world bank and peru, indonesia mining (fwd)

Robert Johnson (johnsorl@COLORADO.EDU)
Tue, 15 Aug 1995 14:36:10 -0600

to Indonesia

By Pratap Chatterjee

WASHINGTON, Aug 14 (IPS) - From the deserts of southern Peru to
the tropical forests of West Papua New Guinea in the South
Pacific, a relatively new World Bank agency is helping mining
multinationals dig deep for copper and gold.

But it is not providing protection against possible
environmental or social abuses committed by these same
companies' operations there, according to activists and the
agency itself.

The Multilateral Investment Guarantee Agency (MIGA), a
five-year-old Bank affiliate, sells insurance against risks
like nationalisation of assets and war to companies that have
set up ventures in developing countries. The Bank regards this
service as critical to the effort to promote direct foreign
investment in poor countries.

In 1994-95, MIGA was paid 14.4 million dollars in fees for
insuring 1.6 billion dollars in projects ranging from mining to
silk production in developing countries.

MIGA says it is promoting development in these countries. But
activists, who have just begun tracking MIGA's insurance of
mining projects, say it is supporting projects that are
precisely what poor communities in these countries don't need.

While MIGA guarantees multinational companies in developing
countries against political intervention. What affected
communities need, say the activists, is insurance against
possible abuse by the foreign companies, all of whom have
dubious environmental records.

For example, copper and gold mining companies setting up
operations in Peru received the biggest chunk of MIGA insurance
in any country during the past year, according to data released
by MIGA last week.

Three U.S. multinationals and their banks were awarded 105.5
million dollars in new insurance coverage out of the 672
million dollars that MIGA sold in the year that ended Jun.

Cyprus Climax Metals of Colorado and Magma Copper company of
Arizona were awarded insurance for existing copper mines in
southern Peru they acquired from the Peruvian government while
Newmont Mining of Colorado bought insurance for a new gold mine
in Yanacocha, northern Peru.

Last year MIGA also provided Newmont's planned gold-mining
operations in Uzbekistan in central Asia with 10 million
dollars in insurance cover. And it held a seminar in Toronto,
Canada, this May to encourage multinationals to invest in
mining in Africa.

All three of the mining companies insured by MIGA conduct major
mining operations in the United States. Local groups here say
that all of them have run afoul of the law for major
environmental or safety violations.

Magma, which has taken over the Tintaya copper mine in Peru,
was cited by the Arizona state mining inspector last January
for 13 safety violations that resulted in the death of four
miners in August 1993.

Magma's Pinto Valley operations in Arizona create 65,000 tonnes
of copper mine tailings waste a day. A large quantity of this
fine-white powder was washed into the local water supply in
1993 after a dam burst.

Nor was this the first such accident for Magma. The Magma
copper mine in Superior, Arizona, destroyed water supplies in
Queen Creek in 1990 when a similar accident occurred.

Cyprus Climax Metals, which took over the Cerroverde copper
mine in Peru, has also caused major environmental pollution.
Its copper mine in Baghdad, Arizona, heavily contaminated
Copper Creek in 1978-79 when acidic water waste from the copper
mine, was washed into it by heavy rains.

In 1990 Newmont Mining, a company that is partly owned by
maverick billionaire James Goldsmith, lost its rights to mine
for uranium on land near Spokane, Washington, when it ignored
repeated government demands to take care of over 15.5 billion
litres of acidic water in pits that threatened to leak into the
Columbia river.

These environmental disasters have cost the companies millions
of dollars in fines. And it is these costs, in addition to
fears of falling copper prices, that explain why U.S. companies
are now expanding abroad.

''Every major copper company is looking to expand into cheap
high-grade mines to subsidise their U.S. operations. Costs here
are hovering near a dollar per pound (2.2 dollars a kilogramme)
which barely allows them to break even, while the cost of
mining Peruvian copper is closer to 60 cents a pound,'' says
Gary Dillard, editor of Pay Dirt, a mining industry journal in

Will these companies respect environmental rules in other
countries? Activists like Michael Gregory of the Arizona Toxics
Project, who has been fighting several of these same companies
in his home state, thinks not.

''The problem is that none of these companies use the concept
of pollution prevention. They would rather get away with
whatever they can,'' he told IPS.

Worse still the companies are more likely to escape scrutiny in
poor countries. ''The World Bank's role in helping these
companies is very scary given that Peru has no environmental
enforcement mechanism,'' says Dick Kamp, an activist with the
Border Ecology Project in Arizona who has inspected Peruvian
mines on behalf of local Peruvian communities.

Nor is MIGA's environmental and social track record very good.
Its very first insurance policy, awarded in 1990 to Freeport
McMoRan, a Louisiana company, has already come under fire from
human rights groups.

Freeport took out the MIGA insurance on its copper and gold
prospecting operations in West Papua, the western half of the
island of New Guinea. West Papua was renamed Irian Jaya in 1990
after Indonesia invaded it. Shortly after the invasion,
Freeport was given the license to operate the world's largest
gold mine there.

Over the last year, Freeport security officials and the
Indonesian army have been accused of massacring 37 people near
their mines, according to a report issued by the Australian
Council for Overseas Aid (ACFOA), for protesting the mine.

Freeport's existing mines dump 115,000 tonnes of toxic mining
waste a day into three local rivers that supply drinking water
to the Amungme indigenous people, according to WALHI, an
Indonesian environmental group.

Activists in the United States point out that Freeport's
environmental work in Irian Jaya could have easily been
predicted by examining its record in this country. Statistics
issued by the United States Environmental Protection Agency
(EPA) show that Freeport is the biggest polluter in the

But MIGA points out that it is not providing insurance for the
local communities. ''Even if there is an environmental
disaster, it is not really our problem. It would be a little
like appealing to your car insurance company after you were
accused of murder,'' says Gerald West, a senior adviser at

West says he was approached this June by Indonesian citizen
groups who were concerned about MIGA's support for Freeport.
But he said there was nothing MIGA could do about it.

''One needs to be careful not to over-react. All of these
accusations have yet to be fully documented,'' he said.

MIGA itself has no capacity to follow up on these charges. It
does not have an environmental official among its small,
60-member staff. West says that the 15 insurance analysts on
staff are not available to talk to the public about their
investments because they are already over-stretched to process
the 80-plus applications they receive each month from

Instead, it contracts environmental work to the International
Finance Corporation, the World Bank affiliate which supports
the private sector in developing countries. ''If the IFC tells
us that the project will cause environmental problems, we do
tell our board of directors,'' says West. (ENDS/IPS/PC/JL/95)