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Don’t bankroll the next foreign mine disaster

A Brazilian mine spill shows how Canadian agencies risk getting tangled up in abuses

(Published in Embassy on Monday, January 11, 2016)

Thomas L. Friedman’s The World Is Flat: A Brief History of the Twenty-First Century suggests that a level playing field has emerged in the world of global commerce, affording competitors equal opportunity. But this analysis ignores government intrusion in the form of massive loans to favoured players and projects.

Case in point: last November’s immense mine spill in the state of Minas Gerais, Brazil’s worst environmental disaster, which Brazilian President Dilma Rousseff compared to the Deepwater Horizon catastrophe in the Gulf of Mexico.

Fifty million tons of toxic waste flooded the Doce River, leaving a wake of destruction for hundreds of kilometres. At least 19 are dead and thousands have lost their homes and livelihoods.

Indigenous Krenak people demanding safe drinking water have blocked the local railway. The Brazilian government is suing the mine’s joint venture owners, which includes Brazilian multinational Vale, for over $5 billion USD.

There is a direct Canadian connection to this venture. Export Development Canada, a Crown corporation, provided Vale with hundreds of millions of dollars in financing for its global operations, most recently in 2014.

EDC promotes Canadian exports and investment by issuing government-backed loans, guarantees and insurance. In 2014, EDC provided mining, oil and gas companies with over $28 billion in support. In the same period, the Harper government spent less than $1 billion on international humanitarian assistance.

EDC reports that it screens its transactions for potential impact on human rights and the environment. Its support for clients such as Vale brings this process into question.

In 2011, the United Nations adopted a set of Guiding Principles regarding business and human rights. The principles, promoted by Canada, identify the state-business nexus as an area requiring heightened due diligence. States must protect against human rights abuse by companies that receive support from public agencies such as Export Development Canada.

Last month, the UN Working Group tasked with promoting the Guiding Principles completed a site visit to the Minas Gerais spill area. It confirmed that both the state and private sector in Brazil have failed to implement the principles.

In fact, Vale’s historic environmental and human rights performance is a matter of public record.

At the world’s largest iron ore mine in northern Brazil, the company operates a railway lacking basic security infrastructure. Locals have been hit by passing trains, according to a Brazilian government agency, resulting in death or serious injury. The company’s nickel mine in the state of Pará was recently ordered shut by a Brazilian court. The court order said the project contravened its environmental licence, exposing indigenous populations to toxic waste.

In Canada, five of Vale’s workers died on the job in recent years. In 2013, an Ontario court imposed a record-breaking fine on the company for workplace safety violations responsible for the deaths of two employees. Last year, the Ontario Ministry of Labour laid nine charges against Vale in connection with another workplace death. In October, the company said it was under investigation by Environment Canada and the RCMP regarding allegations of violating the Fisheries Act in 2012.

Nonetheless, twice under Stephen Harper’s government, in 2010 and 2014, EDC provided Vale with hundreds of millions in financing. Yet the agency could provide no guarantee that this bountiful support would produce the intended stimulus to the Canadian economy.

EDC provided loans to Vale for the procurement of Canadian goods and services. However, as a public institution, EDC is subject to Canada’s international trade obligations, which prevent the Crown corporation from compelling its clients to preferentially source from Canadian suppliers. Accordingly, EDC asks its client Vale to consider Canadian suppliers, and seemingly hopes for the best.

As residents along the Doce River begin the difficult process of rebuilding their lives, EDC under the new Trudeau government must undertake a cleanup of its own. The agency reports that it’s working to align its operations with the UN Guiding Principles, but the newly-elected Canadian government must oversee and expedite this process.

In the meantime, EDC should suspend support for sectors with an elevated risk of environmental and human rights impact, such as the aforementioned extractive industries.

EDC’s behaviour indicates that Friedman’s world is not truly flat. Nor should Canadians bankroll the next foreign mine disaster.