraperlife.com.

In spite of this gray outlook, it seemed that until now everything suggested that the IDB would prescribe more of the same medicine. They predicted an increase in loans to the region for the record figure of US$18 billion for 2009 as a response to the crisis. This will generate a new wave of debt in the recipient countries, while at the same time the development model behind the loans faces a crisis of credibility due to its dubious results. For the IDB, development is seen as a process of ensuring the transnational mobility of capital, enabling foreign investment, the transfer of goods, and access to natural resources. In recent years, this model has been imposed on regions that were previously closed off due to their geographical location or because of little interest from big business. Now that the value of natural resources is increasing and national economies have opted for exports, mega-projects including transportation infrastructure and hydroelectric power plants, among others, have become attractive again. They generally target regions with a low population density, and, in many cases, significant indigenous populations. While these communities are often forgotten by their national governments and suffer high levels of marginalization, at the same time their territories are rich in both culture and biodiversity.

The IDB has been a major promoter of infrastructure mega-projects designed to drive this vision. Two mega-project master plans have been of particular interest to the IDB: The Plan Puebla-Panama (also known as the Mesoamerican Integration and Development Project) and the Initiative for the Integration of Regional Infrastructure in South America (IIRSA). These plans include the construction of super-highways, dams, electricity networks, and more. The projects signal a drastic change in the use of land and resources. Local, regional, and national markets—which generate more jobs and constitute the majority of food distribution—are seen as a hindrance, and natural resources—conserved by indigenous communities—are considered the spoils of transnational business.

Among its objectives, the IDB aims to generate development in these regions. However, a recent study revealed that the mega-projects financed by the IDB in many cases end up displacing thousands of people who are supposed to be the beneficiaries. The construction of dams is the clearest example because it entails the involuntary displacement through the flooding of vast areas which often include pre-existing communities. One example is the La Parota hydroelectric dam in Guerrero, Mexico which would displace around 25,000 people and has currently been halted due to popular resistance. A group of 43 grassroots organizations met prior to the IDB meeting in Medellin. They presented studies and testimonies on the impacts of these projects in an effort to change the IDB's policies. Through the campaign known as "The IDB: 50 years financing inequality," these groups argue that, rather than alleviate the issue of poverty, mega-projects channel the profits gained from natural resources into the hands of the private sector and destroy the social fabric and community networks necessary for indigenous survival.

The solution to poverty that the IDB fundamentally proposes would seem to be: reduce poverty by expelling the poor. The two meetings—that of the IDB authorities and that of the organizations which question its practices—present an opportunity to revise the concept of development and move toward a fairer development model.

Originally posted on April 1, http://americas.irc-online.org/am/6008.

Who Will Determine the Future of Capitalism?

Posted by Philip Mattera on March 13th, 2009

Amid the worst financial and economic crisis in decades, the U.S. business press tends to get caught up in the daily fluctuations of the stock market and, to a lesser extent, the monthly changes in the unemployment rate. By contrast, London’s Financial Times is looking at the big picture. It recently launched a series of articles under the rubric of The Future of Capitalism. In addition to soliciting varying views on this monumental question, the paper published a feature this week presuming to name the 50 people around the world who will “frame the way forward.”

Kicking off the series, the FT’s Martin Wolf was blunt in asserting that the ideology of unfettered markets promoted over the past three decades must now be judged a failure. Sounding like a traditional Marxist, Wolf writes that “the era of liberalisation [the European term for market fundamentalism] contained seeds of its own downfall” in the form of tendencies such as “frenetic financial innovation” and “bubbles in asset prices.”

An article in the series by Gillian Tett casually notes that “naked greed, lax regulation, excessively loose monetary policy, fraudulent borrowing and managerial failure all played a role” in bringing about the crisis. Richard Layard of the London School of Economics weighs in with a piece arguing that “we should stop the worship of money and create a more humane society where the quality of human experience is the criterion.” Did editorial copy intended for New Left Review mistakenly end up in the FT computers?

Wolf finished his initial article with the statement: “Where we end up, after this financial tornado, is for us to seek to determine.” Yet who is the “we” Wolf is referring to?

Following the damning critique of markets and poor government oversight, the last ones we should turn to for leadership are the powers that be. Yet that is exactly the group that dominates the list of those who, according to the editors of FT, will lead the way forward. The 50 movers and shakers include 14 politicians, starting with President Obama and Chinese Prime Minister Wen Jiabao; ten central bankers; three financial regulators; and four heads of multinational institutions such as the IMF and the WTO. Also included are six economists, including Paul Krugman and Obama advisor Paul Volcker, and three prominent investors, among them George Soros and Warren Buffett.

The list also finds room for three chief executives (the heads of Nissan, PepsiCo and Google) and, amazingly, the chiefs of four major banks: Goldman Sachs, JPMorgan Chase, HSBC and BNP Paribas. It even includes two talking heads: Arianna Huffington and Rush Limbaugh.

Except for Olivier Besancenot of France’s New Anticapitalist Party, who is included among the politicians in a way that seems a bit condescending, there is not a single person on the list directly involved in a movement to challenge corporate power or even to significantly alter the relationship between business and the rest of society. There is not a single labor leader, prominent environmental advocate or other leading activist. The editors at FT seem never to have heard of civil society.

Then again, the problem may not be thickheadedness among FT editors. Perhaps the voices for radical change have simply not been loud enough to earn a place on a list of those who will play a significant role in the shaping capitalism’s future. In fact, one of the articles in the FT series suggests that in Europe neither the Left nor the labor movement has taken a leadership role in responding to the crisis, even as spontaneous protests have erupted in numerous countries.

In the United States, where those forces are weaker, anger at the crisis has to a great extent been channeled into support for the Keynesian policies of the Obama Administration. That’s unavoidable in the short term, but it doesn’t address the need for fundamental alteration of economic institutions. If, as the Financial Times suggests, the future of capitalism is up for grabs, let’s make sure we all join the fray.

Originally posted at: http://dirtdiggersdigest.org/archives/341

Norway finds Canada's largest publicly-traded company, Barrick Gold, unethical

Posted by Sakura Saunders on February 2nd, 2009
protestbarrick.net

Norway's Ministry of Finance announced Friday that it would exclude mining giant Barrick Gold and U.S. weapons producer Textron Inc from the country's pension fund for ethical reasons.  This is an especially significant judgment for Canada, as Barrick Gold is currently Canada's largest publicly traded company.

While the Norwegian Council of Ethics full recommendation mentions conflicts involving Barrick in Chile, Tanzania, and the Philippines, the panel acknowledged that, "due to limited resources," it restricted its investigation of Barrick to the Porgera mine in Papua New Guinea.  The Porgera mine has been a prime target for criticism for its use of riverine tailings disposal, a practice banned in almost every country in the world.

"It's unbelievably embarrassing," admitted Green Party deputy leader Adriane Carr. "It's got to be bad news for Canada when a foreign government says it's going to sell its shares in a Canadian company they figure is unethical."

This isn't the first time that Norway's Fund has divested from a gold mining company. In fact, looking at a list, the fund – with the notable exception of Walmart – divests exclusively from mining (primarily gold mining) corporations and corporations that produce nuclear weapons or cluster munitions... an interesting juxtaposition highlighting the comparable nature of mining to the production of weapons of mass destruction, especially in terms of long-term environmental consequences.

Compare that to Canada's treatment of gold mining companies. Just this last December, Peter Munk, the chairman and founder of Barrick Gold, received the Order of Canada, Canada's highest civilian honor. Additionally, within Toronto he is honored as a philanthropist, with the Peter Munk Cardiac Center and the Munk Centre for International Studies at the University of Toronto both adorning his name. Similarly, Ian Telfer, the chairman of Goldcorp, the world's second largest gold miner behind Barrick, has the Telfer School of Management at the University of Ottawa bearing his name.

These symbolic gestures, along with the fact that several Canadian Pension funds and even Vancouver-based "Ethical Funds" are still heavily invested in Barrick Gold, show that Canada has a long way to go in demanding that its companies honor human rights and halt its colonial-style, exploitative economic regime. In fact, by its own admittance, Canada's Standing Committee on Foreign Affairs and International Trade stated that "Canada does not yet have laws to ensure that the activities of Canadian mining companies in developing countries conform to human rights standards, including the rights of workers and of indigenous peoples." Since the date of that landmark confession, Canada has yet to adopt any intervening structures (like an ombudsperson) or develop any mandatory regulations for Canadian companies operating abroad.

Gold mining produces an average of 79 tons of waste for every ounce of gold extracted, 50 percent of it is carried out on native lands, and about 80 percent of it is used for jewelry, according to the "No Dirty Gold" campaign, a project of Oxfam and Earthworks. It is no wonder that in a portfolio with plenty of human rights abuses, the Norwegian Pension Fund decided to concentrate on gold miners, cluster munition manufacturers and nuclear weapon producers first. It is time that the rest of the world catch up.

Digging for Dirt in the DRC?

Posted by Amelia Hight on July 25th, 2007

Billy Rautenbach, a South African mining kingpin, was deported from Lubumbashi airport in the Democratic Republic of Congo (DRC) on July 18th. “He was accused of fraud, theft, corruption and violating commercial law [the expulsion document] said. He was persona non grata. He would have to leave,” writes Ben Laurence in the Sunday Times (UK).

Best known in South Africa and Botswana for his activities in assembling Hyundai cars, Rautenbach faces hundreds of charges of fraud, corruption and other crimes in his home country of South Africa (the reasons cited in the documents prepared for his deportation last week). South Africa is currently considering asking Zimbabwe to extradite him to stand trial.

But Rautenbach was also once a powerful man in the DRC. He ran Gecamines, the DRC’s state-owned copper mining company, from 1998 to 2000. At the time he was accused of under-reporting exports of sales of huge quantities of DRC cobalt when he was in charge – and diverting the profits to a company he controlled in the British Virgin Islands.

Although Rautenbach lost his job, he continues to play an important role in the mining sector, as he also happens to be a major shareholder of Central African Mining & Exploration Company (CAMEC), which won major contracts in the DRC a couple of years later.

CAMEC’s contracts were the result of an investor-friendly mining code introduced by the World Bank in July 2002. (An informative analysis of this code was done by the Bank Information Center.) While the code calls for a much-needed regulatory framework and environmental protection, it hands the responsibility for mining development to private companies.

However, it is doubtful that the Congolese public institutions charged with regulating the mining sector have the resources to carry through with it, and the World Bank certainly has not been successful in providing oversight. A memo leaked to the Financial Times in November 2006 details the World Bank’s failure to provide sufficient oversight in three major contracts made between Gecamines and international mining groups like CAMEC. Worth billions of dollars, these contracts reportedly gave these groups control over 75% of Gecamines mineral reserves. (In May 2007, the Financial Times also revealed that the World Bank withheld the findings of an inquiry into alleged mismanagement of funds in the Democratic Republic of Congo.) 

More details on the business dealings of Rautenbach and CAMEC may emerge from a DRC commission that recently began a three-month review of mining contracts signed in the last decade. The commission is the first attempt of a new “democratically elected” government to investigate ongoing corruption in the DRC’s valuable mining sector. The new commission follows a string of attempts by previous governments and international financial institutions to investigate the exploitation of natural resources in the DRC.

If the commission hopes to be successful it must take a look at whose interests are being promoted/protected in the Congo and how. This would include an investigation into local elites, regional influences, international financial institutions and the powers they represent, and international corporations along with the relationships between these different actors.

History has shown that the more resources a nation or region possess, the more conflict and poverty the people of that nation are forced to endure. The DRC is the third largest country in Africa and is rich in natural resources, particularly cobalt, copper, diamonds and gold. It is home to one third of the world’s cassiterite, the most important source of the metallic element tin and holds 64-80% of the world’s coltan reserves, an ore that is the source of the metal tantalum, which is used in cell phones and other devices.

In an article for Alternet, Stan Cox quotes a miner responsible for digging the valuable cassiterite:  "As you crawl through the tiny hole, using your arms and fingers to scratch, there's not enough space to dig properly and you get badly grazed all over. And then, when you do finally come back out with the cassiterite, the soldiers are waiting to grab it at gunpoint. Which means you have nothing to buy food with. So we're always hungry." This cassiterite will inevitably end up in cheap cell phones and laptops laying abandoned in American landfills.

Despite (or indeed because of) its abundance of resources, the DRC has been plagued by conflict, famine and political instability since its independence in the 1960s. Following the end of the 30-year dictatorship of Mobutu Sese Seko (who was brought to power by the U.S. in the 1960s), the greed of neighboring countries for natural resources forced the DRC into the center of what organizations like Human Rights Watch have deemed, “Africa’s first world war.”  The war resulted in the death of three to five million people, many from famine, exposure and disease.

A cease-fire ended the war in 1999, but the DRC has continued to suffer the extraction of resources and wealth through corrupt deals between local elites and international companies. A 2006 report from the London-based watchdog organization, Global Witness, describes how copper and cobalt are mined informally and illicitly exported,  robbing the Congolese people of any opportunity to reduce poverty.

The new commission’s plan to revisit mining contracts between the state and private companies is a response to years of domestic and international pressure. Hopefully, once the review is completed (assuming that it is a transparent and non-corrupt process), the international companies involved will be willing to re-negotiate contracts in a way that is more beneficial to the Congolese state and its citizens. An interesting precedent was established last year in Liberia when Mittal Steel, the world’s largest steel company, agreed to step down from an unbalanced concessionary agreement made with a corrupt transitional government once a democratically elected government was in place.