Canadian Company Threatens El Salvador with Free Trade Lawsuit Over Mining Project


Written by Cyril Mychalejko 

From Upsidedownworld

A Canadianmining company intends to sue El Salvador's government for severalhundred million dollars if it is not granted permission to open awidely unpopular gold and silver mine that scientists warn would havedevastating effects on local water supplies.

Pacific Rim Mining Corp., using its Nevada-based subsidiary Pac Rim Cayman LLC, filed a Notice of Intent on Dec. 9 through provisionsin the Central American Free Trade Agreement (CAFTA) that allowtransnational corporations to sue governments over laws and decisionsthat often put public interests ahead of corporate profits.

"Wereject Pacific Rims claims. Giving over [exploitation] permissionwould be a death sentence from the country and the arbitration cant beaccepted because it is the mining company that should be sued," theNational Table Against Metallic Mining, and umbrella group of socialmovements and NGO's, responded in a statement.

Thecompany and government have 90 days to settle the dispute before thecase goes before an arbitration tribunal, while the 90-day period endsjust 5 days before the country's presidential election. The company islooking for permission to begin mining for gold and silver at its ElDorado mine in the department of Cabañas, about 40 miles outside of SanSalvador. The lawsuit threat also comes as the government is debatingnew mining laws.

"They're either using the threat of a lawuit asleverage or it could be a strategy to help ARENA win the election,"said Burke Stansbury, of the Committee in Solidarity with the People of El Salvador (CISPES), a member of the Stop CAFTA Coalition.The right-wing, ruling Arena party is supportive of new mining lawsthat loosen restrictions for the industry, but has been delaying anyactions because of upcoming local and national elections.

TimothyMcCrum, the company's lawyer in the dispute, in a conference call forinvestors co-hosted with Pacific Rim President and CEO Tom Shrake,noted a case filed through the North American Free Trade Agreement(which served as a model for CAFTA) he believes serves as a precedentthat should work in the company's favor. The dispute, betweenCalifornia-based Metalclad Co. and the Mexican government, ended withthe Mexican government forced to pay the company $15.6 million indamages because it refused to grant Metalclad permission to build atoxic waste site in an area designated as an ecological preserve.

AndrewGussert, executive director of Citizens Trade Campaign (CTC), said hiscoalition opposes these provisions that were originally introduced inthe North American Free Trade Agreement's Chapter 11 investor rules.

"They'reways to circumnavigate laws that cost these corporations profits. Andthese laws are mainly public interest laws dealing with environmental,health and labor standards," Said Gussert. "That's why we have to rollback these investors rights provisions, because we don't wantcorporations to have more rights than people.

But the mining opposition, which includes social movements, the Catholic Church, NGO's, local lawmakers and environmentalists, may have an unlikely ally--President-elect Barack Obama.

Obama, in a February letterto the Wisconsin Fair Trade Coalition (an affiliate of CTC), clearlystated his opposition to these "investor rights" provisions in freetrade agreements.

"With regards to provisions in several FTAsthat give foreign investors the right to sue governments directly inforeign tribunals, I will ensure that this right is strictly limitedand will fully exempt any law or regulation written to protect publicsafety or promote the public interest," said Obama, who voted againstCAFTA while in the Senate.

Obama added that "we should addbinding environmental standards so that companies from one countrycannot gain an economic advantage by destroying the environment. And weshould amend NAFTA to make clear that fair laws and regulations writtento protect citizens in any of the three countries cannot be overriddensimply at the request of foreign investors."

Destroying the Environment

In 2005, hydrogeologist Robert Moran conducted a technical reviewof Pacific Rim's Environmental Impact Assessment (EIA) for the ElDorado Mine Project, concluding the company's study was incomplete andlacked necessary data and testing. 

"The El Dorado EIA,unfortunately, presents baseline data that are incomplete and which donot allow a reader to adequately evaluate the pre-mining water quantityconditions. To a lesser extent the baseline water quality data are alsoinadequate, especially with respect to ground water quality" wroteMoran. "The contents of the El Dorado EIA and the related public reviewprocess indicate clearly that neither the general public nor theSalvadoran regulators have been adequately informed regarding thepossible environmental or socioeconomic impacts to the localpopulations."

According to a  studysponsored by the Catholic organization Caritas-El Salvador and thenon-governmental Salvadoran Ecological Unit (UNES), local watersupplies will be contaminated by mercury, cyanide, arsenic, zinc andaluminum, and can be expected to cause health problems for localpopulations.

"It is estimated that Pacific Rim will use 7,300 tons of cyanide in the El Dorado site in Cabañas," said a staff member of U.S.-El Salvador Sister Cities,a solidarity network that has been active in supporting anti-miningadvocacy. "The left over cyanide would bring illness and contaminationto the people living near and down river from the mining sites.  Alsoopen pit process uses 900,000 liters of water day, which is what afamily consumes in 20 years." 

The Center for Research on Investment and Trade has also concludedin a study that intensive water use and contamination by the miningindustry in El Salvador would devastate the country's agriculturalsector and in turn threaten food security as well as the livelihoods ofcampesino farmers.

But Pacific Mining CEO Tom Shrake dismissesconcerns of long-term environmental damage as "preposterous." On hisconference call with investors he also accused NGO's of employing"masked armed gunmen" to "chop down trees planted in our reforestationprogram." His lawyer McCrum also took shots at the Catholic Church'sopposition to the company's mine, as well as its criticism of freetrade agreements like CAFTA. He said that the church "has alloweditself to be influenced by NGO's," has segments that are "almostradically left-leaning," and that members of the church opposed tomining are not "acting consistent with Catholic doctrine."

CarlosPeraza Alarcón, a member of Comunidades Unidas, calls mining projectslike Pacific Rim's El Dorado mine a "project of death."

"Theseprojects, if played out as planned, will destroy most of our resourcesjust to satisfy the interest of a small group of people," said Alarcón.

Meanwhile,this conflict presents a President Obama with an opportunity to showLatin America that he has the "audacity" to stand up to corporatepower, and in the process begin to repair relations with the people ofthe region while forging a path to the creation of fair tradeagreements. Salvadorans, Americans and the rest of the hemisphere willhave to wait until after Jan. 20 to see if hope actually translatesinto change on this issue.

Cyril Mychalejko is an editor at

For more information visit:

U.S.-El Salvador Sister Cities


Citizens Trade Campaign

Mining Watch Canada

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