Extractive Industries

The effects of Chinese mining in Ecuador

Chinese mines have caused social and environmental disruption
<p>Cordillera del Cóndor, in Ecuador (image: <a href="https://www.flickr.com/photos/andrewneild/32784296040/in/photolist-8Y7yH5-q2W8vE-q39AL6-qGvCEa-Skzkpn-RX362s">Andrew Neild</a>)</p>

Cordillera del Cóndor, in Ecuador (image: Andrew Neild)

On September 2, indigenous communities from around the Morona-Santiago, Azuay, and Zamora regions of south eastern Ecuador gathered to detail their experiences dealing with Chinese mining activities during the past decade. One of these projects (Río Blanco) is currently facing a sit-in protest from hundreds of local residents, and another (Mirador) has been the scene of violent conflict between local community members and the Chinese company operating in the region, supported by the Ecuadorian state.

What this tribunal represents is surely not what Rafael Correa envisioned taking place upon winning the presidency in 2006. Correa campaigned on a bold platform of indigenous rights, environmental sustainability, and political sovereignty, uniting the country’s leftist political factions in a firm rebuttal of ‘Washington Consensus Neoliberalism.’ This movement cantered on incorporating Ecuadorian notions of Buen Vivir (or Sumak Kawsay) into a ‘Citizen’s Revolution’ that was hailed both domestically and abroad as either alternative development or an alternative to development. Correa proposed changing the country’s “productive matrix” through broad construction of infrastructure, arguing that by diversifying the economy away from oil he could achieve environmental conservation and national self-determination while simultaneously financing broad social programs.

After sweeping to a convincing electoral win, Correa and his governing Alianza País party set in motion a series of changes that uprooted the country. The president, educated in Belgium and the United States (with a PhD in economics from the University of Illinois), declared US$ 3.2 billion of Ecuador’s external debt “illegitimate” in a stunning defiance of “real monsters” comprising the Western political economic order. Correa called for and received a constitutional assembly in 2008, and the resulting constitution (Ecuador’s twentieth) among other things granted explicit rights to nature and centralised political power by reorganising the country’s institutional structures. Importantly for the petro state, he pushed for renegotiations of oil concessions held by foreign multinationals, seeking to end the “robbery” of natural wealth by foreign hands.

International markets did not take kindly to these audacious moves, despite their support from regional and ideological allies. Labeled a pariah by Ecuador’s traditional lenders, Correa turned to China, at the time one of the only available sources of development finance.

The two countries found in the other a friendly business partner. The Chinese government was able to expand its regional influence through a series of bilateral loans that secured profitable sources of oil for its state-owned companies. In return, Ecuador found financing and contracting for its ambitious development ‘revolution’.

The Chinese-backed model of transformation, hailed by the Alianza País propaganda machine as a boon for the country, can today be seen in very mixed terms. While Correa did manage to temporarily improve poverty, health, and education markers, a recession following a sharp drop in commodity prices in 2013 showed the perils of the true economic structure: continued reliance on oil. Chinese-built projects have carried social and environmental drawbacks, with the Chinese companies’ preferential treatment as a result of diplomatic power allowing them to ignore prior community and environmental assessment processes normally required by Ecuadorian law. Finally, countless stories of corruption are associated with Chinese works, none bigger than the Odebrecht scandal that is currently threatening to bring down the Ecuadorian Vice President Jorge Glas.

Mining has always been a contradiction within the Alianza País development strategy. Correa’s vision of reclaiming national sovereignty included having the ability to exploit the country’s natural resources; “we can’t be beggars sitting on a sack of gold” was the president’s frequent refrain. This resource nationalism, supported through ‘changing the productive matrix’, presented a clear departure from the spirit of Buen Vivir present in the Constitution, which states the Amazon must be recognized as central to global ecology and that indigenous communities be granted clear provisions of prior consultation to development of their ancestral lands.

This erratic theoretical grounding mirrors the trajectory of the mining industry’s development under Rafael Correa. Rodrigo Izurieta, President of the Ecuadorian Mining Chamber, noted that pre-Correa, mining was mostly limited to small, artisanal projects, never comprising a full percentage point of the country’s GDP. Upon election Correa suspended and nationalised most existing resource concessions, which scared off international investors.

The only mining company to successfully be granted a contract during this period was Ecuacorriente S.A. (ECSA), owned by Chinese consortium CRCC-Tongguan. This contract came most likely from a combination of diplomatic pressure and the Chinese company’s, backed by the Chinese state, seemingly bottomless capital reserves. “It was state policy not just to accept but to favour Chinese influence in Ecuador”, Izurieta said.

Chinese state-owned companies operating abroad have had countless examples of either having difficulties or an unwillingness to establish positive relations with local communities living near or on their resource concessions, and this has proven true in Ecuador. For many, blame lies both with the Chinese companies’ disinterest in their investments past the point of securing a profit margin as well as the Ecuadorian government’s not only lack of enforcement for environmental protection and social consultation regulations but also support of Chinese mining activities via physical force and political manipulation. “Western mining companies in the region at least gave the appearance of caring about local communities on their concessions”, said a former senior Ecuadorian ECSA official. “The Chinese don’t even pretend that they don’t care”.

In Ecuador, the Mirador open-pit mine has proven endlessly problematic for all sides involved. Lauded as the country’s first large-scale mining project, its operation has been stalled by a fierce civil resistance from the indigenous Shuar community, upon whose territory the concession was drawn. Faulty enforcement of environmental risk assessments, forced displacement by state police forces, and the death of Shuar leader José Tendetza have sparked outrage in local communities.

The September 2nd tribunal culminated in the production of a memorandum, aided by the non-profit Acción Ecológica. The document lists specific grievances against Chinese mining activity in the region done with the Ecuadorian state’s explicit support.

Some see next steps for Ecuadorian development as being anti-Chinese and pro-mining. Pressured by a decade’s worth of oil-backed loans very favourable to the Chinese government, Ecuador’s new president Lenin Moreno has announced austerity measures in response to debt overhangs as well as promoted the development of “responsible mining”. The Ministry of Mining touts Ecuador’s position on the same Andes concessions as mining powerhouses Chile and Perú, with only 10% of the country’s mining potential having been explored, and investor-friendly reforms to the mining codes have attracted numerous Western corporations, including giants BHP, Solgold, and Lundin.

“The Chinese lesson was an expensive one to learn, but a good one in the end”, Izurieta said. The question is: did Ecuador learn it?